What are the charges for Outward Remittance?

What are the charges for Outward Remittance?

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Key Takeaways

If you wish to send money to your family in India from abroad, you typically have to pay an outward remittance fee. This fee is levied by the bank or financial institution initiating the transaction and generally depends on the remitted sums. Find out the applicable outward remittance charges associated with sending money to India in this article.

Introduction

As the world becomes more connected, more and more people are gaining the confidence to transcend border and move to foreign lands for new opportunities. You may wish to go abroad for higher education or job opportunities. But if you have dependent family members back home, you may have to take the necessary steps to ensure their financial upkeep. Thanks to remittance services, you can send money to your families, no matter which part of the world they are in. However, you have to pay a charge for services. In this article, we shall attempt to understand what outward remittance charges are.

What is Outward Remittance Charge?

Outward remittance charge is the fee a remitting financial organisation charges their customer for transferring money from a foreign bank account to a bank account in another country. For instance, if you live in the USA and wish to send money to your kin in India, the sum should be remitted into their Indian bank account. For rendering this service, your bank in the US will charge you an outward remittance fee. Also known as foreign remittance charges, the charge levied by your bank involves certain additional costs and commissions and is based on the amount of money being transferred.

What is the commission involved in Outward Remittance Charge?

An outward remittance is usually known as 'wire transfer', an electronic mode of transferring money between bank accounts in different countries. Sometimes, this transfer also relies on intermediaries, which is why some additional costs are involved in the transfer process. Foreign remittance charges include commissions like handling fees, cable or telex charges, exchange rate mark-up charges, and fees for intermediary banks and the recipient banking services. The commission is charged over the spread or the difference between the buy and sell price of the currency by the bank.

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Is outward remittance levied to Goods and Services Tax (GST)?

Yes, Goods and Services Tax is levied on outward remittance on the commission amount. Also, GST applies to the conversion of the currency as well. Moreover, GST is also levied on the 'taxable value' of the sums being transferred.

What is the applicable rate of GST on Outward Remittance Charge?

The Government of India and the RBI typically set the GST rate on outward remittance charges. The GST rate applied for outward remittance, as a rule, is 18% for money coming into India. This rate applies to the commission value. The GST on 'taxable value' is as under:

  • 1% for transfer up to INR 100,000
  • 5% + INR 1000 on transfers above INR 1 lakh up to INR 10 lakh
  • 1% +INR. 5500 on transfers above INR lakh.
  • The maximum amount of GST on 'taxable value' can be INR 60,000.

TDS on Outward Remittance

Apart from the mandatory GST, outward remittance charges are also subjected to Tax Deducted at Source (TDS), sometimes referred to as Tax Collected at Source (TCS). As per the Finance Act(2), 2020, the Tax Collected at Source is 5% on foreign transfers above INR 7 lakh in a year.

Conclusion

While outward remittance services enable you to make convenient, quick, and seamless transfers, they involve some mandatory fees. These fees may differ from one bank to another. Thus you must confirm the bank charges for foreign remittance before making an international money transfer. You can also research the different ways to reduce the outward remittance charges, including online wire transfers, setting up recurring transfers and opening joint NRE and NRO accounts with family members in India.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.

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