Sending money abroad in a secure and convenient way through remittance
When you live overseas on business, as a student, or as a migrant worker, you may often need to send part of your foreign earning to your family back home to maintain their financial upkeep. You visit your bank to enquire about the fund transfer process and learn about a process called foreign exchange remittance. Let us understand what is remittance, its types, payment methods and more in this article.
Remittance refers to the process of transferring or sending money from one party to the other. The term remittance is typically used to denote the transfer of funds overseas. Essentially, remittance helps you ensure the financial security of your family in one country while you are based in another.
Inward remittance refers to the funds you receive in your bank account from another account in India or abroad. So, as an NRI living in Canada, if you send money to a local account in India, the fund transfer is called an inward remittance.
When you transfer funds overseas from your local account, it is an outward remittance. For instance, when parents in India transfer funds to their child, an international student living in Singapore, the money transfer service becomes an outward remittance for the parents.
Having explained what is remittance in banking, let us now understand the various payment methods.
Wire transfer is one of the most popular methods used for remittances. An international money transfer can easily take anywhere from 3-5 business days or longer. Wire transfers can be quite expensive, with some host countries charging high fees for the service.
A bank transfer is used for sending money between your bank accounts. This can be done locally or internationally. A local bank transfer is a cross-border payment where a deposit is made into a foreign bank account.
The proliferation of technology has given rise to several apps that facilitate faster remittances. Paying through money transfer apps is easy, secure, and convenient. Processing is almost instant.
Remittance charges are usually zero. But the remitting or intermediary bank may charge a fee. You will also have to pay a foreign currency conversion charge, which is a flat fee. Service tax is also levied.
Understanding remittance meaning in banking is crucial if you wish to initiate international fund transfers. When deciding whether to do a wire or a bank transfer, consider important factors like timing, exchange rates, and costs. Doing so can help you choose a suitable payment method so that your loved ones can receive the funds faster.
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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.