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)

1. 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.
2. 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

1. Keep Gifts Below $18,000 Per Year
• Ensures the transfer remains tax-free under US law.
2. Use an NRE Account for Investments
• Income earned in NRE accounts is tax-free in India.
• Helps avoid double taxation.
3. 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