Things to check before sending money abroad

You have decided to send money abroad — for a child studying overseas, a relative who needs help, or your own foreign investment. Before you tap "transfer", spend ten minutes on the checks below. These FEMA rules for Indian investors protect you from rejected payments, surprise tax notices, and frozen bank accounts.

Sending money out of India is legal, but it is regulated. Get the small steps right and the transfer goes through in a day. Skip them, and the money can sit in a suspense account for weeks while the bank asks for documents you never knew existed.

1. Confirm your annual LRS limit is not breached

The Liberalised Remittance Scheme allows every resident Indian to send up to 250,000 dollars abroad per financial year. This is a per-person limit, so a family of four can send 10 lakh dollars combined.

Check what you have already sent in the same financial year. Loan repayments, gifts, foreign investment, and education fees all count toward the same 250,000 limit. The bank will not warn you if you are about to cross it. The system will simply reject the next payment.

2. Know which purpose code applies

Every outward remittance under LRS needs a purpose code. The wrong code is the second-most-common reason for rejection.

• S0301 — travel
• S0305 — studies abroad
• S0301 — medical treatment
• S0023 — gift
• S0001 — investment in equity
• S0003 — investment in debt

If you are not sure, ask the remitting bank. They have the master list and use it daily.

3. Calculate TCS upfront, not after

Tax Collected at Source applies to most outward remittances. Knowing the rate before you transfer prevents a nasty 5% surprise on the bill.

The TCS table runs roughly like this:

• Foreign tour package — 5% on the first 7 lakh, 20% above that
• Education through a loan from approved lender — 0.5% above 7 lakh
• Education without loan — 5% above 7 lakh
• Medical treatment — 5% above 7 lakh
• Other purposes — 20% from the first rupee

TCS is not an extra tax. It is a credit you can claim back when filing your ITR. But it ties up the cash for several months, so plan around it.

4. Pick the right route — bank, fintech, or remittance house

You have three real options.

1. Your home bank — safe and slow, with a 0.5 to 1% spread on the exchange rate
2. A fintech aggregator — faster and tighter rates, often 0.2 to 0.4% spread
3. A licensed money-changer — useful for travel-card top-ups, weaker for large investments

Compare the all-in cost: exchange rate, fixed fee, GST on the fee, and TCS. The aggregator is usually cheapest for amounts above 5 lakh rupees, but only if the recipient bank accepts the route.

5. Verify the recipient details twice

This is the boring step that saves the most money. A wrong IBAN, SWIFT code, or routing number can lock the money in transit for two to three weeks.

Verify three things from the recipient:

• Beneficiary name exactly as on their bank account
• SWIFT/BIC for the destination country
• IBAN for European countries, account + routing for the US

6. Keep a paper trail for FEMA records

RBI does not ask for documents on every transfer, but they can ask years later. Keep these for at least eight years:

• The Form A2 you signed at the bank
• Bank receipt with reference number
• Any invoice or admission letter that explains the purpose
• The TCS challan if applicable

You can review the official LRS framework on rbi.org.in.

7. Plan for the return leg if it is an investment

If you are sending money to buy foreign stocks or property, plan how the money will come back. Indian residents must repatriate foreign income within a defined period.

Open the receiving brokerage or bank account before you send the money. Set up a clear paper trail showing the purpose, the investment, and the dividends. This makes filing Schedule FA in your ITR painless.

8. Time the transfer for the rate, not the day

The dollar/rupee rate moves on RBI policy days, US Fed days, and large oil-price moves. If you are sending a discretionary amount, watching for two or three quiet weeks can save 20,000 to 40,000 rupees on a 50,000 dollar transfer.

For urgent payments — fees, medical bills — do not chase the rate. Pay the spread and move on. Time spent waiting for a 0.2% better rate often costs more in deadline anxiety than the saving is worth.

One more habit worth building: keep a small spreadsheet of every outward remittance with date, amount, exchange rate, and TCS. It takes a minute per entry and saves hours when you file your ITR or face an FEMA query.

Frequently asked questions

Do I need RBI approval to send money abroad?
Not for ordinary purposes within the LRS limit. Approval is needed only for unusual transactions or amounts above 250,000 dollars per financial year.

Is TCS refundable?
Yes. It is a tax credit you can claim against your final tax liability when you file the ITR.

Can I send money to a friend abroad as a gift?
Yes, under the gift purpose code S0023, within the LRS limit. The gift becomes the recipient's income in their tax country.