Laws and legal documents when transferring large sums of money into India
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Emigrating, funding a business or helping family abroad? Sending large sums into India can be tricky.
There’s a lot for you to consider when sending money to India. But you can’t avoid the laws and potential paperwork that go along with transferring large amounts of money.
How India regulates large remittances
India is the world’s leading remittance recipient, with more than $10 billion sent from the US to India in 2015 alone. Many providers in the US offer transfer services to India, but your recipient could be on the hook for a gift tax as regulated by the Indian Income Tax Act.
In general, if your recipient is a “blood relative” — including spouses, children and grand-children, siblings or in-laws — they 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.
However, if your recipient is not related to you, any amount over 50,000 rupees (about $750, depending on the exchange rate) that you send is taxable and must be declared 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.
What are the penalties for not filing a large remittance?
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 is above board and complies with the laws of both the US and India.
Do I have to report large transfers out of the US?
How will my recipient receive my remittance in India?
The process of receiving a money transfer in India will vary by provider and delivery method. In general, your recipient will provide ID or a confirmation number for the transaction to receive your funds.
Money transfer services with no maximum sending limit
Frequently asked questions
The US trades about $63.7 billion in goods and services with India. If you’re interested in getting in on that action, we’ve put together a guide to starting an import/export business with India that includes information on startup costs, registering your business and more.
If you follow the law and submit your legal documentation timely and accurately, you shouldn’t experience hassles with the IRS. If you choose not to follow the law, you may be on the hook for stiff penalties, including jail time.
Penalties can be avoided if you can show the IRS reasonable cause for a failure to file. However, the US does not consider reasonable cause to include information that might be a crime in another country.
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