The transfer of money from one party to another, particularly the sending of funds by foreign workers to their home countries or cross-border business payments.
Remittance refers to any money transfer between parties, but is most commonly associated with cross-border transfers. Personal remittances (sent by migrant workers to families) form a significant part of India's economy — India is the world's largest remittance recipient (over $100 billion annually). Business remittances include: payment for imports, service payments, dividend repatriation, and investment transfers. In India, outward remittances by residents are governed by FEMA (Foreign Exchange Management Act) and the RBI's Liberalised Remittance Scheme (LRS), which allows up to $250,000 per financial year for permitted purposes. Channels include: SWIFT transfers, NEFT/RTGS (domestic), correspondent banking, money transfer operators (Western Union, Wise), and UPI (increasingly for international transfers).
An NRI in Dubai sends $5,000 to parents in India. Exchange rate: ₹83.50/$. Transfer fee: $10. Amount converted: $4,990 × ₹83.50 = ₹4,16,665. If using a service with 1% exchange markup: effective rate ₹82.67, amount received ₹4,12,522 — a difference of ₹4,143 lost to hidden markup. This is why comparing total cost (fee + exchange margin) matters.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Under LRS, Tax Collected at Source (TCS) applies: 5% on remittances for education/medical above ₹7 lakh (0% up to ₹7 lakh), 20% on all other remittances above ₹7 lakh (0% up to ₹7 lakh). Education funded by loan: 0.5% above ₹7 lakh. TCS is adjustable against income tax liability.
SWIFT bank transfer has lowest margins for large amounts (>$1,000). Wise (TransferWise) offers mid-market exchange rates with transparent fees. UPI international is emerging as a low-cost option. Avoid airport money changers and high-fee services. Always compare total cost (fee + exchange rate) not just the advertised fee.
An electronic fund transfer system in India that enables bank-to-bank transfers in batches, available 24/7 with near-instant settlement.
A continuous, real-time payment system operated by RBI for large-value interbank transfers with a minimum transaction amount of ₹2,00,000, available 24/7.
An instant interbank electronic fund transfer service in India available 24/7, enabling real-time money transfers up to ₹5 lakh through mobile, internet banking, or ATMs.
A written guarantee from a bank (on behalf of the buyer) promising payment to the seller upon presentation of specified documents proving shipment of goods.
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