Foreign Remittance in India: Types, Taxation, Limits, and Fees
TL;DR - Summary
- What is foreign remittance? - Foreign remittance is the transfer of money between parties in two different countries. It covers both inward remittance, which is money coming into India such as freelance income or export payments, and outward remittance, which is money sent from India abroad for education, travel, or investments.
- Is there a limit on foreign remittance in India? - There is generally no FEMA limit on inward foreign remittance, so an exporter or freelancer can receive any amount, provided reporting rules are followed. The $250,000 per financial year cap under the Liberalised Remittance Scheme applies only to outward remittances by resident individuals, not to business receipts.
- Is foreign remittance taxed in India? - Inward foreign remittance carries no tax at the point of transfer, though the income is still taxable as business or professional income. Outward remittance attracts TCS once your total LRS transfers cross ₹10 lakh in a financial year, but TCS is an advance tax you can adjust against your income tax or claim back as a refund.
- How much do you lose on a foreign inward remittance? - Most banks add a 2% to 3% exchange rate markup on foreign remittance, plus intermediary and SWIFT charges that quietly reduce your earnings. On a $5,000 payment, the platform you choose can change your final amount by tens of thousands of rupees, so always compare the total cost before picking a service.
- How do you stay compliant when receiving foreign remittance? - Use the correct purpose code for every international payment to stay compliant with RBI regulations, and keep documents like the FIRC as proof of foreign-source income. Switching to a modern payment platform with zero FX markup and auto-generated FIRC can save thousands of rupees on each foreign remittance.
What is Foreign Remittance?
Foreign remittance is the transfer of money between parties in two different countries. It covers both sending money abroad and receiving payments from overseas. A typical foreign remittance involves the following parties:
- Sender: The person or business that initiates the payment, such as your client in another country.
- Beneficiary: The party who receives the money, which in this case is the Indian exporter.
- Intermediary Banks: The banks that act as middlemen, moving the money from the sender's bank to the beneficiary's bank.
- Reserve Bank of India (RBI): The central authority that regulates and sets the rules for all foreign currency moving into India.
What are the Types of Foreign Remittances?
There are two main types of foreign remittances: inward remittances and outward remittances. They get the name based on the direction in which the money moves across the border.
- Inward Remittance: This is money coming into India from another country. A freelancer receiving international payments, service export revenues, or support from family members living abroad falls under this type of payment.
- Outward Remittance: This is money sent from India to a foreign destination. Most common reasons for outward remittances are overseas education fees, travel, investments abroad, or to send gifts to relatives.
How Does Foreign Remittance Work?
How Foreign Remittance Works
India sends money abroad
Step 1
Sender initiates via bank
Step 2
LRS compliance check
Step 3
SWIFT network transfer
Step 4
Beneficiary receives funds
India receives money from abroad
Step 1
Foreign client initiates payment
Step 2
SWIFT and intermediary banks
Step 3
Indian AD bank verifies
Step 4
FIRC issued with purpose code
Step 5
INR credited to your account
Foreign remittance works by transferring money from a bank account in one country to a bank account in another through authorised banking channels, with the funds converted into the recipient's currency before they are credited. The exact steps depend on whether you are sending money overseas or receiving it in India. We have broken down both paths below, so you know exactly what to expect.
Outward Remittance
- Sender starts via bank or a payment platform: You start the transfer by providing the recipient’s bank details and the amount you want to send.
- Liberalised Remittance Scheme(LRS) compliance: The bank checks for LRS compliance and ensures that the payment is within the yearly limit.
- SWIFT transfer: The money travels through the SWIFT transfer network that connects different banks worldwide
- Beneficiary receives: The recipient’s bank receives the payment instructions and adds the funds to their account.
Inward Remittance
- Overseas client starts the payment: Your client starts the payment from their local bank using your account number and bank SWIFT code.
- SWIFT network: The payment information travels through the SWIFT network
- Intermediary or correspondent bank: Sometimes intermediary banks help move the funds if the two banks do not have a direct connection.
- Indian AD bank: An Authorized Dealer (AD) bank in India receives the money and checks it against local rules.
