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Tax implications on money transferred from overseas to India


Many NRIs working abroad often transfer money to their families in India, and it is advisable to be aware of the tax implications of such transfers. The Indian Income Tax Department notes:


"Any sum received by an individual or HUF [Hindu Undivided Family] without consideration shall be included in the total income of the previous year of the person in receipt of such sum." Such income shall be "taxable in the hands of the receiver."


It means that any money transferred to your family back home is taxable in India. But if you transfer this money through a proper channel, it will be taxed at a concessional rate between 10% and 30%. Suppose you transfer money using the Foreign Contribution Regulation Act (FCRA). In that case, your family in India will be exempt from income tax on this money. But there are some restrictions imposed by the FCRA. However, it is currently not applicable to political parties.


Transferring money through professional channels like settlements or an employment contract will attract a maximum tax of 30% in India.


If you transfer money to a close relative, it is taxed at 20%. Likewise, it applies if your siblings stay with you and have not inherited any property from anyone, including their parents. If this is not the case, they will be taxed 40%. If you want to transfer money anonymously to India, you can make a one-time payment of up to Rs 50,000. It is also exempt from tax.


Money transferred beyond Rs 50,000 gets taxed any other limit at 30% if you transfer it to a close relative. If the sum exceeds Rs 50,000 but does not exceed Rs 5 lakhs, 20% tax will be levied on it. If you transfer money in installments, each installment will be charged 10%. However, this rule is applicable only when your total foreign remittance during the financial year is within the limit of Rs 2 lakhs.


Interest received on money transferred to India will be taxed at 10%. It applies to any interest that you receive up to Rs 10,000 in a financial year outside your income from other sources. An interest that exceeds this limit will be taxable at 20% or 30%. It depends on whether the money has been transferred to an NRI or a close relative.


Transfer of money through banking channels is considered professional, and hence you will need to pay up to 30% tax on it. Moreover, transferring this money outside Indian waters (i.e., through hawala) is punishable by imprisonment for three years, according to section 276CC of the Income Tax Act.


Transferring money to buy property in India is taxed at 20% or 30%. However, if you transfer this money through settlements, there will be no tax implications. According to the experts at Western Union, "Register and create your profile for free to send money to India from Australia online." To send money to India, give them a call.

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