Foreign remittance refers to the process of transferring money across borders, typically for personal, educational, or business-related purposes. In India, the foreign remittance procedure is regulated under the Foreign Exchange Management Act (FEMA), which ensures that remittances are made smoothly and in compliance with the country’s financial regulations. Understanding the process, limits of money transfers, documentation, and compliance details is important for a hassle-free procedure. Let’s explore the details in the blog-
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What is Foreign Remittance?
Foreign Remittance involves the transfer of funds from residents of one country to individuals or entities in another country. Financial institutions like banks, money transfer companies, or other authorized dealers usually make this transfer.
It includes the transfer of funds for educational purposes, personal remittances, and investment-related remittances. For study-abroad aspirants, the primary focus will be on tuition fees, living expenses, and travel-related costs.
All transfers must comply with various regulatory frameworks set by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA).
- The Liberalized Remittance Scheme (LRS) allows Indian residents to send money abroad for various purposes.
- The maximum limit of foreign remittances is USD 250,000 per financial year as per LRS.
- Individuals must fill out Form A2 and make the remittance through AD Banks for Form A2 remittances.
Also Read: Check out this blog to make the cheapest international money transfers abroad.
Foreign Remittance Procedure
The process of making foreign remittances may seem complicated at first, but it’s straightforward when you follow the correct steps.
By following the steps- visiting an authorized bank, submitting the required documents, choosing the appropriate payment method, and being aware of fees, you can ensure a smooth and hassle-free remittance process. Check out the steps below-
The first step in the foreign remittance process is to approach an authorized dealer or a bank that offers remittance services. Licensed institutions like banks or authorized money transfer agents, recognized by the Reserve Bank of India (RBI), must process all remittances. These institutions ensure secure transfers and compliance with FEMA regulations.
Some of the popular banks and authorized dealers offering foreign remittance services include the State Bank of India (SBI), ICICI Bank, HDFC Bank, and Western Union, among others.
Step 2: Fill Out the Remittance Application Form
Once you visit the bank or authorized dealer, you’ll need to fill out a remittance application form. It is important to know how to fill out Form A2 and understand the details that this form will require-
- Your Details: Name, address, contact number, passport number, and other identity details.
- Recipient’s Details: The name, address, and bank account information of the educational institution abroad or the receiving party.
- Purpose of Remittance: Specify that you are sending the funds for tuition fees, living expenses, or other study-related costs. For this, you must fill out the correct purpose code for outward remittance for education.
- Amount to be Remitted: Specify the total amount of money you wish to send, either in INR or the foreign currency of the destination country.
It’s essential to provide accurate details to avoid any delays in processing your remittance.
Step 3: Submit Required Documents
Along with the remittance application form, you will need to submit a set of documents to support your remittance request. The documents required can vary depending on the purpose of the remittance, but for study abroad payments, you’ll generally need:
- Admission Letter: A copy of the admission letter from the educational institution abroad, confirming your enrollment.
- Fee Structure: A detailed breakdown of your tuition fees, accommodation charges, and other academic expenses.
- Proof of Identity: Government-issued identity proof such as your passport, Aadhar card, or Voter ID.
- Proof of Address: A utility bill, bank statement, or a copy of your passport showing your current address.
- PAN Card: If the remittance amount exceeds INR 50,000, you may also need to submit a Permanent Account Number (PAN) card.
Banks or authorized dealers will verify the documents to ensure everything is in order and compliant with the regulations.
Step 4: Choose the Payment Mode
After submitting the necessary documents, you’ll need to decide how you want to make the payment for the remittance. There are a few common options available:
- Cheque: You can issue a cheque in INR to make the payment. The bank will process the cheque and deduct the equivalent amount in INR.
- Demand Draft: A demand draft drawn in INR, which the bank will convert into foreign currency and transfer to the recipient’s account abroad.
- Direct Bank Transfer: The most efficient method involves directly debiting funds from your bank account and converting them into the required foreign currency. This option is quick and typically incurs lower transaction time and fees.
In most cases, paying via direct bank transfer is the easiest and quickest method for study abroad students, as it avoids any delays that may occur with cheques or drafts.
Step 5: Bank Processes the Transaction
Once you choose the payment method, the bank or authorized dealer processes your remittance.The process typically involves:
If you’re paying in Indian Rupees (INR), the bank will convert your INR into foreign currency (usually USD) as per the current exchange rate.
