If you’ve received international payments, then you probably have waited for days for the amount to land in your account. And in the end, you would have mostly received less than what you expected. You’re not alone, cross-border banking can be complex, and no one wants to go through this hassle!&nbsp;

Today, SaaS businesses, exporters, and freelancers come across this common problem. Even though your payments come through, you’re mostly unclear about timelines. Sometimes, the fees are unpredictable, and systems often lack transparency in tracking. Most of these transactions take place on a system called a telegraphic transfer.&nbsp;

This article explains what a telegraphic transfer is, how it works, and how much it costs. You’ll also get to know when it makes sense to consider alternatives.

Telegraphic transfer is an electronic method for sending money from one bank to another, usually across countries. The term comes from when banks used telegraph systems to send payment instructions, even though the process is now fully digital.

Today, most TT payments run on the SWIFT network, a secure system banks use to communicate and process international transfers. While it enables the transfer, it doesn’t move money itself.

For example, when a US client pays an Indian exporter through their bank, the transaction is processed as a telegraphic transfer.

A telegraphic transfer typically functions by moving funds securely from one bank account to another across countries through a network of banking systems. There are a number of processes moving behind the scenes. Suppose a client in the UK is sending payment to an Indian influencer.&nbsp;

Here’s how a telegraphic transfer works through different stages:

The process is initiated when the sender instructs their bank to transfer money. They provide:

The sender may need to complete a form as required by the bank, either online or at the branch.

2. Bank Verification and Compliance Checks

The bank runs compliance checks before sending the money. This includes:

The payment may be flagged or delayed if a discrepancy shows up.

After approval of the payment by the bank, a message regarding the same is sent through the SWIFT network. In case the sending bank is not directly connected with the receiving bank, <a href="https://www.skydo.com/blog/intermediary-bank-meaning-and-hidden-fees">intermediary banks</a> are used to route the TT payment.

Each intermediary passes the payment forward. It may charge a fee, which adds to the processing time.

In some cases, the telegraphic transfer payment may involve multiple currencies. It is here that the conversion occurs. The bank uses an exchange rate at this stage, usually the <a href="https://www.skydo.com/blog/tt-selling-rate">TT selling rate</a>, along with markups. The money flows on nostro/<a href="https://www.skydo.com/blog/vostro-account-meaning-benefits-indian-businesses">vostro accounts</a>. These are the ones that the banks have in foreign currencies. As an example, the GBP is exchanged for INR until it arrives in India.&nbsp;

Finally, the receiving bank processes the incoming transfer. It applies charges (if any) for receiving the amount and credits the beneficiary account with the payment. It is at this point that the recipient gets the money. This sum is usually a bit below expectations after all deductions.

How Long Does a Telegraphic Transfer Take

Usually, the TT transfer time is between 1 and 5 business days. However, it’s not fixed, and the timing may be affected by several factors.

What are Telegraphic Transfer Fees and Charges

The TT charges are often layered, which makes them feel expensive. Now, take a look at the telegraphic transfer fees that may be involved in the process.&nbsp;

Unpredictable TT fees can significantly impact the final amount received. It’s time you switched to Skydo. Experience transparent international transfers at a flat fee and enjoy exchange rate visibility in real time! <a href="https://www.skydo.com/">See how it works</a>.

What is the Difference Between Inward and Outward Telegraphic Transfers

If you’re receiving money from foreign clients, it’s important to understand the differences between inward and outward telegraphic transfers to better manage your expectations.

As you are the beneficiary, the money is credited into your account. The bank may charge a fee to receive the money. For instance, when a US client pays you for your services, it’s an inward telegraphic transfer.

In this case, you are the sender, and the money is debited from your account. You have to pay the transfer fee. For instance, when you pay a supplier in Germany, it is categorized as an outward telegraphic transfer.