- Purpose code tagged: A specific purpose code is chosen that tells the regulator why you are being paid.
- FIRC issued: The bank creates a Foreign Inward Remittance Certificate to prove that you received foreign money for a legal business reason.
- INR credited: The bank converts the foreign currency into rupees and adds the money to your Indian account.
What is the role of purpose codes?
Purpose codes tell the RBI why money is moving outside or inside India from overseas. While sending money, you must mention it on the bank remittance form, and when receiving money, you must use the correct purpose code in the invoice.
For example, if you are getting paid for software services, you would use the code P0802. If you are sending money to a relative as a gift, you might use a code like P1301.
What are the Foreign Remittance Limits in India
Foreign remittance limits in India differ by direction: outward remittances are capped at $250,000 per financial year under the Liberalised Remittance Scheme, while inward remittances have no upper limit, provided the reporting rules are followed. Knowing these limits helps you and your business stay compliant. Here are the rules you must know:
Outward Remittance
The Liberalized Remittance Scheme allows Indian residents outward remittance of up to $250,000 per financial year.
Permitted categories for sending money abroad include:
- Overseas education and school fees
- Medical treatments in foreign countries
- Travel expenses for holidays
- Gifts or support for family members abroad
- Buying foreign stocks or real estate
Inward Remittance
There is generally no FEMA limit on the amount an Indian business can receive from overseas. The USD 250,000 LRS limit applies to outward remittances by resident individuals and does not restrict business receipts.
Banks may request supporting documents for large or unusual transactions and are required to comply with RBI reporting and anti-money-laundering requirements. If payments are received through payment aggregators, the applicable RBI framework and transaction limits depend on the payment channel being used.
What are the Benefits and Risks of Foreign Remittance
Foreign remittance gives Indian businesses and freelancers access to global income, but the way payments are routed and converted can quietly erode what actually reaches your account. The main benefit is reach and earnings; the main risks are cost leakage and compliance friction. Both sides are broken down below.
Benefits
- Access to global clients: Receiving foreign payments lets you work with customers anywhere in the world, rather than being limited to the domestic market. This widens your addressable market and reduces dependence on local demand cycles.
- Currency diversification: Earning in multiple currencies such as USD, EUR, and GBP spreads your income across economies, so a slowdown or currency weakness in any one market has less impact on your overall earnings.
- Higher earning potential: International clients often pay rates benchmarked to their home markets, which can be considerably higher than domestic rates for the same work, improving your margins on every project.
Risks
- Hidden FX markups: Banks and many payment providers convert your foreign currency at a marked-up exchange rate rather than the mid-market rate, taking a cut that is rarely shown as an explicit fee. On large or frequent payments, this silently reduces your earnings.
- Intermediary bank deductions: When a payment passes through one or more correspondent banks, each can deduct a charge along the way. These deductions are often opaque, so the amount you finally receive can be less than what your client sent, with little visibility into where the money went.
- Exchange rate volatility: Because there is a gap between invoicing and receiving payment, a depreciating rupee or a swing in the currency pair can change the final INR value you receive, making your earnings less predictable.
- Compliance paperwork: Receiving foreign payments means meeting FEMA requirements, selecting the correct purpose code, and maintaining supporting documentation for each transaction, which adds an administrative burden, especially as volumes grow.
- Delayed FIRC issuance: Banks sometimes issue the Foreign Inward Remittance Certificate only after repeated follow-ups. Since the FIRC is needed to claim GST refunds and prove foreign-source income, delays can hold up your compliance and tax filings.
Are Foreign Remittances taxed in India?
It depends on the direction. Money you receive from abroad is not taxed at the point of transfer; only money you send abroad attracts a tax called TCS, and even that is an advance tax you can recover. In short, inward remittances carry no transfer-stage tax, while outward remittances attract TCS that is adjustable against your income tax. Both are explained below.
Tax on Outward Foreign Remittance
When you send money abroad under the Liberalised Remittance Scheme, your bank collects Tax Collected at Source (TCS) under Section 206C(1G) of the Income Tax Act. TCS applies only once your total LRS remittances cross ₹10 lakh in a financial year, and the rate depends on the purpose:
- Investments, gifts, property, and other purposes: 20% on the amount exceeding ₹10 lakh.
