Failing to file could land both you and your recipient in tax trouble.
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 $700, depending on the exchange rate) that you send is taxable and must be declared as income.
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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 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?
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, use 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 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.