With an increasing number of Indians working and settling in Canada, sending money to India has become a common financial activity. However, many individuals are unaware of the tax implications of money transfers from Canada to India.
Whether you’re sending funds to support family members, for investments, or for any other purpose, understanding the tax laws in both Canada and India is crucial. Read this blog to know the tax rules, limits, and exemptions related to money transfers from Canada to India.
Table of contents
Is There a Tax on Sending Money from Canada to India?
The taxation of money transfers depends on various factors, including the purpose of the transfer and the recipient’s status. Here’s how taxes apply in both countries:
Tax Implications in Canada
Sending money from Canada to India is not taxable. Canada does not tax the act of transferring money. However, you must send money from income that has already been taxed.
If you earned the money legally and paid taxes in Canada, you can transfer it without paying extra tax.
Gifts are also tax-free. Whether you send a small or large amount as a gift, Canada does not charge a gift tax.
Example: If you earn CAD 5,000 in Canada, pay taxes on it, and then send CAD 1,000 to your family in India, you don’t owe any additional tax on that transfer.
Check out the tax implications on money transfers from Canada to India below-
No Tax on Sending Money
Canada does not impose a tax on outward remittances. This means you can send money to India without paying any tax to the Canada Revenue Agency (CRA).
If international students in Canada send money to India from their part-time jobs, investments, business income, or earnings from research or teaching assistantships, they do not have to pay additional tax on the transfer.
However, they must file taxes in Canada on their earned income. Learn more in our guide on tax for international students in Canada.
Gift Tax Rules
If you are sending money as a gift, there is no specific gift tax in Canada. However, any income generated from the gifted amount in India may be subject to taxation.
Reporting Large Transfers
While Canada does not tax money transfers, financial institutions must report transactions over CAD 10,000 to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) for anti-money laundering purposes.
Tax Implications in India
India does not directly tax money received from abroad. This means that the recipient does not have to pay tax on the money received.
However, if the transfer is large, especially as a gift, the recipient must report it to Indian tax authorities for transparency.
Gifts from family members are tax-free. But if a non-relative sends a large gift, the recipient may need to pay tax on it.
Example: If a parent in Canada sends INR 5 lakh to their child in India, no tax applies. But if a friend sends the same amount, the recipient may need to pay tax under the Income Tax Act, of 1961.
Receiving Gifts from Abroad
If you send money to an immediate family member (spouse, parents, children, or siblings), it is not taxable under India’s Income Tax Act.
If the recipient is not a close relative and the amount exceeds INR 50,000 in a financial year, it is treated as taxable income.
Income Tax on Investments
If the transferred money is invested in fixed deposits, stocks, or real estate, any income generated (interest, dividends, or capital gains) will be subject to taxation in India.
Foreign Exchange Regulations
The Reserve Bank of India (RBI) monitors inward remittances under the Foreign Exchange Management Act (FEMA).
NRO (Non-Resident Ordinary) accounts are subject to tax on interest earned, while NRE (Non-Resident External) accounts offer tax-free interest.
Also Read: Check here for the details of some of the best banks for inward remittance. Know all about the charges on remittance.
Is There Any Tax Charged in India on Money Transfers from Canada to India?
Receiving money from Canada in India is generally not taxable for the recipient, but certain conditions and tax laws apply. Here are the key points to consider:
- No Tax on Personal Transfers: If you send money to family members (parents, spouse, children, or siblings), the amount is considered a gift and is not subject to Indian income tax.
- Tax on Gifts from Non-Relatives: If the recipient is not an immediate family member and receives more than INR 50,000 in a financial year, the entire amount is taxable as per the Income Tax Act, 1961.
- Investment-Related Taxation: If the recipient in India invests the money in fixed deposits, stocks, or real estate, any income generated (such as interest, rental income, or capital gains) from money transfers from Canada to India is taxable.
- Business Transactions: If the money is sent for business purposes, it may be subject to taxation based on its usage.
While receiving money is generally tax-free, certain cases require Tax Deducted at Source (TDS). Know about what kinds of money transfers from Canada to India are taxable-
Tax Deducted at Source (TDS) in India on Money Transfers from Canada
- TDS on Foreign Remittances for Investments: If funds are used to purchase property or investments that generate taxable income, TDS may be applicable under Section 195 of the Income Tax Act.
- TDS on Business Transactions: If the recipient is a business entity receiving payments for services rendered, TDS may be applicable based on the nature of the transaction.
- TCS on Foreign Remittances: Under the Liberalized Remittance Scheme (LRS), if an Indian resident sends money abroad, a Tax Collected at Source (TCS) of 5% applies to remittances above INR 7 lakh per financial year. However, this does not apply to inward remittances from Canada to India.
Also Read: Know everything about TCS on foreign remittance for education section, what is foreign remittance, present vs future, and more.