Is a Telegraphic Transfer the Same as a Wire Transfer

Yes, they are essentially the same. Many users often ask what the difference is between a telegraphic transfer vs <a href="https://www.skydo.com/blog/international-wire-transfer-all-you-need-to-know">wire</a> transfer. The term “TT bank transfer” is mostly used in the UK, Asia, and Australia.&nbsp;

On the other hand, “TT wire payment” is a more commonly used term in the US. For a broader term, you may consider saying “TT bank transfer”. All of them use similar systems like SWIFT for international payments.&nbsp;

What are the Pros and Cons of TT Payments

Telegraphic transfers are widely used as they’re reliable and accepted almost everywhere. But once you start receiving frequent <a href="https://www.skydo.com/blog/cross-border-payments">cross-border payments</a>, the limitations become hard to ignore. Have a look at the benefits and disadvantages of these transfers.

What are T/T Payment Terms in International Trade

In global trade, every participant should be aware of <a href="https://www.skydo.com/blog/payment-terms-in-export">T/T payment terms</a>. These terms define when the payment is made. Here are some common structures for T/T payments:

Consider a situation where an exporter may ask for 50% advance and 50% after shipment. In these cases, both parties should have a detailed knowledge of the payment terms.&nbsp;

What are the alternatives to Traditional Telegraphic Transfers

The limitations of telegraphic transfers become more visible as businesses scale. At one point, alternatives like Skydo became viable. Have a look at some alternatives to telegraphic transfer for international transactions.

Virtual Multi-Currency accounts can receive money in the local currency of the sender, which may be USD, EUR, GBP, or any other currency. The sender makes the payment via local bank transfer to avoid the international charges for online telegraphic transfers. The amount is converted to the home currency at competitive rates when it’s ready. For instance, an Indian freelancer may receive&nbsp; USD as a local US transfer.

If you want to receive money from a client abroad, <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo">online invoicing</a> helps you send payment links directly to them. The client pays by bank transfer or card, and the funds are credited directly to your account. This process eliminates the need for clients to initiate the telegraphic transfer manually.&nbsp;

Today, you have many fintech alternatives to traditional banking. These platforms offer a transparent payment structure at a flat fee. You can track transfers in real time, and settlements occur faster. These are suitable for regular and recurring payments for global businesses.&nbsp;

How to Receive International Payments with Lower Fees and Faster Settlement

If you regularly receive payments from abroad, you know that the real challenge doesn’t lie in sending money. It’s more problematic to receive it seamlessly, with complete peace of mind.&nbsp;

Traditionally, TT systems come with these common problems for businesses and freelancers.

&nbsp;With Skydo, recipients enjoy a much better alternative. These include:

Exporters and freelancers in India using Skydo can <a href="https://www.skydo.com/blog/how-to-receive-international-payments-in-india">receive international payments</a> through virtual accounts in USD, EUR, GBP, and other currencies at flat fees. See transparent exchange rates and enjoy fast settlements. Open your free <a href="https://www.skydo.com/">Skydo account</a> in 10 minutes now!

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Remitly alternatives

You're an Indian pharma exporter receiving payments in euros, but your loans, supplier costs, and overheads are all in rupees.&nbsp;

A forward contract handles short-term exposure fine. But when the risk runs for years, with interest payments and principal amounts tied to a foreign currency, you need something more structured.

That's where a cross-currency swap comes in. This article covers what it is, how the three-phase mechanism works, a real example with numbers, and when it actually makes sense to use one.

A cross-currency swap is an OTC (Over-The-Counter) derivative contract in which two parties agree to exchange principal amounts and interest payments in two different currencies over a set period.&nbsp;

You'll also see it written as CCY swap or XCCY swap in financial markets. In practice, these contracts are rarely arranged directly between two corporations. A bank or swap dealer typically sits in the middle, matching counterparties, facilitating cash flows, and taking on some of the credit risk in exchange for a fee. The end users, usually corporations or financial institutions, use these swaps either to hedge long-term currency exposure or to access foreign capital at better rates than they'd get locally.

