Understand the difference between remittance and transfer for easier decision-making.
The term 'remittance' is derived from 'remit', meaning 'to send back'. A bank remittance refers to the funds sent or transferred to another entity or account as payment for services or a product. Remittances can also be personal money transfers made to family and friends overseas and any sort of business payments.
Bank remittance is a type of transaction involving two separate account holders. Such individuals should be residing in two different countries. For instance, if a migrant or foreign worker sends money back home, the fund transfer is a remittance. India has been the largest recipient of remittances from 2008 until 2020.
Bank transfer is defined as a transaction between accounts (in most cases, two accounts of the same individual). Sometimes called a wire transfer, this facility instructs the bank to send money from one bank account/savings account to another via online banking. This can happen either locally or internationally. A local bank transfer is a payment method on a cross-border medium wherein the money is deposited into a foreign bank account.
Local bank transfers are an intermediary organisation that runs between the payer (source of origin) and the payee (the recipient of the transfer). Much like a credit union, these local bank transfers perform the task of a clearing mechanism. They protect and settle the transfer of funds.
The most obvious similarity between bank remittance and bank transfer is that both of them are modes of transferring money. You also need to set up beneficiary details such as their name, bank name and branch and bank code number (known as IFSC code for domestic transactions and SWIFT/IBAN code for international transactions) before initiating the fund transfer. With technological advancements in the banking sector, both transfers and remittances can be completed within 2-24 hours.
When making international bank transfers, the process may take more time when compared to transactions taking place within India because the transfers happening overseas involve third-party intermediaries and the difference in the time zones.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.