Moving abroad for work is not for the faint-hearted. Add in financial responsibilities back home and things get even trickier.
Non-resident Indians (NRIs) frequently transfer money to India. The money may be required to pay household bills, fund medical expenses, or cover the children’s tuition fees. Many people send money to India from USA to carry out investments.
Often, the reason for transferring large sums of money internationally is to cover mortgage payments. Missing a mortgage payment could result in hefty penalties. Default on the loan and you could even lose your house.
Remittances for mortgage payments: Things to keep in mind
- The exchange rate:
When you transfer money to repay an equated monthly instalment (EMI), factor in the current exchange rate.
Say, an NRI living in the USA has to pay a home loan EMI of Rs 25,000 in India. When the exchange rate is ‘USD 1 = Rs 70’, he transfers approximately USD 357.
Now, suppose the exchange rate changes to ‘USD 1 = Rs 65’. The earlier USD 357 is no longer enough. The NRI must now send USD 385 to his bank account in India.
If he transfers only USD 357, the creditor cannot collect the EMI because of inadequate funds. Thus, he would miss the EMI payment and attract a penalty.
- The timeline
The time zones may differ considerably between your country of residence and your home country. So, double-check the due dates for your mortgage EMIs. The morning of 12 March may just be starting in Seattle, but banking hours would already be over in Mumbai.
Besides, transferring the funds may take time as well. Bank transfers are known to take up to five days. They may take longer if holidays get in the way.
If you have the time in hand, that’s great. But if you are in a hurry, look at other modes of international money transfer. For instance, online remittance services like RemitMoney are much nimbler. It takes just an hour to transfer money to India from USA, Canada, and Europe. Such players are also cheaper than international bank transfers and non-banking remittance services.
Sending money to India? Tax implications you must know
You may have wondered, ‘How much money can I send to India from USA?’
The good news is that there is no money transfer limit to India. You can remit large sums without worrying about caps on the amount. Just ensure that the applicable taxes are paid.
- Income tax for sender
India has agreements with many countries to avoid double taxation on the same income. Check if this agreement is in force in your country of residence. In such a case, your income would be taxed as per the laws of your country of residence. There would be no further taxation to worry about back in India.
- Gift tax
Gift tax may apply depending on where you live. For instance, in the USA, you would pay gift tax on amounts exceeding USD 15,000 sent to one person in a single financial year.
- Income tax for recipient
Remittances of over Rs 50,000 are added to the personal income of the recipient in India. The recipient then pays tax as per their income tax slab. However, specified ‘blood relatives’ can receive any amount from abroad and all of it is tax-free.
Large transfers out of USA
All banks in the USA report transactions of $10,000 and above. But they also report smaller transactions if these seem suspicious.
As an NRI remitting money to India, it’s best to report all remittances, including your large mortgage payments. Then you will not fall afoul of the tax laws.
Your outstanding loans back in India do not cease to exist simply because you have moved abroad. So, do yourself a favour and mark the EMI due dates on your calendar. Check the exchange rates before transferring any funds. Also, look at different remittance modes for the best rates and the fastest speeds. Never miss a mortgage payment again.