A member in our Dubai WhatsApp group sent me a message last month that I’ve seen hundreds of times over the years.
“Mani, I’m sending $50,000 to my NRE account. Will I be taxed 20% on this in India?”
Short answer: No. Absolutely not.
But I understand the confusion. There’s so much misinformation floating around about taxes on money transfers that even smart, well-informed NRIs get anxious about sending their own money to India.
Here’s the truth that will let you breathe easier.
The act of transferring money to India is not a taxable event. India does not tax inward remittances.
What gets taxed – if anything – depends on three things: what kind of money it is, who’s sending it, and which account it lands in.
That’s what this guide will break down – country by country, scenario by scenario.
The Big Rule: India Does Not Tax Inward Remittances
This is the single most important thing to understand.
When you send money from the US, UK, UAE, Canada, Singapore, Australia, or anywhere else to India, the Indian government does not levy any tax on the transfer itself.
No income tax. No TDS. No GST on the amount you receive.
The 20% TCS (Tax Collected at Source) that many NRIs worry about? That applies only to outward remittances – money being sent OUT of India under the Liberalised Remittance Scheme. It has nothing to do with money coming IN.
So if you’re sending your own foreign earnings to your own NRE account in India, there is zero tax on the transfer. The money arrives. It sits in your account. No tax.
Now, that doesn’t mean there are never tax implications. There are. But they depend on the nature of the money, not the transfer itself.
When Money Coming Into India IS Taxable
Here’s when tax does apply.
1. Interest Earned on NRO Accounts
The money you transfer isn’t taxed. But the interest it earns in an NRO account is taxed at approximately 30% (plus surcharge and cess), deducted at source by the bank.
NRE account interest? Completely tax-free.
This is why sending foreign earnings to NRE instead of NRO matters so much. I’ve written about this in detail in our NRE vs NRO account guide.
2. Gifts From Non-Relatives Exceeding Rs 50,000
If you receive money as a gift from a relative, it’s 100% tax-free in India. No limit.
But “relative” has a specific legal definition under the Income Tax Act. It includes your spouse, parents, siblings, children, and their spouses, plus lineal ascendants and descendants, and siblings of your spouse.
If the gift comes from anyone outside this list – a friend, a colleague, a business partner – and the total gifts from non-relatives exceed Rs 50,000 in a financial year, the entire amount becomes taxable as “Income from Other Sources.”
Not just the amount above Rs 50,000. The full amount.
3. Income Earned Abroad (If You’re a Resident)
If you’ve returned to India and become a tax resident, your worldwide income is taxable in India.
So if you earned money abroad and transfer it to India, the transfer isn’t taxed – but the income itself is, because you’re now a resident.
The exception: during your RNOR (Resident but Not Ordinarily Resident) period – typically the first 2-3 years after returning – your foreign income is NOT taxable in India. Only Indian-sourced income is.
This is an important window for returning NRIs to transfer savings to India tax-efficiently.
4. Investment Income or Business Income
If the money being transferred represents salary, freelance income, business revenue, rental income from foreign property, or investment gains – and you’re an Indian tax resident – that income is taxable regardless of whether you transfer it.
The transfer is just moving money. The taxability was determined when you earned it.
Tax Implications: Country by Country
Now let’s look at what happens on the sending side. Because while India doesn’t tax inward transfers, the country you’re sending FROM might have its own rules.
United States
The new 1% US Remittance Tax (Effective January 1, 2026)
This is the biggest change in 2026 for US-based NRIs.
The “One Big Beautiful Bill Act” was signed into law on July 4, 2025. It includes a 1% excise tax on certain remittance transfers.
Here’s what you need to know:
| Detail | What It Means |
|---|---|
| Tax Rate | 1% of the transfer amount |
| Who Pays | Non-US citizens (H1B, L1, green card holders, students) |
| What’s Taxed | Transfers funded by cash, money orders, cashier’s checks |
| What’s Exempt | Online bank transfers, debit card, credit card funded transfers |
The important detail: if you transfer money through your bank’s online platform or through services like Wise, Remitly, or similar digital services funded from your bank account, this tax does not apply.
It only applies to physical instruments – walking into a money transfer office and paying with cash or a money order.
US citizens are completely exempt regardless of the method.
The tax went through several revisions – originally proposed at 5%, reduced to 3.5% by the House, and finally settled at 1% by the Senate.
