Quick tips to save tax in India & US, on Foreign Remittance for NRIs from India
A. Tax Collection at Source (TCS) on Foreign Remittances
- TCS is a tax collected when money is remitted from India under the Liberalised Remittance Scheme (LRS).
- The LRS limit allows Indian residents to remit up to $250,000 per financial year.
- NRIs cannot use LRS, but they can repatriate funds from their NRO accounts up to $1 million per RBI rules.
- TCS rates vary based on the purpose of remittance.
- If PAN is not submitted, TCS rates double.
2. Foreign Remittance Tax for NRIs from the USA to India
A. Gift Tax Rules in the USA
- Tax-Free Gift Limit: Up to $18,000 per person per year (2024).
- Gifts exceeding this limit must be reported to the IRS using Form 709.
- Lifetime Gift Tax Exemption: $13.61 million (2024).
B. Reporting Foreign Bank Accounts (FBAR & FATCA)
- FBAR (Foreign Bank Account Report)
- NRIs in the USA must report foreign bank accounts exceeding $10,000 to the US Treasury using FinCEN Form 114.
- FATCA (Foreign Account Tax Compliance Act)
- If total foreign financial assets exceed $50,000, they must be reported using IRS Form 8938.
C. Tax on Remittance to India from the USA
- No tax on transferring personal savings to India.
- Income sources (salary, business profits, etc.) must be reported on US tax returns.
- Interest earned on Indian bank accounts (NRO accounts) is taxable in the USA.
3. Tips for NRIs Sending Money from the USA to India
- Keep Gifts Below $18,000 Per Year
- Ensures the transfer remains tax-free under US law.
- Use an NRE Account for Investments
- Income earned in NRE accounts is tax-free in India.
- Helps avoid double taxation.
- Monitor FBAR & FATCA Limits
- Keep bank balances below reporting thresholds to avoid compliance issues.
Also Read: Mis-Selling of Financial Products: A Growing Concern for NRIs