- Self-funded education or medical treatment: 2% on the amount exceeding ₹10 lakh.
- Education funded through a loan from a recognised financial institution: 0%, fully exempt.
- Overseas tour packages: 2%, with no threshold (TCS applies from the first rupee).
TCS is not an additional tax. It is recorded against your PAN, reflects in your Form 26AS, and can be adjusted against your total income tax liability when you file your return, or claimed as a refund if you have no tax to pay.
Tax on Inward Foreign Remittance
TCS does not apply to inward remittances. This means your bank will not deduct any tax from freelance income or export proceeds.
However, your income is still taxable under the Income Tax Act. The tax amount depends on your residential status in India and the nature of the work you perform. Since this money is earned from your business or services, it is treated as professional income.
You must report these foreign earnings under Income from Business or Profession. This allows you to claim deductions for relevant business expenses, such as software costs or home office bills. Proper documentation, like an FIRC, is essential to prove the source of this income to tax authorities.
What Are the Fees and Charges on Foreign Remittance
Fees and charges on foreign remittances tells you how much you must pay for sending money abroad and how much you can expect to receive in hand after all the deductions
Outward Remittance Fees
When you send money abroad, your bank takes the following cuts from it:
- Bank transfer fee: A flat fee for handling the transaction
- SWIFT charge: The cost of using the global messaging network
- GST on fees: A standard 18% GST is applied to the bank’s fees
- TCS: An advance tax collected on transfers that cross certain limits
Most Indian banks will charge you between ₹500 and ₹1,500 for each transaction. On top of this fee, they apply an exchange rate markup between 0.5% and 2%.
For example, the State Bank of India typically charges ₹250 for individuals and ₹500 for others
Inward Remittance Fees
Here are the costs deducted from inward remittances that most receivers do not realize:
- SWIFT charge: The sender’s bank levies this charge, but it could be passed on to you, especially in case of business transactions
- Correspondent bank charge: A fee taken by intermediary banks facilitating the transfer
- FX markup: This is not a fee or a charge, but the difference between the real exchange rate and the one your bank gives you.
Modern platforms like PayPal are a fitting alternative to banks and are easy to use. However, PayPal usually charges Indian freelancers a 4.4% transaction fee plus a 4% currency conversion fee. You get the advantage of international recognition with PayPal, but the high costs hurt your profits too.
We suggest you compare other payment platforms with PayPal to find the best and most affordable solution for your business.
How Much Do You Actually Lose on Foreign Inward Remittance
How much does a foreign inward remittance cost your business? Let’s look at what happens to a $5,000 payment assuming an exchange rate of 1 USD = 85 INR. We will compare four different ways to get your money into India.
Traditional Bank (SWIFT)
Your client's bank will charge a SWIFT fee of $15 to $30 per payment; in most cases, it gets passed on to the receiver. Intermediary bank charges can cost $5 and $25 on top of this. That means the total deduction would range between $20-$55 (Rs. 1700 - Rs. 4675).
The forex markup is between 1 to 3.5%, we assume it to be 2%. That means you will receive Rs. 83.3 for 1 USD.
Putting all the above numbers together, you can expect to receive ₹414,834 to ₹411,918 in your account. You may also have to pay an extra ₹500 to ₹1,500 to get the FIRA from the bank.
PayPal
PayPal charges a 4.4% transaction fee. That cuts your income short by: $220. It also adds a 4% currency conversion markup to the exchange rate, which means you get Rs. 81.6 for USD 1.
That means a $5,000 payment would leave you with about ₹390,000.
Wise
Wise uses the real mid-market exchange rate with zero markup. On a $5000 payment, they charge a transaction fee around 1.7% to 1.8%.
Using Wise’s Transfer Fee Calculator, we found out that on a $5000 payment; you have to pay a transfer fee of $81.20, e-FIRC charges of $2, and an 18% GST taking the total deductions to ~$100.
For this $5,000 transfer, you would receive approximately ₹416,000 in your Indian bank account.
