Studying abroad is a thrilling adventure that brings with it a world of opportunities and experiences. However, managing finances across borders can be a challenging aspect for many Indian students. One of the most important aspects of financial management is to understand how foreign remittance works. In this blog, we’ll discuss how foreign remittance transactions are made and what are the processes of inward and outward remittance.
Table of contents
What is Foreign Remittance?
Foreign remittance refers to the transfer of money from one country to another. This financial transaction involves individuals sending money to their home country from abroad, often by migrant workers or individuals living in a foreign country. Foreign remittances can also include transfers between businesses or governments across borders.
- The process of foreign remittance can be carried out through various means, such as bank transfers, online money transfer services, wire transfers etc
- The sender incurs fees and exchange rate costs during the transaction.
- Governments and financial institutions closely monitor and regulate foreign remittances to ensure transparency and prevent illegal activities such as money laundering and fraud.
What is Inward Remittance and How it Works?
Inward remittance refers to the process of sending money from a foreign country to India. For Indian students studying abroad, this often involves receiving financial support from family or sponsors back home. Inward and outward remittances are closely monitored by RBI and the LRS scheme is applicable for this. Check all the details below about the process of inward remittance:
Initiating the Transfer
For an inward remittance, the sender initiates the transfer from their bank in the foreign country or any correspondent bank to an Indian Bank. Details such as account number, customer id, swift code, purpose of sending money etc are required to complete the transaction. Usually, an inward remittance transaction takes around 24-48 banking hours to be completed.
Bank Processing
The sender’s bank in the foreign country processes the transfer and converts the money into Indian Rupees (INR) based on the prevailing exchange rate. For example, when you deposit the money for remittance in a correspondent bank of an Indian Bank say HDFC Bank, then it gets transferred and the bank charges applicable charges and converts the money as per the the ongoing exchange rate.
Also Read: Looking for an easy inward remittance through an Indian Bank? Check out this blog on the best banks in India for Inward Remittance
Receiving Bank
After the money is received by the bank in India, it is transferred to the beneficiary after applicable deductions. The beneficiary will receive a notification from their bank informing them about the successful transfer. Please note that the deductions of TCS will be applicable as per the guidelines of the Reserve Bank of India.
What is Outward Remittance and How it Works?
Foreign outward remittance involves sending money from India to a foreign country. This might be necessary for paying tuition fees, accommodation, or other expenses. Check all the steps involved in outward remittance:
Application Process
The sender visits their bank in India and fills out an outward remittance application form. The bank asks for necessary details such as the purpose of remittance, the information of the beneficiary, and the foreign bank account details or the details of the correspondent bank abroad where the remittance is being made.
Also Read: Confused between bank transfer and remittance? Check this blog and understand the differences between Bank Transfer and Bank Remittance
KYC Compliance
The sender from India will have to submit Know Your Customer (KYC) documents as per regulatory requirements directed by the Reserve Bank India (RBI). This may include a copy of their passport, visa, and university admission letter.
Bank Approval
When you submit all the necessary details for remittance to the bank, it will verify the same to initiate the transfer. The bank reviews the application and, upon approval, processes the outward remittance.
Conversion and Transfer
The bank converts the Indian Rupees into foreign currency at the applicable exchange rate and transfers the funds to the beneficiary’s bank account. The taxes may also be deducted as per the guidelines of the RBI. The student will receive the confirmation from their bank, verifying the successful completion of the outward remittance.
Note: All the inward and outward remittances are closely monitored by the monetary authority of the country i.e. Reserve Bank of India. Please refer to LRS (Liberalised Remittance Scheme) guidelines issued by RBI and check the limits, taxes and other applicable rules.
FAQs on How Foreign Remittance Works
Money sent by an individual from abroad or a foreign country to family, friends or relatives staying in their home country to manage expenses is known as foreign remittance.
Sending money abroad is very easy these days. International Wire Transfer is one of the best ways to send money abroad or to receive money from a foreign country.
Foreign outward remittance is the process of sending money to an individual from India to a foreign country to pay tuition fees, accommodation, or other expenses.
As per the revised LRS scheme, no TCS will be applicable for remittances if it is for medical and educational purposes. However, a 20% TCS will be applicable on remittances for all other purposes. Also, a TCS of 5% will be applicable for amounts exceeding INR 7 lakh for education and medical treatment abroad.
When a certain amount of money is transferred from one account to another, it is known as a bank transfer. However, bank remittance means when a transfer is made between two different accounts.
Inward remittance is the process of sending money from a foreign country to India. The money sent to the family, friends or relatives to support them financially is usually considered a remittance.
Understanding foreign remittances is important for Indian students studying abroad. Whether receiving financial support from home or covering educational expenses, being well-versed in the inward and outward remittance processes ensures a smooth financial journey. By following these simple steps and staying informed about exchange rates and regulations, students can focus on their studies without the stress of managing international finances.
To know more about the remittance process, loan application process, the best international bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
| Related Blogs |
| Currency Exchange Strategies for Studying in Expensinve Destination |
| Is it Better to Exchange Currency at Home or Abroad |
| Airport Currency Exchange Rate |
Follow Us on Social Media
