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Tax guidelines and regulations for large money transfers into India
Failing to file could get your recipient in trouble with Indian tax authorities.
India is the world’s leading remittance recipient, with around $800 million sent from Canada to India in 2018 alone. Knowing the tax implications and how the process works can help give you peace of mind when transferring money there.
Is there tax on money being transferred from abroad to India?
The CRA won’t charge you taxes simply for sending money abroad. Additionally, India has signed agreements with many other countries — including Canada — to prevent “double taxation,” or being taxed on money you’ve already paid income tax on. The only tax you need to worry about in Canada is any sales tax or transactions fees applied to your transfer.
However, your recipient may be subject to taxes in India depending on the amount sent and the purpose of the funds. For example, residents of India are taxed on gifts of any kind (cash, real estate, gold, paintings or other items of value) that exceed than ₹50,000. Note that any gift worth more than ₹50,000 is taxed in its entirety, not just on the amount over ₹50,000.
Thankfully, there are some exceptions to this rule. There is no tax on money being transferred from abroad to India when it’s being sent to blood relatives. In general, “blood relatives” — including spouses, children and grandchildren, siblings or in-laws — do not pay tax on any amount that you send. Your recipient also won’t pay tax on any money sent as part of an inheritance or a wedding gift.
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What are the penalties in India if my recipient fails to file?
If you don’t report a transfer on your taxes in India, you could be charged a 10%, 50% or 200% penalty on the taxes owed, depending on whether it was considered intentional or not.
With so much attention on money entering and leaving India, if you fail to report large sums, don’t know you have to report them or don’t report them correctly, it will likely be discovered. Make sure to declare any large remittance as income on your general tax return with the Indian Income Tax Department.
To avoid the severe penalties that could come with a failure to report large sums of money into the country, speak with a professional to guarantee that everything complies with the laws of both Canada and India.
Do I have to report large transfers out of Canada?
No, the CRA does not require you to report large transfers out of Canada. However, financial institutions such as banks, credit unions and loan companies are required to comply with Canadian laws designed to prevent money laundering and terrorist financing.
This includes reporting transfers over CAD $10,000 to FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada). FINTRAC coordinates with law enforcement agencies like the RCMP and local police to track down and prevent financial crimes. Money transfer businesses are also required to report any transaction that seems suspicious.
How much money can I send to India?
There’s no legal cap on the amount of money you can send, but some transfer providers will set their own limits. If you’re planning on initiating a large transfer, consider using a limit-free provider such as XE.
How will my recipient in India get the money?
Your recipient can pick up the cash in person or have the money deposited directly into their bank account or mobile wallet. Not every provider will offer all three options, so check before initiating a transfer.
In general, your recipient will provide ID or a confirmation number for the transaction to pick up the money in cash.
If you’re sending money to a blood relative in India, they won’t have to worry about taxes — but if you’re sending money to a friend, they’ll need to report anything over ₹50,000 as income.
As with all international money transfers, be wary of potential fraud and only send money to people you know. Using a reputable provider can safeguard you from potential scams.
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