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Tax guidelines and regulations for large money transfers into India
Emigrating, funding a business or helping family abroad? Sending large sums to India from Malaysia can be tricky.
India is the world’s leading remittance recipient, with more than USD$287 million sent from Malaysia to India in 2017 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 transfers from abroad to India?
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.
However, if you’re sending more than 50,000 rupees (about RM2,757, depending on the exchange rate) to someone in India who isn’t a blood relative, they’ll need to report it on their taxes — regardless of how you know them. No matter how you send the money, your recipient could be on the hook for a gift tax if they aren’t a blood relative, as regulated by the Indian Income Tax Act.
Compare providers for your next large transfer to India
Different money transfer providers will offer different money transfer limits from the USA to India. Compare money transfer options to save money on your next transfer. Simply enter the amount you want to send and click Calculate.
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 Malaysia and India.
Do I have to report large transfers out of Malaysia?
By law, banks and money transfer services report all cash transactions that exceed RM25,000 and any transaction of any amount that alerts their suspicions to the Central Bank of Malaysia (BNM). You generally won’t need to do anything on top of this, but it’s good to keep all records of the transfer just in case.
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.
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 INR50,000 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.
Frequently asked questions
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