Last updated on May 28th, 2020
“Money can not be created or destroyed. It can only be transferred from one account to the other.”
– Harsh, The Philosopher
Quite often, people move to a developed country for the dollar figure. Due to the exchange rate difference, it makes sense to earn good money overseas and send a portion of it to pay off debts or help parents/siblings back home.
However, sometimes the process goes the other way round i.e. you need to send money from India to overseas. For example, you might need funds to finance a new business or to buy a piece of land or to build a house.
Unfortunately, when you want to send money from India to abroad, the rules are not as straightforward as they are the other way around.
First, you have to deal with different types of bank accounts you may need to open as an NRI. Secondly, the process to send money abroad has become more complicated, thanks to the changes in the taxation and FEMA rules to curb the black money. Frequent changes to the banking regulations by RBI only add to the confusion. No wonder people who want to send money from India to Australia are fraught with so many questions.
- What is the cheapest way to send money from India to Australia?
- Do I need to pay tax on it?
- What is the maximum amount I can transfer from India?
- How can I transfer money from India to Australia?
I was sailing in the same boat sometime back when I wanted to get some money here from India. To get the right answers, I consulted a few tax experts.
Here are the answers that I found.
What Is The Best Way To Send Money From India To Australia?
Under RBI’s Liberalised Remittance Scheme (LRS), banks are authorised to remit funds abroad without RBI’s approval if the transfer satisfies the guidelines laid out by RBI. As a resident Indian, you can transfer up to USD 2,50,000 per financial year to your friends or relatives or even your account abroad, under the LRS. The best way to do the transfer is to use services like Bookmyforex or ExTravelMoney who compare exchange rates across different banks and provide the best possible exchange rate with a minimal transaction fee.
Recently, two new services – TransferWise and InstaRem – also launched a beta version of their money transfer service in India. They provide a much better exchange rate and faster execution. It’s a good idea to always compare their rates against your traditional favourites such as banks or exchange houses to see how much you can save.
As an NRI, the simplest way is to do a wire transfer from FCNR/NRE account to your overseas account. If you transfer from FCNR/NRE account, you don’t have to go through any special formalities to transfer the money. However, the process is not so easy if you want to transfer from NRO account to overseas account.
Another important thing to look for is the currency conversion rate. Usually, banks will apply the conversion rate on the day on which the bank approves and initiate the transfer, not the day when you applied for it. Depending on the bank, there might be a significant gap between the two steps.
This is another reason why using an intermediary is better since you can freeze the current rate for over 2 days, which means even if the rate goes up tomorrow you don’t lose anything.
A word of caution here: Irrespective of which account you send money from, usually the Australian banks will charge some fees for each international transfer. As an example, National Australia Bank(NAB) charges $15 AUD for each inward international transfer while Commonwealth bank charges $11 AUD. So it’s a good idea to check with your bank about the fees involved. As a result, it makes sense to make large infrequent transfers rather than doing small frequent ones, if you can.
If the amount is reasonably small, sometimes it is more cost-effective to load the amount on travel card which you can use for shopping or withdraw cash.
For example, if you load the card with AUD 5000 and assume that you want to withdraw all the amount in Australia. Usually, ATM charges 2 AUD as withdrawal charges. Now assuming you can withdraw only AUD 1000 at a time, you will have to spend a maximum of 5 times * 2 AUD = 10 AUD to withdraw all the money.
So if doing an international transfer costs more than your total withdrawal cost, travel card might prove to be a better option. Plus, banks nowadays provide an online option to reload your travel card with the desired amount which is quick and hassle-free.
What Are The Tax Implications?
When you move to Australia for the first time, any money that you bring to Australia is not taxable. As you have just moved, you are not yet considered as a tax resident of Australia. However, when you become an Australian tax resident, you need to pay tax on any of your foreign income. Hence, it’s a good idea to understand your tax liabilities before sending money from overseas.
If you are an Australian tax resident, the rent you receive in India, interest on a bank account, dividends or any sale of the asset might attract a tax in Australia. Thankfully, Australia has a tax agreement with India. Essentially, if you have paid tax in India on your income, you don’t need to pay tax again in Australia on the same and vice versa. To get this exemption, however, you must submit a proof of tax you paid when you lodge your Australian tax return.
One exception to this rule is the income you receive as a gift. Let’s suppose your parents send you a certain amount as a gift, you don’t need to pay tax on such amount.
However, the line between what is considered as income and a gift is very narrow. Let’s assume your parents live in your house in India and they send you the rent amount every month. It will be considered as income rather than a gift since it is not regular. In other words, the gift must appear as a genuine gift and not as a way to beat the system.
What Is The Maximum Amount I Can Transfer From India?
The amount you can legally transfer from India to overseas differs based on your the type of account from which you do the transfer. Below is the summary of how much you can transfer:
|Type of Account||Maximum Amount That Can Be Transferred|
|Domestic Savings||USD 2,50,000 per financial year|
|NRO||USD 1 million per financial year|
How Can I Send Money From India To Australia?
If you are Resident Indian and want to transfer money to Australia, you need to submit Form A2 to the bank along with the copies of passport, visa and pan card. Please note that each bank has its own variation of Form A2. So it’s better to get the appropriate version of the form from your bank. Once the bank has verified the documents, it will initiate a wire transfer to the beneficiary’s account. Usually, the transfer takes 2-5 business days.
If you are NRI and want to transfer money from NRO account to overseas bank account, the process gets a little complicated. You need to follow a similar process to transfer money from NRO to NRE account as well.
To sum up, there are plenty of options to send money from India to Australia. Travel Card and Cash are the easy ones with a lot of flexibility especially if you are moving to Australia for the first time. Use money transfer services like TransferWise or InstaRem to get the best possible conversion rate for wire transfer. The next best option is to transfer from NRE/FCNR without losing anything in the currency conversion. Lastly, you can transfer from your resident or NRO account, both of which requires a bit of paperwork and time.