Transferring From India to the USA Without Tax (2024)

Kelly Sikkema

Sending money from the United States to India is possible without tax, but only if your transfer meets certain requirements set in place by the Liberalised Remittance Scheme (LRS) and other tax regulations in India. We'll go through them in more detail in this article, but in summary, your transfer to America will generally not be taxed only if you're:

1. a Non-Resident Indian (NRI) remitting under $1,000,000 USD via your NRO account in India to an NRE account in the USA,
2. remitting for a tax-exempt reason (listed later) that's under any relevant threshold amount.

This short guide explores the varied tax implications for remitting to the United States from India, which largely involve what's known as Tax Collected at Source (TCS). TCS is a tax levied by the Indian government on outbound remittances to foreign countries, including America. These taxes are subject to specific rates and exemptions, aiming to generate revenue for the government while ensuring transparency in financial transactions.

However, these taxes can quickly add up and make the actual amount you transfer less than intended. This is where you can take advantage of real-time money transfer comparison platforms like Monito. Monito's market-leading comparison engine offers an effective way to save money on these transfers by helping you find the best rates and options available. Compare for yourself and save money on your next transfer to the US. 👇

Find the best deal when remitting to the US in real time:

How to Transfer Money From India to the USA Without Tax

• 01. What taxes impact remittances from India to the US? scroll down
• 02. How to transfer money from India to the USA without tax scroll down
• 03. How to save money when sending from India to the US scroll down

What Taxes Impact India-USA Remittances?

First things first, let's take a moment to understand the taxes involved in the transfer of money to the United States from India.

There are a few dimensions to understand here, namely (1) the Liberalised Remittance Scheme (LRS), which is the legal guidelines for outward remittances from India allowing resident Indians to transfer up to $2,50,000 USD from India to foreign currency accounts abroad per fiscal year, (2) Tax Collected at Source (TCS), which is the tax collected automatically from senders at the moment of transaction, and (3) the Income-tax Act, 1961, which forms the basis for all income tax law in India.

LRS Tax Rates & Applicability

Until October 2023, under the LRS, you were required to pay a TCS of 5% on all outbound remittances exceeding Rs 7 lakh per year. However, after October 1, 2023, this rate has gone up significantly to 20%, with some changes to the threshold limits too. These new TCS rates vary based on the purpose of the remittance, which we outline below:

• Overseas education financed by a loan: A TCS of 0.5% is applicable for remittances of more than Rs 7 lakh per year. However, if money is sent to meet the living expenses of students, the TCS will be 5% of the amount (see below). No TCS will be deducted on foreign remittances below Rs 7 lakh.
• Overseas education not financed by a loan: A TCS of 5% is applicable for remittances of more than Rs 7 lakh per year.
• Overseas medical treatment: Same as the above.
• Overseas tour program packages: A TCS of 5% until Rs 7 lakh per year, then a TCS of 20% of the entire amount thereafter.

All other transfers to the USA will be subject to a TCS of 20%, including buying stocks of American companies directly, purchasing property in the US, and sending ordinary remittances to American bank accounts from India below $2,50,000 USD per fiscal year (which is the maximum you're allowed to send under the LRS). These regulations apply to remittances to other foreign countries and currencies, too.

It's also worth noting that the TCS is 10% if PAN (Permanent Account Number for Indians) is not provided during the transfer (for transfers with normal income sources) and that a higher tax rate of 10% applies if you haven't filed your Income Tax Returns for the last two years. These apply both to residents and non-residents.

TCS Collection Process

When you instruct a money transfer through your bank or another authorized dealer, they'll automatically deduct the TCS amount while receiving the funds or during the debit process (whichever comes first). This can have a big impact on your money transfer. For instance, if you remit Rs 20 lakh and the TCS rate is 20%, then the TCS deducted will be Rs 4 lakh.

Are Any Transfers Tax-Exempt?

Although there's no way to avoid TCS altogether when remitting abroad, it's important to note that TCS is not always applicable, and the following types of payments won't incur TCS at all:

• payments made by the government for imports or purchases,
• transfer made using international debit or credit cards up to Rs 7 lakh,
• transfers made by Non-Resident Indians (NRIs) under $1,000,000 USD when instructed via an NRO account to an NRE account according to Section 206C(1G) of the Income-tax Act, 1961. This includes transfers of your salary, rent, bill payments, business profits, dividends, and more. To do this, you'll need to submit some paperwork for the RBI first (namely Form 15CA, Form 15CB, and a FEMA Declaration), which will be facilitated by your bank.

How to Transfer Money From India to the USA Without Tax

• Step 01

  Consider your transfer needs

  Your TCS rate will depend heavily on the purpose of your transfer. If you're remitting to the USA to support someone's education or pay medical bills, you'll pay no tax if you send less than Rs 7 lakh per year, and you'll pay lower tax rates for all amounts thereafter.

• Step 02

  Pay with a debit/credit card if possible

  If it's possible for you to do so, consider using a debit or credit card to make your transfer. This is especially easy if you want to pay for something online in a foreign currency, since most e-commerce checkouts accept card payments, but in some cases it might be possible to send money, via your card, to a foreign bank account using a mobile wallet like Paytm.

• Step 03

  Check whether you need to file Form 3520

  If you're sending more than $100,000 USD to America per year, you'll need to file a special form called Form 3520 to the Internal Revenue Service (IRS) in the US that legally declares your funds transfer. Filing this form bears no tax implications.

• Final step

  Compare to find the best deal

  Before you click 'Send' on your money transfer, make sure you're getting the best deal. Exchange rate markups between the INR and USD are notoriously bad among big Indian banks, and you may already be paying more than you'd like in taxes, so it's best to keep the costs as low as possible and compare money transfer providers in advance. You can do this in just a few clicks right here on Monito! 👇

  Compare on Monito now

How to Save Money Transfering From India

Monito's comparison engine can be your go-to resource for making informed decisions on outward remittances. By comparing different transfer options and rates, you can potentially save a significant amount of money.

The platform helps you find the most favourable rates, understand fees, and choose the best provider for your specific remittance needs. With the fresh changes in TCS rates in October 2023, using Monito's services becomes even more valuable in optimizing your international money transfers and saving money in the process. Give it a try yourself below!

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