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How much money can be transferred from USA to India?

These are the tax guidelines and regulations you should keep in mind when receiving large amounts of money in India.

India is the world’s leading remittance recipient, with more than $12 billion sent from the US to India in 2019 alone. Knowing how much you’ll pay in tax and how the process works can give you peace of mind when receiving money from the US to India.

How much money can I receive from the USA?

There is no money transfer limit on how much you can receive in India from the US, at least none imposed by the Indian or US governments. However, the specific money transfer or banking service that you are using might impose limits on how much they can accommodate in a single transfer. If you’re planning on receiving a large transfer, consider using a limit-free provider such as XE.

Do senders from the US have to report and pay taxes to transfer money to India?

When you receive money from abroad in India, the first $15,000 USD sent will be exempt from taxes by the IRS under the Gift Tax policy. This limit is charged on a per person basis — if the sender would like to transfer $15,000 USD each to multiple recipients, they will still be off the hook for any gift taxes.

If they do send more than the allotted $15,000 USD, they’ll need to file an IRS Form 709 to disclose the gift. On top of the $15,000 annual exclusion, they get an $11.7 million lifetime exclusion in 2021. Should you be fortunate enough to have received over $11.7 million, your sender may then be liable for gift taxes at a rate anywhere from 17% to 40%.

Tax for receiving money from the USA in India

There is no recipient 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 received.

However, if you’re receiving more than about $700 from someone who isn’t a blood relative, you’ll need to report it on their taxes. No matter how you receive the money, you could be on the hook for a gift tax if you aren’t a blood relative, as regulated by the Indian Income Tax Act.

Tax for India residents sending money abroad

How much money can you send from India to the US? Well, in February 2020, the Indian government introduced a new law that would put in new limits for remittances out of India. Because of this law, resident individuals in India can only remit a maximum of USD $250,000 overseas each year. Additionally, any amount remitted above ₹700,000, which translates to roughly 9,500 USD, will be taxed at 5%.

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What are the penalties in India if I fail to file taxes on money received?

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 receipts 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 the US and India.

How will I receive the money in India?

You can pick up the cash in person or have the money deposited directly into your bank account or mobile wallet. Not every provider will offer all three options, so check before the transfer is initiated.

In general, you will have to provide an ID or a confirmation number for the transaction to pick up the money in cash.

Frequently asked questions

What is the IRS limit on sending money to India?

The IRS has no limit on how much money your friends or family can send to India. However, above $11.7 million USD, they’ll be liable for taxes.

How to avoid double taxes on money transfers to India?

Since India has a Double Taxation Avoidance Agreement with various countries, including the US, it would typically be very rare for you or your friends to be accidentally taxed twice. Should you be double-taxed, do work with a financial advisor to assess the specific provisions under which you can claim a tax credit and recoup your money.

Can I avoid penalties if I fail to file?

Yes, you can typically avoid penalties if you can show reasonable cause for your failure to file — such as a house fire, serious illness or natural disaster. Consult your personal financial advisory on the impact this might have on you.

Picture: Shutterstock

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