US Gift Tax Rules
If you’re sending money as a gift (to parents, siblings, friends in India), US gift tax rules apply on the sender’s side.
You can gift up to $19,000 per recipient per year (2025 limit) without any filing requirement.
If you gift more than $19,000 to any single person in a year, you must file IRS Form 709. But here’s the thing – you won’t actually owe any tax unless your total lifetime gifts exceed approximately $13.99 million.
So Form 709 is a reporting requirement, not a tax bill.
FBAR and FATCA
These aren’t transfer taxes, but they’re directly connected to your India accounts.
If your Indian bank accounts (all combined) hold more than $10,000 at any point during the year, you must file FBAR with FinCEN.
If your foreign financial assets exceed $50,000 on the last day of the year (or $75,000 at any point), you must file FATCA Form 8938 with your tax return.
Penalties for not filing are severe. Up to $10,000 per violation for non-willful failure. Don’t skip these.
Bank Reporting
US banks automatically report international wire transfers of $10,000 or more to the IRS. This doesn’t trigger any tax – it’s just information reporting. But keep records of all transfers in case questions arise.
United Kingdom
The UK does not have a specific remittance tax on money sent to India.
However, if you’re a UK tax resident, HMRC taxes your worldwide income. This means any Indian income – rent, interest, dividends, capital gains – must be declared on your UK Self Assessment tax return, even if you’ve already paid tax on it in India.
The UK-India DTAA prevents double taxation. You can claim Foreign Tax Credit Relief (FTCR) in the UK for taxes already paid in India.
Key change from April 2025: The old “remittance basis” of taxation has been abolished. It’s been replaced by the Foreign Income and Gains (FIG) regime, which gives a 4-year relief window to qualifying new UK residents.
If you’ve been in the UK for fewer than 4 years and weren’t a UK resident in the previous 10 years, you may be able to exclude foreign income from UK tax. But you must actively claim this on your tax return.
UK Gift Rules
You can give up to GBP 3,000 per year tax-free under the annual gift exemption. Gifts beyond this may be subject to Inheritance Tax if the donor passes away within 7 years.
Money sent to relatives in India for family maintenance or support is generally not taxable on either side.
UAE, Saudi Arabia, and Other Gulf Countries
Good news for Gulf-based NRIs.
The UAE, Saudi Arabia, Qatar, Bahrain, Kuwait, and Oman have no personal income tax. There is no tax on sending money abroad.
You can transfer any amount to India without any tax implications on the sending side. Zero.
On the India side, the same rules apply – the transfer itself isn’t taxed. Interest on NRE accounts is tax-free. NRO interest is taxable.
For UAE-specific guidance, see our return to India from UAE guide.
Canada
Canada does not have a remittance tax on money sent to India.
But like the UK, Canada taxes worldwide income for residents. Any income earned in India must be reported to the CRA (Canada Revenue Agency).
India and Canada have a DTAA that prevents double taxation. You can claim foreign tax credits in Canada for taxes paid in India.
FINTRAC Reporting: Canadian financial institutions must report international transfers of CAD 10,000 or more to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada). This is information reporting, not a tax.
Gift Tax: Canada has no gift tax. You can send any amount to India as a gift without Canadian tax implications for the sender. However, the recipient in India is subject to Indian gift tax rules (Rs 50,000 limit for non-relatives).
For Canada-specific guidance, see our return to India from Canada guide.
Singapore and Australia
Neither Singapore nor Australia imposes a tax on outward remittances.
Both countries tax worldwide income for residents, and both have DTAAs with India.
Australian NRIs should note that the ATO (Australian Tax Office) actively uses CRS (Common Reporting Standard) data to identify undeclared offshore income, similar to HMRC.
The DTAA Safety Net
I’ve mentioned DTAA several times. Here’s why it matters.
India has Double Taxation Avoidance Agreements with over 85 countries, including the US, UK, Canada, UAE, Singapore, Australia, Germany, and Japan.
The core principle: you should not be taxed twice on the same income.
If you’ve already paid tax on income in one country, the DTAA allows you to claim credit for that tax in the other country. You end up paying the higher of the two rates, but not both stacked on top of each other.
For US NRIs, I’ve covered this in detail in our DTAA for US NRIs guide.
Special Scenarios NRIs Ask About
“I’m selling my US home and sending the proceeds to India”
The sale of your US home is subject to US capital gains tax first. After paying US taxes, the remaining proceeds can be transferred to your NRE or RFC account in India freely.