Every CCY swap is built on five core elements that define how the agreement works from start to finish.

At the start of the agreement, both parties exchange principal amounts at the current spot rate. No forward rate, no negotiated markup, just the rate as it stands on that day.

Say Company A is a US firm that needs euros to fund a European acquisition. Company B is a German company that needs dollars for its US operations. Company A hands over USD 10 million; Company B hands over the equivalent in euros, say €9.2 million, at the prevailing EUR/USD spot rate. Both parties now hold the currency they came for.

2. Periodic interest payments during the swap term

Once the principal is exchanged, both parties make regular interest payments to each other for the duration of the swap.&nbsp;

There are three ways this can be structured:

At the end of the swap term, both parties reverse the original principal exchange, at the same spot rate used on day one, not whatever the market rate is at maturity.

In an FX swap, the re-exchange occurs at a pre-agreed forward rate that reflects the interest rate differentials between the two currencies. In a cross-currency swap, the original rate remains in effect. Both parties get back exactly what they put in.

Why do businesses use cross-currency swaps?

The reasons vary by company size, debt structure, and where they operate. But they broadly fall into three buckets.

Say a European company borrowed in dollars five years ago when rates looked attractive. Now it earns revenue in euros but owes quarterly dollar repayments. Every time the dollar strengthens, that debt gets more expensive in euro terms, and there's nothing the company can do about the exchange rate.

A cross-currency swap fixes the mismatch. The company swaps its dollar obligation for a euro one, so what it earns and what it owes are in the same currency. The FX risk disappears&nbsp;

Sometimes borrowing abroad is simply cheaper. A Japanese company might find it can raise dollar debt at 4% while domestic yen borrowing costs 6%. The catch is it earns in yen and can't carry dollar exposure long-term.

So it borrows in dollars, enters a cross-currency swap to convert the obligation into yen, and ends up paying yen interest at an all-in rate below what local lenders were quoting. It accessed a cheaper market without taking on the currency risk.

Optimizing funding costs across currencies

The cross-currency basis spread is the premium or discount built into one leg of the swap at any given time. When that spread favors your currency pair, swapping into your home currency from a foreign borrowing can cost less than borrowing outright in your home currency. Treasurers watch this number closely because the window doesn't stay open long.

Corporate treasurers monitor this spread actively.&nbsp;

What are the risks of cross-currency swaps?

These instruments do a specific job well, but they come with risks worth understanding before signing anything.

Because these contracts are negotiated directly between parties and not traded on an exchange, you're exposed if the other side defaults. You'd still owe your underlying debt but would stop receiving the swap payments meant to cover it.

ISDA agreements and collateral arrangements reduce this risk, but they don't remove it entirely, especially over a five or ten-year tenor.

The basis spread built into your swap doesn't stay fixed. It moves with market conditions. If it shifts against you after you've entered the contract, your actual hedging cost ends up higher than you originally calculated.

Think of it like locking in a fuel price for your business, then watching the formula that determines your locked rate quietly move against you. The underlying risk is covered, but the cost of covering it has changed.

Cross-currency swaps are long-dated and customized. You can't exit one the way you'd sell a stock. Unwinding early means finding a willing counterparty, calculating what the position is worth at that moment, and usually paying a termination fee.

For a company whose funding needs shift mid-way through a five-year swap, that exit cost can be significant.

Cross-currency swap example with calculations

Company A and Company B don't find each other directly. They each approach a swap bank, which structures the deal and stands in the middle.

At the spot rate of 1.10, $10 million equals €9.09 million (rounded to €9 million for simplicity). The swap bank facilitates the exchange: Company A hands over $10 million, Company B hands over €9 million. Both now hold the currency they need. The bank earns a small fee built into the swap pricing.

Each year for three years, both parties pay interest in the currency they received, routed through the swap bank.

Company A pays 3% on €9 million = €270,000 per year. Company B pays 4% on $10 million = $400,000 per year. The bank passes these payments to the respective counterparties.

