Friday, January 13, 2017

What is the limit and tax implication of Sending Money to India from the USA?

In theory, there is absolutely no limit to how much money you can send to India, provided you earned your money legally and paid your taxes but the USA is special. In practice, depending upon which channel you are using for sending money to India, you might have some limit. Similarly, you will also hit the daily limit of transaction you can do with your local bank e.g. paying bills up to 50,000 dollars daily for remittance purpose.

There is also a limit of US $14,000 per person per year for the tax-free transaction. Any amount sent above the US $14,000 per person per year, the sender is responsible for paying the gift taxes in the USA. Though, if you are married you can gift up to USD 28,000 + USD 28,000 = USD 56K if you include you and your spouse as a giver and your mom and dad as a beneficiary of the gift.

In this article, we'll see how much money you can send daily, weekly and monthly by using different remittance channel, particularly from the USA to India and any tax implication by sending a large amount of money from the USA to India.

First thing first, once you pay your taxes in the USA, you can send any amount of money to India but due to safety, security, convenience and exchange rate benefit I advise to send in multiple small chunks for example if you want to send 50K USD then instead of sending in one go you can send in two transactions of 25K USD each or 3 transactions of 16K, 17K, and 17K USD.

You can transfer this amount by using wire transfer to your NRE or NRO account. Most of the Indian banks has tied up with US banks, also known as correspondent banks which help NRIs to send money to India quickly and efficiently. For example, Wells Fargo has some understanding with ICICI and they only charge $5/transaction and also give good exchange rate.

In general, once the money is taxed once, it's not taxed again and only interest earned on money is taxed. When you send money to India from the USA there is a tax implication on India if you send money to someone who is not your children, spouse or parents. For them, that money is considered as income and they have to pay income tax in India on that money + any interest earned by that money in their bank account.

But, when you send money to India from the USA in your parent's bank account or your wife's normal saving account it is considered as a gift to them and a gift is not taxed in India. But, suppose you send 50K USD i.e. 34 lakh INR and your wife or parents created fixed deposit which earned 3 lakh Rs per annum on interest then they have to pay tax on that money in India.

What is the limit and tax implication of Sending Money to India from the USA?

In short, there is no limit of sending money to India from the USA if you have paid your taxes. The money you send to India will qualify as Remittance and it is your earning after you pay your taxes. Though, you should maintain sufficient documentation of your US tax returns, W-2 forms etc.

Though the daily limits i.e. the maximum amount of money you can send from the USA to India daily will depend upon several factors e.g. the limit imposed by online/offline remittance service you will use e.g. Western Union, Money2India, Xoom or Bank wire transfer and daily transaction limit imposed on your saving bank account by your local bank.

1 comment:

  1. You mention that once the money is taxed, it's not taxed again and there is no limit, but you also specify there's a gift tax on transfers over 14K. Can you clarify more on how much gift tax does the sender pay for transfers over 14K to a family member?