After converting the INR into foreign currency, the bank will remit the funds to the recipient’s bank account abroad (or the designated institution).
Step 6: Tracking and Settlement
After you initiate the remittance, most banks and service providers offer a tracking number or receipt. You can also check remittance status with Form A2. The bank will transfer the money to the recipient’s account once the transaction is completed. The transfer may take anywhere from 1 to 3 business days, depending on the destination country and the service provider.
Also Read: Check here some of the most important terms related to international money transfer.
How Foreign Remittance Works?
In this section, we will briefly explore how foreign remittance works– both inward remittances and outward remittances. Inward remittance refers to the transfer of money from a foreign country into India. This typically happens when students studying abroad receive financial support from their families or sponsors.
Outward remittance refers to transferring money from India to a foreign country, typically for students to pay tuition fees, accommodation charges, or other living expenses abroad.
How Inward Remittance Works
Initiating the Transfer
The process begins when the sender, usually a family member or sponsor, transfers money from their bank account in a foreign country to an Indian bank. The sender will need to provide key details such as the recipient’s bank account number, SWIFT code, and the purpose of the transfer.
Bank Processing
Once the sender’s bank processes the transfer, the funds are converted into Indian Rupees (INR) based on the current exchange rate. This is done either through the sender’s bank or a correspondent bank in India.
Receiving the Money
After the funds reach the receiving bank in India, the bank credits the money to the student’s account, minus any applicable charges. The recipient receives a notification of the successful transfer, and the bank deducts taxes like Tax Collected at Source (TCS) as per RBI guidelines.
How Outward Remittance Works
Application Process
To initiate an outward remittance, the sender (student or their sponsor) must visit their bank in India and fill out a remittance application form. This will include information such as the recipient’s details, the purpose of the payment (e.g., tuition fees), and the recipient’s foreign bank account information.
KYC Compliance
As part of regulatory requirements, the sender must submit the necessary Know Your Customer (KYC) documents. These typically include a passport, visa, and an admission letter from a foreign educational institution.
Bank Verification and Approval
Once the application is submitted, the bank verifies the details and approves the transaction. After approval, the bank processes the outward remittance, ensuring all documents are in order.
Currency Conversion and Transfer
The bank then converts the INR into the relevant foreign currency at the prevailing exchange rate and sends the funds to the recipient’s bank abroad. Like inward remittance, taxes and fees may apply, and students will receive a confirmation once the transfer is complete.
Charges Associated with Foreign Remittance
There are several charges associated with sending money abroad, and these can vary between banks or remittance agents. Usually, a flat fee is charged by banks or agents for processing the remittance. The amount typically ranges from INR 250 to INR 500 per transaction, depending on the service provider.
Besides, banks convert INR to the required foreign currency. They may add a margin to the exchange rate, which could impact the final amount received by the recipient. This is called the currency conversion fee.
If you’re using an international wire transfer, there could be additional charges. These fees depend on the amount and destination country.
This was all about the foreign remittance procedure. To learn more about education loans, the best bank accounts for students, forex, banking experience for global students, or international money transfers, reach out to our experts at 1800572126 to help ease your experience with studying abroad.
FAQs
Foreign remittance refers to transferring money from one country to another. In India, RBI and FEMA regulate the foreign remittances, especially for study abroad expenses.
To send money abroad, visit an authorized bank or financial institution, fill out the remittance form, submit the necessary documents, and choose your payment method.
You’ll need an admission letter, fee structure, identity proof (passport), address proof, and PAN card if the remittance exceeds INR 50,000.
LRS allows Indian residents to send up to USD 250,000 per financial year for education, travel, or investment purposes, subject to RBI regulations.
Under LRS, you can send up to USD 250,000 per financial year for tuition fees, accommodation, and other study-related expenses.
First, you fill out a remittance application, submit documents, choose a payment method, and the bank converts INR to foreign currency and transfers it to the recipient’s bank.
Yes, direct bank transfers are the fastest and most efficient way to send money abroad, where the bank debits your account and converts INR to the required foreign currency.
Typically, foreign remittances take 1-3 business days to process, depending on the destination country and the financial institution.
Fees vary by provider but generally include transaction fees, currency conversion charges, and potential wire transfer fees, which can range from INR 250 to INR 500 or more.
Yes, taxes like Tax Collected at Source (TCS) are applicable on outward remittances as per RBI guidelines, and these are deducted at the time of remittance processing.
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