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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.
India is the world’s leading remittance recipient, with more than $11 billion sent from the US to India in 2017 alone. Knowing how much you’ll pay in tax on money received from abroad to India 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 about $700 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 blood relations. 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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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 the US and India.
Do I have to report large transfers out of the US?
Generally, yes — though it depends on how much you’re sending and for what purpose. Gifts over $15,000, business transactions over $10,000 and any foreign account in your name that’s held more than $10,000 in the past year will need to be reported on your taxes.
By law, banks report all cash transactions that exceed $10,000 — and any transaction of any amount that alerts their suspicions. Money transfer businesses, which often solely send money between countries, sometimes have reporting thresholds as low as $1,000.
Sending a lot of money out of the country? Know what the IRS expects of you.
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.
How to send money to India
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.
Frequently asked questions
I’m interested in starting an import/export business in India. How do I get started?
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.
Is dealing with the IRS a hassle when transferring large amounts?
If you follow the law and submit your legal documentation in a timely and accurate manner, 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.
Can I avoid IRS penalties if I fail to file?
Yes, you can avoid IRS penalties if you can show reasonable cause for your failure to file — such as a house fire, serious illness or natural disaster.
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