Neither party is exposed to exchange rate movements on these payments. The amounts are fixed at the outset.

At the end of year three, both parties return the original principal through the swap bank at the same spot rate used on day one, 1 EUR = 1.10 USD. It doesn't matter if the market rate has shifted to 1.25 or 0.95 by then.

Company A returns €9 million and receives $10 million back. Company B does the reverse. Both recover their original principal with no residual FX exposure.

At inception, neither party owes the other anything. The swap starts at zero value. Over time, that changes as interest rates shift and exchange rates move.

Every swap has two sides: payments you make and payments you receive, spread out over several years. To figure out what the swap is worth today, you calculate what those future payments are worth in today's money.

Receiving €1 million three years from now is not the same as receiving it today. You discount it back to its present value using current interest rates. You do this for both legs of the swap, then compare the two numbers.

The role of the cross-currency basis spread

Interest rates alone don't capture the full picture. There's an additional cost or saving depending on which currencies are involved and how much demand exists for each at that moment. This is the cross-currency basis spread.

If dollars are in high demand globally, borrowing dollars through a swap costs more than the interest rate alone would suggest. That premium gets built into the pricing.

Once the swap is live, its value doesn't stay frozen. Interest rates move, exchange rates shift, and the present value of each payment leg changes with them.

This is why most institutional swap agreements require collateral. If the swap moves significantly in one direction, the party sitting on a loss posts collateral to protect the other side.

How exporters can manage currency risk without complex derivatives

Cross-currency swaps are built for corporations carrying millions in foreign debt across multiple years. A dedicated treasury team, ISDA agreements, collateral management, and the infrastructure requirements alone put them out of reach for most exporters and freelancers.

SMEs often don't need to hedge interest rate exposure across currencies. They need to <a href="https://www.skydo.com/blog/how-to-receive-international-payments-in-india">receive international payments</a> quickly, know their conversion rate upfront, and avoid fees that quietly erode their margins.

If you're an exporter or freelancer receiving international payments, explore how Skydo simplifies cross-border transactions with local virtual accounts and straightforward pricing.

<a href="https://www.skydo.com/">Explore Skydo!</a>

As an exporter or a freelancer, you might have become curious about currency rate fluctuations at some point. After all, they directly impact your income. To answer in short, there are seven factors that affect exchange rates.

We have dived deeper into each of them in this blog. We have also covered various ways you can prepare your business for forex risk and protect your income.&nbsp;&nbsp;

What is an exchange rate and why does it continuously fluctuate

The exchange rate is the price at which you can buy a currency by exchanging another currency. That means if 1 USD = 90 INR, you must have 90 INR to buy 1 dollar.

There are two ways these exchange rates are decided:

Fixed rate: The government or the central bank locks or pegs the currency's value to another major currency. For example, the Saudi Central Bank (SAMA) has used a fixed exchange rate of 1 USD = 3.75 SAR since 1986.

Floating rate: The value of the currency moves freely as ‌buyers and sellers participate in the market to buy or sell currency. Countries like India, the US, and Japan depend on this system to determine the exchange rate.&nbsp;

Most currencies you deal with in your daily business, the US Dollar (USD), Euro (EUR), British Pound (GBP), and Indian Rupee (INR) follow the floating system, as their value rises and falls based on the demand and supply.&nbsp;

What are the seven key factors that affect exchange rates

Currency rates keep moving. But what’s moving them up or down? There are multiple economic, political, and market forces at play, and here are the seven most important ones that you need to know:

Interest rates are the cost of borrowing money. Central banks like the Reserve Bank of India (RBI) or the US Federal Reserve use it to control inflation and stimulate economic growth.

In India, the RBI actively manages these rates to balance inflation and growth. The RBI also occasionally steps into the market to buy or sell foreign currency to manage volatility&nbsp;

Inflation is the rate at which the prices of goods and services rise in an economy. Money loses its purchasing power, which simply means that the same 1,000 rupees buys you fewer goods today than it did a year ago.&nbsp;

For a freelancer or exporter, a weaker currency means you get more rupees for every dollar you earn, but your local expenses also climb simultaneously.