Limit on Money Transfer from Canada to India
There is no official legal limit on the amount of money you can send from Canada to India. However, banks and financial institutions may impose daily or monthly transfer limits, which typically range from CAD 25,000 to CAD 100,000, depending on the service provider.
However, you must keep the following points in mind to avoid any unknown tax implications of money transfers from Canada to India-
Reporting Requirements in Canada: Any transaction exceeding CAD 10,000 must be reported to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as part of anti-money laundering regulations.
Scrutiny in India: While India does not impose a tax on receiving foreign remittances, large transfers may be scrutinized under the Foreign Exchange Management Act (FEMA). Additionally, banks may require the recipient to provide proof of the source of funds for transfers above INR 10 lakh (approximately CAD 16,500).
FATCA & FEMA Compliance for Money Transfers from Canada to India
When transferring large amounts from Canada to India, compliance with international financial regulations is crucial to avoid legal and tax-related issues. Here’s how FATCA and FEMA impact tax implications of money transfers from Canada to India-
FATCA (Foreign Account Tax Compliance Act)
If you are an Indian citizen or a Non-Resident Indian (NRI) with financial ties in both India and Canada, you must disclose offshore assets exceeding a certain threshold under FATCA regulations.
Banks and financial institutions may report large transfers to tax authorities in both countries to prevent tax evasion.
FEMA (Foreign Exchange Management Act)
In India, FEMA regulations for NRIs govern international money transfers. While personal remittances are usually tax-free, any transfer exceeding INR 10 lakh (approximately CAD 16,500) may be scrutinized under FEMA.
The recipient may need to submit details such as the source of funds and the purpose of the remittance.
Bank Reporting Requirements
Indian banks may require additional documentation for large transfers, especially if the funds are used for investment or business purposes. Failure to comply with FEMA regulations could result in penalties or legal action.
However, one can easily handle and fix FEMA violations by understanding the RBI’s compounding of contraventions rules.
Best Ways to Send Money from Canada to India
When transferring money from Canada to India, it is essential to choose a method that is secure and cost-effective while considering the tax implications of money transfers from Canada to India.
The right transfer option can help you save on fees, get better exchange rates, and ensure smooth processing without unnecessary delays or scrutiny.
Here are some of the cheapest ways for international money transfers from Canada to India:
1. Online Money Transfer Services
- Wise (formerly TransferWise) – Low fees, mid-market exchange rates.
- Remitly – Fast transfers, competitive rates.
- Western Union – Instant cash pickup, wide availability.
- MoneyGram – Quick transfers, multiple payout options.
Also Read: Is Remitly safe? Explore security measures for safe Remitly transfers and protect your funds while sending money internationally.
2. Bank Transfers
- RBC, TD, Scotia, CIBC, BMO – Direct transfers to Indian bank accounts.
- ICICI Bank Canada & SBI Canada – Special services for India transfers.
3. Wire Transfers (SWIFT)
- Secure but may involve higher fees and longer processing times.
4. Forex & Currency Exchange Services
- Companies like KnightsbridgeFX and OFX offer good exchange rates.
5. Crypto Transfers (For Tech-Savvy Users)
- Sending stablecoins like USDT or USDC and converting them in India.
6. Demand Drafts (Traditional Method)
- A secure way to send money, but slow and less common now.
Each method varies in speed, cost, and convenience, so choose based on your needs!
To sum up, sending money from Canada to India generally does not attract taxes on the sender’s side. However, tax implications may arise for the recipient, depending on the purpose of the transfer.
Understanding the tax laws in both countries helps ensure compliance and avoid unnecessary tax liabilities.
If you are making large transfers or investing in India, consult a tax expert to ensure compliance with the tax regulations in both Canada and India.
FAQs
No, Canada does not tax money transfers to India. However, the money you send must come from income that has already been taxed in Canada.
No, India does not tax money received from abroad. However, large gifts from non-relatives exceeding INR 50,000 may be taxable.
There are no strict limits on sending money from Canada to India, but banks and transfer services may have their own limits based on the transaction method.
No, international students in Canada do not pay tax on money transfers to India. However, they must file taxes on their income earned from part-time jobs, investments, or assistantships.
In Canada, you do not need to report personal remittances. In India, the recipient may need to declare large amounts, especially if it is a gift from a non-relative.
The best options include online money transfer services like Wise, Remitly, and Western Union, as well as bank wire transfers and Forex services for better exchange rates.
Gifts from family members are not taxed in India. However, gifts from non-relatives above INR 50,000 in a year may be subject to tax.
No, sending money does not impact your tax returns in Canada. However, if you are a U.S. citizen living in Canada, you may need to report foreign accounts under FATCA regulations.
To avoid tax issues, keep proper documentation, report large transfers if required, and ensure that money received as a gift from non-relatives does not exceed INR 50,000 in a financial year.
Banks and money transfer services may ask for identification (passport, driver’s license), proof of income, and recipient details to comply with regulatory requirements.
To learn more about bank accounts for students, the best education loans, 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.
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