India does not tax this transfer. You’re moving your own after-tax money.
Keep documentation of the sale, US tax paid, and the FIRC from your Indian bank. You may need it if the IT Department ever asks about a large deposit.
“I’m sending money to my parents in India every month”
Completely tax-free in India. Parents are “relatives” under the Income Tax Act. There’s no limit on how much you can send for family maintenance.
On the US side, if you send more than $19,000 per parent per year, file Form 709. But you won’t owe any actual gift tax.
From the UK, UAE, Canada, or most other countries, there are no tax implications for the sender on family support transfers.
“I want to gift money to a friend in India”
If the total gifts your friend receives from all non-relatives in a financial year exceed Rs 50,000, the entire amount is taxable in your friend’s hands as “Income from Other Sources.”
This catches many NRIs by surprise. You send Rs 1 lakh to a close friend thinking it’s a simple gift. Your friend ends up with a tax liability on the full Rs 1 lakh.
“I’m returning to India and moving all my savings”
Transferring your own savings to India is not a taxable event – either in India or in your current country.
But timing matters. Send money to your NRE account while you’re still an NRI. Interest stays tax-free. After you become a resident, NRE accounts must be converted to resident accounts.
Better yet, open an RFC (Resident Foreign Currency) account after returning. It lets you hold foreign currency in India, convert to INR in batches, and earn tax-free interest during your RNOR period.
I’ve covered transfer strategies in detail in our guide on sending large amounts from USA to India.
“I’m cashing out my 401(k) and sending it to India”
Your 401(k) withdrawal will be taxed in the US – federal income tax plus a 10% early withdrawal penalty if you’re under 59.5.
The after-tax amount can be transferred to India without additional tax in India (during your NRI or RNOR status).
If you’ve already returned and are a resident, the DTAA ensures you don’t pay Indian tax on income already taxed in the US.
Our 401(k) guide for returning NRIs covers this in depth.
TCS: The Outward Remittance Tax (When Sending Money FROM India)
This section is for returning NRIs or residents who need to send money out of India.
TCS (Tax Collected at Source) applies when you send money abroad under the Liberalised Remittance Scheme (LRS). Key changes from Budget 2025 (effective April 1, 2025):
| Purpose | TCS Rate | Threshold |
|---|---|---|
| Education (via loan from specified institution) | 0% | No limit |
| Education (self-funded) or Medical | 5% above threshold | Rs 10 lakh/year |
| Overseas tour packages | 5% above threshold | Rs 10 lakh/year |
| All other purposes (investment, gifts, etc.) | 20% above threshold | Rs 10 lakh/year |
Important: TCS is not an extra tax. It’s an advance tax payment that gets credited to your account. You can claim it back when filing your ITR if your actual tax liability is lower.
The Rs 10 lakh threshold (raised from Rs 7 lakh in Budget 2025) is cumulative across all purposes for the financial year.
For more on TCS, see our TCS on remittances guide.
The FIRC: Your Most Important Document
Every time you receive a significant inward remittance, request a FIRC (Foreign Inward Remittance Certificate) from your Indian bank.
A FIRC is proof that money entered India through proper banking channels. You’ll need it for:
- Buying property (to prove source of funds)
- Tax assessments (if the IT Department questions a large deposit)
- Investment documentation
- Loan applications
Banks don’t issue FIRCs automatically. You have to request them.
Keep every FIRC. Seriously. Store digital copies in the cloud. These are more valuable than you think, especially years down the line.
Quick Reference: Tax Summary by Transfer Type
| What You’re Transferring | Tax in India | Tax in Sending Country |
|---|---|---|
| Own salary/savings to NRE account | No tax | Country-specific (see above) |
| Gift to relative in India | No tax (any amount) | Gift rules of sending country |
| Gift to non-relative in India | Taxable if > Rs 50,000/year | Gift rules of sending country |
| Family maintenance to parents | No tax | Generally no tax anywhere |
| Property sale proceeds (after local tax) | No tax on transfer | Capital gains tax in that country |
| Freelance/business income (if Indian resident) | Taxable as income | May have DTAA credit |
| Returning NRI moving savings | No tax (send to NRE/RFC) | No tax |
| Investment into Indian markets | No tax on transfer | Country-specific reporting |
Common Mistakes to Avoid
Mistake 1: Confusing TCS with inward remittance tax. TCS applies only when sending money OUT of India, not when receiving money from abroad.
