When you want to send money overseas to India there are tax obligations that you incur. If you are sending the money, it is only natural to think about how much you will pay in tax in the country you are sending the money from.
If you are receiving the money from India, you also need to know if there are any tax implications on your side for receiving the money. All these scenarios need to be considered so that the intended amount is sent or received. Here is what you need to know in terms of tax and your obligations when transacting internationally in India.
What are Tax Implications While Sending Money to India?
If you are sending money overseas from the USA to India you can send up to $14,000 per year to as many people you want as of 2015. You have to calculate the rate now with inflation being accounted for. The $14,000 dollars has an exception in the federal gift tax. Any amount above that is taxed. If you are married, you can send $28,000 with the federal gift tax excluded. So, for example, if you send $10,000 each to four different people, you will not be taxed because the amount is below the annual exclusion threshold.
Receiving Money in India
If you receive more than 50,000 Rupees per year from people who are not your close relatives, the government automatically considers the money to be income, and you are taxed as income tax. This tax is imposed on the recipient of the money.
If you are not related to the sender in any way, you are obligated to pay tax by the Indian government on the excess amount above 50,000 rupees. You should consider using a bank or international money transferring service that explains everything you need clearly like Western Union.
The government of India considers these people to be close relatives:
- A spouse of the person sending money overseas
- A sister or brother to the sender.
- A sister or brother to the sender’s spouse.
- A sister or brother to either of the sender’s parents.
There is no limit to the amount of money you can send overseas to India from the USA if you pay the taxes. There is a limit of the tax-exempted that is considered as a gift card, which may amount to up to $14,000 as of 2015. Any amount the sender sends to India above the gift-free limit, the sender is required to pay the gift tax.
There is no income tax on the amount you send but the recipient might be taxed the income tax. If you are sending money overseas from India, you are limited to $250,000 per year.
You need to find a good bank that offers competitive currency exchange rates if need be and one that gives you all the information you need if you are transacting internationally to India. We hope that we have given a clear highlight on all the information that you may need when sending money to India.