Skydo
Skydo does not add any markup to the exchange rate you see on Google. For a payment of $5,000, you pay a flat fee of only $29. There are no hidden intermediary bank deductions or extra SWIFT fees.
This means you would receive ₹422,535 in your account if you use Skydo. You also get free FIRA with every inward remittance.
Which Option Saves You the Most?
Based on these numbers, Skydo is the cheapest option for you, while PayPal is the most expensive one. By choosing Skydo over PayPal, you save ~₹33,000 on fees. Compared to banks, you save ~₹10,617.
In a year, you would save more than ₹390,000 by switching to Skydo from PayPal. And up to ₹127,500 if you switch from banks.
Cost Comparison for a $5,000 Inward Remittance
| Parameter | Traditional Bank (SWIFT) | PayPal | Wise | SkydoBest |
|---|---|---|---|---|
| Exchange Rate Markup | ~2% | ~4% | 0% | 0% |
| Platform / Transfer Fee | ~$30 | 4.4% | ~1.62% | $29 flat |
| Intermediary Charges | $5 to $25 | $0 | $0 | $0 |
| FIRA / FIRC Fee | ₹500 to ₹1,500 | Included | $2 | Free |
| Final Net Amount (INR) | ~₹4,11,918 to ₹4,14,834 | ~₹3,90,023 | ~₹4,16,454 | ₹4,22,535 |
⚠️ COMMON MISCONCEPTION
"No transfer fee" does not mean no cost. Most platforms recover 2 to 4 times the fee through exchange rate markups you never see on the invoice.
How to choose the right remittance service?
When you choose the right remittance service for your business, make sure you evaluate them based on these key criteria:
Key Criteria
- Total cost: Don’t just go by the transfer fees, check for forex markup fee too
- Transparency: Prioritize platforms that display the complete breakdown of fees
- FIRC or FIRA issuance: Check if the platforms provide these certificates automatically and if they charge for it
- Speed of settlement: Quick settlement means higher liquidity, but the fastest may not be the most user-friendly
Inward Remittance
- Look for a service that gives you an auto-generated FIRC/FIRA for every payment
- FIRA/FIRC is critical for your GST compliance and acts as proof of exports.
Outward Remittance
- Ensure the platform helps you track your yearly LRS limits
- Check if it handles the Tax Collected at Source correctly and supports the countries you need to send money to.
Red Flags
- Be careful with platforms that do not show the actual exchange rate until after the transfer is done
- Avoid services that offer no support for getting your FIRC or make vague claims about having very low fees.
How Does Skydo Help You Receive Foreign Remittance
Skydo offers flat pricing and emerges as a strong alternative to traditional banks. If Skydo seems like a good fit for your business, here are some essential details you may want to know before checking out the website.
Zero FX markup
Skydo uses the live mid-market exchange rate, the one you see on Google, during conversion. This remains the same for all foreign currencies, regardless of the amount.
Auto-generated FIRC/FIRA
After you receive an international payment, you can download the FIRC/FIRA from the dashboard for free. It’s available instantly, so you can save them on your PC and use it during tax filing.
End-to-end transparency
With Skydo, you always know how much money will end up in your account. You also get real-time updates on money transfers to stay on track with receivables.
Build for Indian freelancers and service exporters
Skydo is an India-based platform designed specifically for Indian freelancers and exporters. While you can create virtual accounts in key geographies like the UK, US, and Australia, our support team is India-based. Which means help is always available in case you get stuck or need help with an urgent request.
Those are the most important things you must know about Skydo. We invite you to check out our website to explore it on your own, book a demo.
Is foreign remittance taxable when received in India?
There is no tax on foreign inward remittances, but it is part of your taxable income. If you are a freelancer or exporter, this money is treated as business income, and you must pay tax on it based on your regular income tax bracket. You should keep documents like a FIRC to prove the source of this money to the tax authorities.
How much foreign remittance can I send abroad under LRS in 2025?
How do I avoid 20% TCS on outward foreign remittance?
What documents do I need when receiving a foreign remittance as a freelancer?
What is the difference between inward and outward foreign remittance?