Mistake 2: Not filing FBAR/FATCA despite holding Indian accounts. US-based NRIs must file these annually. The penalties for non-compliance are harsh.
Mistake 3: Sending foreign earnings to NRO instead of NRE. NRO interest is taxed at ~30%. NRE interest is tax-free. This single mistake can cost you lakhs over time.
Mistake 4: Not requesting FIRCs. When the IT Department asks about a Rs 50 lakh deposit three years later, you’ll wish you had that certificate.
Mistake 5: Assuming gifts to friends are tax-free. They’re not – if total non-relative gifts exceed Rs 50,000/year, the recipient pays tax on the full amount.
Mistake 6: Not declaring Indian income in your resident country. The UK, US, Canada, and Australia all tax worldwide income. With CRS data exchange, tax authorities know about your Indian accounts.
Mistake 7: Panicking about the 20% TCS. This applies to outward remittances only. And even then, it’s an advance tax credit, not an additional tax.
What Returning NRIs Should Do
If you’re planning your return, here’s the smart sequence for transfers:
Before returning (while still NRI):
- Transfer maximum savings to your NRE account
- Open an FCNR FD if you want to hold foreign currency for 1-5 years
- Complete all large transfers while your NRI status is intact
- Collect FIRCs for every transfer
Immediately after returning:
- Open an RFC account to hold remaining foreign currency
- Don’t convert everything to INR at once
- Update your residential status with your Indian bank
During RNOR period (first 2-3 years):
- Your foreign income is not taxable in India during this window
- Convert RFC to INR in batches as needed
- File your ITR correctly showing your RNOR status
For a complete timeline, see our return to India from USA guide or our financial checklist for returning NRIs.
Frequently Asked Questions
Q: Is there any tax on money I send to my own NRE account?
No. Transferring your own foreign earnings to your NRE account is not taxable in India. The interest earned is also tax-free.
Q: How much money can I send to India without tax?
There’s no limit on inward remittances to India. You can send any amount. The transfer itself is not taxed. Tax depends on the nature of the money and which account it goes to.
Q: Does the 20% TCS apply to money I receive from abroad?
No. TCS applies only to money sent OUT of India under LRS. It does not apply to inward remittances.
Q: Will the new US remittance tax affect my Wise or bank transfers?
The 1% US remittance tax (effective January 2026) only applies to transfers funded by physical instruments like cash or money orders. Online bank transfers, debit card, and credit card funded transfers are exempt.
Q: Do US citizens have to pay the US remittance tax?
No. US citizens are completely exempt from the remittance excise tax regardless of the transfer method.
Q: My parents in India received Rs 10 lakhs from me. Will they be taxed?
No. Parents are defined as relatives under the Income Tax Act. Gifts from relatives are completely tax-free in India, regardless of the amount.
Q: I gifted Rs 2 lakhs to my friend in India. Is that taxable?
Yes, for your friend. Since you’re not a “relative” under the tax definition, and the amount exceeds Rs 50,000, the full Rs 2 lakhs is taxable in your friend’s hands.
Q: I’m a UK resident. Do I need to declare my Indian income to HMRC?
Yes. UK residents are taxed on worldwide income. You must declare Indian income on your Self Assessment return. You can claim Foreign Tax Credit Relief under the UK-India DTAA to avoid double taxation.
Q: What is FIRC and do I need it?
FIRC (Foreign Inward Remittance Certificate) is proof that money entered India through proper banking channels. You should request it from your Indian bank for every significant transfer. It’s crucial for property purchases, tax assessments, and investment documentation.
Q: I’m returning to India. Should I transfer all my money before or after?
Transfer as much as possible to your NRE account before returning (while you’re still an NRI). After returning, use an RFC account for remaining foreign currency. This gives you maximum flexibility and tax efficiency.
Disclaimer: This guide is for informational purposes only and should not be considered tax or legal advice. Tax laws change frequently. Always consult a qualified tax professional in your country of residence and in India before making financial decisions. Cross-border taxation is complex – getting personalized advice is worth every penny.
Sources: Income Tax Act of India, FEMA guidelines, RBI circulars, IRS (US), HMRC (UK), CRA (Canada), One Big Beautiful Bill Act (July 2025), DTAA treaties, and real experiences shared by BacktoIndia community members.
If you’re planning your move back, join our WhatsApp community at https://backtoindia.com/groups – 20,000+ NRIs helping each other with real, lived experience. It’s free and volunteer-run.
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