Global investors prefer to park their money in countries where the economy is stable and protected. If they see inflation rising much faster in a country, they lose confidence and start selling that currency to move their wealth into more stable markets.&nbsp;

Trade balances and current account deficits

Trade balance is a simple calculation: the total value of its exports minus the value of its imports. It is a major indicator of how much a nation’s goods and services are in demand on the global stage.

Global investors use the trade balance to assess an economy’s competitiveness. A persistent surplus means a productive and healthy economy to invest capital in the country. Conversely, a long-term deficit makes investors nervous about the currency’s future stability and leads them to pull their funds out.

Example: Export-heavy economies like Germany often see stronger currencies because there is a constant, worldwide demand for euros to pay for German-made products and machinery.

Political stability and government policies

Foreign businesses look at a country with a stable government and a reliable legal system as a safe place to invest capital. Such countries, therefore, attract more Foreign Direct Investment (FDI) which strengthens the local currency.

But when there is ‌political instability because of a major election or sudden policy shifts, investors often pull their money out, also known as capital flight, causing the currency to weaken almost instantly.

Example: In 2018, Turkey’s lira lost 35% of its value against the US dollar, mostly because of President Erdoğan's pressure on the central bank to keep interest rates low. Later in 2021, he fired the central bank governor overnight, causing the lira to fall 44% further that year and inflation to hit 85.5%.

Public debt is the total amount of money a government owes to its creditors. Governments borrow money to fund large projects, but extremely high debt levels make global investors rethink a country’s long-term financial health.

The logic is that the government might print more money to pay off the debt, which triggers inflation. To hedge against this risk, investors demand much higher interest rates or pull their capital out of the country. This outflow of foreign money decreases demand for the local currency, causing it to weaken.

Example: In 2009, Greece’s national debt ballooned to 262 billion euros with a trade deficit of 12.7% of the GDP. Investors lost their confidence in Greece, and the euro fell 25% against the dollar between 2010 and mid-2015.

Economic growth and performance indicators

Global investors use indicators to decide where to put their money. Here are the three primary indicators they watch for:

When these indicators are positive, it triggers a surge in capital inflows. As international demand for the local currency increases, its value also appreciates.

Example: When India's GDP growth outpaces expectations, the rupee strengthens as global investors rush to participate in the country's economic expansion.

Market speculation and investor sentiment

Factors like trade balance, inflation, and interest rates are the long-term anchors for a currency. Market sentiment and speculation mostly drive ‌short-term movements.

Example: For years, investors borrowed cheaply in Japanese yen to take advantage of the near-zero interest rates. But in 2024, when the Bank of Japan increased the interest rates, investors went into a frenzy to pay off their yen loans. To do that, they started selling their high-value foreign investments, causing the US and Asian stock markets to fall sharply. Sentiment influenced this sudden sell-off and not an economic indicator.

What causes currency appreciation or depreciation

Currency appreciation occurs when global demand for a currency exceeds its supply, making it more valuable. Currency depreciation happens when the supply of a currency in the market is more than the demand, causing its value to drop.

The following table compares the primary drivers behind these movements:

Which businesses are most affected by currency rate changes

When the currency fluctuates, the entire global economy takes a hit. But the following are the businesses most affected by the movements:

Exporters of goods and services: Exporters earn in foreign currency, but their operational costs are in INR. When the rupee gets stronger, their costs increase and foreign income shrinks.

Freelancers working with international clients: Freelancers earn in global currencies like USD or EUR, but spend in their local currency. Therefore, their real paycheck fluctuates every single day.

Amazon sellers on global marketplaces: Amazon sellers receive payouts in foreign currency. During unfavorable exchange rates, their product margins also fall.

