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Tax guidelines and regulations for large money transfers into India

Failing to file could land both you and your recipient in tax trouble.

There’s a lot for you to consider when sending money to India. 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?

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 (approximately S$925 as of 15 October 2020) to someone in India who isn’t a blood relative, they’ll need to report it on their taxes — and you may need to report it to the IRS, 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.

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Disclaimer: Exchange rates change often. Confirm the total cost with the provider before transferring money.

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 Singapore and India.

Do I have to report large transfers out of Singapore?

To avoid global remittance services being used to fund criminal activities, the Singapore Government monitors all overseas transfers of more than $1,500.

Introduced under the MAS Notice 626 on the Prevention of Money Laundering and Countering the Financing of Terrorism, the Monetary Authority of Singapore (MAS) collects data for all cross-border transactions exceeding $1,500 to ensure that Singapore’s banking system isn’t used to fund criminal activities such as money laundering or terrorism.

This means that whenever you send or receive an international money transfer of more than $1,500 (or an equivalent amount in another currency), the bank or remittance provider that handles the transaction must supply details of the transfer to MAS. You may be asked to provide personal information, for example, your NRIC, as evidence of the person completing the transaction. Failure to comply may result in your transaction request being rejected.

International money transfer regulations in Singapore

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 OFX.

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.
How to send money to India

Bottom line

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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