Inward and outward remittance

Procedure for the Inward and outward foreign remittance Sending or receiving money from India to a foreign country can often be a daunting procedure for both foreign businesses and the people living here in the country. There are various schemes and regulations that state and limit how much money can be remitted or sent and for what purpose. Outward remittance has to be approved under the Foreign Exchange Management Act (FEMA), 1999. This act regulates all transactions involving foreign exchange. This article explains the basic procedure for inward and outward foreign remittance. What are Inward Remittances? Inward Remittance is used for remittance from an Overseas Bank to a Domestic Bank. Inward Remittance can be made against Export of Goods/ Services, for Investment purposes, Donations, Gifts, etc. Procedure and bank charges for Inward Remittances There are two things which have to be specially kept in mind and that are as follows: 1. The Remitter At the start, the Sender of money which is the Remitter goes to his bank account and submits the request for payment into the receiver’s (Remittee) account. For remittance the basic and mandatory information required by the Remitter bank of Remittee are: Bank Account number Remitee’s Name and Address Bank’s Swift Code details Bank Branch details Nationality of Bank After completing the transaction the Remitter Bank also provides an acknowledgment of transfer which the Remitter has to submit to the Remittee. 2. The Remittee After finalization of the transfer, the Remittee bank holds the amount for Procedural completion and the compliance check. The Remittee then has to contact his or her bank and should have to submit all the required documents asked by the Bank. The documents that are required by the Bank are as follows: Invoice against which payment is made Purpose Code list for which the amount is received (Bank Share this list) Contract Remittance information (Amount in Foreign currency or the Remitter Name) Bank Generally takes 1-2 working days to complete this whole transaction. If working for the first time, inward remittance to the Bank usually takes 3-4 working days. The Bank charges are generally nil on inward remittances. However, the Bank charges GST on their fees. So, the GST should have to be paid to the Bank. Another thing that is observed is that there is a difference in the Exchange rate and the rate at which the bank clears your funds. This is most of the case fall from 50 paise-70 paise per dollar. So, overall your deduction in inward remittance falls to around Rs 1 per dollar. What is Outward Remittance? An Outward Remittance is a process of transferring money in the form of foreign exchange, by a resident in a particular country, for instance, say India, to a beneficiary who is located outside the other country (except for Nepal and Bhutan) for any purpose and that is been approved under the Foreign Exchange Management Act (FEMA). Procedure for Outward Remittance According to the Liberalized Remittance Scheme (LRS) made by the Reserve Bank of India (RBI), it is compulsory to quote PAN number for remittance transactions which take place from India to Abroad. The LRS scheme is made for the residents of India to ease the process of transferring money abroad. The money can be transferred for several reasons such as overseas education, overseas medical treatments, tour cost, immigration, etc. It can also allow Indian residents to invest in foreign stocks and property. Earlier, PAN card was not a primary requirement for remittance transactions up to $25,000 but now it has been made mandatory for any transaction. There have been multiple instances seen where individuals/businesses involving themselves in unethical practices and breaching the foreign exchange limits that are been specified by the RBI. The current annual LRS limit for every individual in India is $2, 50,000 per FY. Banks are given a strict warning to report all LRS transactions to RBI, irrespective of Amount unlike earlier, and it is also expected that there would be regular checks to ensure that everyone is complying with the LRS rules every financial year. Suggest Read: Funding of Indian Subsidiary in India