Import-dependent businesses: Importers buy foreign currency to pay their international suppliers. A weakening rupee immediately makes every raw material more expensive to source.

How can businesses and freelancers protect against forex risk

You can't control exchange rates, but you can minimize their impact on your business. By adopting the following proactive habits:

Monitor exchange rates and time your conversions

Use FX tools or apps to track live market movements and set automated alerts to notify you when the currency hits your target value. If you have enough cash flow, convert your funds when rates are favorable. Keep checking economic calendars to avoid converting during highly volatile periods, such as major central bank announcements.

Choose transparent low-fee payment providers

Traditional banks charge hidden foreign <a href="https://www.skydo.com/blog/forex-markup-fee-explained">forex markups</a> on the prevailing exchange rate. Choose fintech platforms that offer flat fees and real-time visibility of the exchange rate. Platforms like Skydo show you the exact conversion rate before you transact, so you always know the INR value of your incoming money.

Invoice clients in your preferred currency

Invoice in a stable, major currency like USD or EUR. This acts as an insurance against local currency swings. When setting up contracts, negotiate terms that give you flexibility on when to convert those funds. You can even include currency adjustment clauses in your contracts to share the risk with the client if the rate moves beyond a specific range.

How Skydo helps you navigate exchange rate volatility

By now, you know that there are multiple market forces that decide the currency exchange rate.

It’s hard to predict them, and you certainly can't stop them from fluctuating.

But what you can control is how you <a href="https://www.skydo.com/blog/how-to-receive-international-payments-in-india">receive international payments</a> and how much of your hard-earned money reaches your account.

And <a href="https://www.skydo.com/">Skydo</a> can help you with that.&nbsp;

Skydo is built for Indian freelancers, exporters, and business owners who get paid in foreign currencies. It ensures that you always know how many fees you are paying on foreign income without compromising on speed.

Real-time FX calculator: &nbsp;Skydo shows you precisely what conversion rate you're getting&nbsp; before you confirm anything. There are no hidden markups in the fine print.

Flat, transparent fees: Skydo charges flat, transparent fees so you always know what you're paying, regardless of how the market moves that day.

Virtual accounts in major currencies: With Skydo's <a href="https://www.skydo.com/blog/virtual-account-numbers">virtual accounts</a> in USD, EUR, GBP, and SGD, your international clients can pay you directly using local bank account details. Your money doesn’t have to move through multiple banks, each taking a cut as intermediary fees.

Fast settlements: Predictable settlement timelines mean you know when your money will arrive. Skydo settles international payments in 1 business day, which helps you plan your income around currency rate movements.

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Stable Coins

If you’re familiar with online banking, you can do outward remittances on your own. But you might not be familiar with the RBI guidelines and terms, like AD bank, purpose code, and TCS rate.&nbsp;

Knowing them makes it even easier to pay an international vendor or a foreign university's annual fee. In this blog, we cover those terms and various nuances of outward remittance that a new sender must know.&nbsp;

Outward remittance is when you send money from your bank account in India to a recipient in another country. The Reserve Bank of India (RBI) regulates outward remittances under the <a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance">Foreign Exchange Management Act (FEMA)</a> to ensure that people send money for permitted purposes only.&nbsp;

That’s why you need to complete ‌basic KYC and mention a purpose code while sending money. After you complete the transfer process, banks convert your rupees into the recipient’s currency before the money reaches them.&nbsp;&nbsp;

For example, if you're paying ₹8.5 lakh as a semester fee for your child studying in the UK, that amount gets converted to roughly £8,000 and wired directly to the university

What is the difference between inward and outward remittance

International remittances have two broad types: <a href="https://www.skydo.com/blog/inward-remittance-in-india">inward remittances</a> and outward remittances. Here is a table explaining the key differences:&nbsp;

What are the different types of international remittances

Here are the most-common types of international remittances categorized by purpose:

These are transfers made for individual needs or to support family abroad.

These are payments that keep your business running.

These cover the movement of goods and services and require proper commercial documentation.

How does outward remittance work step by step

Outward remittances are a regulated process. Follow the steps below from start to end, so you can send money abroad effortlessly:

You must send money through an RBI-authorised dealer. It can be a bank (AD-I) or an authorised fintech platform (AD-II). Fintech platforms often deliver faster, sometimes within 24 to 48 hours.

A PAN card and a signed Form A2 declaration are all you need for KYC documentation. An A2 declaration is a formal application where you declare that you’re sending money for permitted purposes. For high-value or business transfers, you may also have to submit bank statements, your latest ITR, or Form <a href="https://www.skydo.com/blog/form-15ca-cb">15ca</a>/15CB from a CA to the bank.

3. Enter recipient details and purpose code

Share the beneficiary's name, account number or <a href="https://www.skydo.com/blog/iban-number-meaning-full-form">International Bank Account Number (IBAN)</a>, and the bank's <a href="https://www.skydo.com/swift-code-finder">SWIFT/BIC code</a>. Also, be careful while mentioning the purpose code while sending money. Getting it wrong can cause a rejected transfer.

Ask your bank how it applies the exchange rate. Check for any <a href="https://www.skydo.com/blog/forex-markup-fee-explained">forex markup</a> applied on mid-market rate and watch out for intermediary bank charges of $15–$30 that may be deducted before the money reaches your recipient.

Double-check all the information and approve the transfer. Note that if your total remittances for the year cross ₹10 lakh, TCS will be collected.

Your bank or fintech platform will share a tracking reference. If not, then ask for the <a href="https://www.skydo.com/blog/mt103-what-is-it-why-it-matters-and-how-to-get-one">SWIFT MT103</a> which is a proof of payment and useful if the recipient needs confirmation that funds have left India.

What are the RBI guidelines for outward remittance from India

Knowing about these RBI guidelines gives you the right head start, even before you start the outward remittance process.&nbsp;

1. Liberalised Remittance Scheme (LRS) and Annual Limits

Under <a href="https://www.skydo.com/blog/what-is-lrs">lrs</a>, resident individuals can send money overseas without special permission. You can remit up to $250,000 per financial year (April to March), and this limit applies per person, including minors. Corporates, partnership firms, and trusts do not fall under the LRS scheme. Also, from April 1, 2025, the TCS threshold has been revised to ₹10 lakh under Budget 2025.

A <a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance">purpose code</a> is an RBI-mandated classification that tells the bank why you're sending money. It affects your TCS rate and determines whether your transfer gets approved or flagged.&nbsp;

Here are some common purpose codes for outward remittances:

3. Prohibited and Restricted Transactions

The RBI prohibits remittances for lottery winnings, sweepstakes, margin trading, and speculative forex. Buying Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in the secondary market is also not allowed.&nbsp;

What are the charges and TCS on outward remittance

This section explains how banks charge fees on outward remittances and what are the different TCS slab rates for different purposes:

Most Indian banks charge a flat processing fee per transaction, and this varies by bank. HDFC Bank charges ₹500 + GST for transfers up to USD 500, and ₹1,000 + GST for anything above that. SBI charges a commission of 0.125% of the remittance amount, with a minimum of ₹125. On top of this, an 18% GST applies to the bank's service fee.

It’s always a good idea to ask your bank about the total charges before starting the process.

Google shows the mid-market exchange rate. Banks add a markup on this, so you get a lower exchange rate. For example, if you're remitting $20,000 and the bank's rate is just ₹1 lower than the mid-market rate, you're already paying an extra ₹20,000 without realising it.

Tax Collected at Source (TCS) is an advance tax payment credited to your PAN. From April 1, 2025, TCS applies only when your total remittances for the year cross ₹10 lakh.

The TCS collected by your bank is deposited with the Income Tax Department and shows up in your Form 26AS. When you file your ITR, you can use it to offset your total tax liability. If TCS exceeds your total tax liability, the government will refund the difference.

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