About to send money to India from Canada online? Check out these tax rules and transfer regulations
Posted: May 05, 2019
Indians are the second largest source of permanent immigration into Canada, with most Indian expats settling around British Columbia and Ontario. With a thriving immigrant community, Canada ranks ninth among the top ten countries that had maximum remittances into India in 2017.
Whether it's to support ageing parents or to help friends and family, Indian immigrants in Canada send frequent money transfers to India. Here in this guide, you can find all that you need to know about taxes, regulations and other rules while transferring money online from Canada to India.
Are there any limits on how much money you can transfer to India?
According to Canadian laws, there are no limits on how much money you can transfer back home. The same applies to Indian government laws too. There is no upper limit on the amount Indians can receive via money transfers from their blood relatives and extended family in Canada.
However, you have to remember that bigger transfers may face extra scrutiny from regulatory panels. Additionally, while transferring large amounts, your transfer service provider may ask you to submit additional documentation. The transfer process is similar – irrespective of the quantum of funds you send.
Taxation rules for money transfers from Canada to India
Taxes to be paid by the recipient
If your recipient in India is a blood relative – spouse, parents, siblings, children, grandchildren, and in-laws, then the recipient doesn’t have to pay tax on any transfer amounts they receive from Canada. The recipient if he/she is a blood relative need not pay any tax on the funds received from their family in Canada, irrespective of the amount. Similarly, money transfers made as wedding gifts or as part of inheritance also don’t require taxation at the recipient’s end.
All other money transfers made from Canada to India (to friends and extended family, apart from blood relatives) come under the gift tax that is regulated by the ITA (Income Tax Act of India). Any transfer over 50,000 INR is taxable and should be declared as an income by the recipient.
Taxes to be paid by the sender
If you are an NRI (Non-resident Indian) residing in Canada, you have to pay a government service tax on the commission or fees you pay to your transfer agent. Some transfer services factor this tax into the totals while others collect it separately. Additionally, some transfer services offer flat-rate service taxes, while others charge this tax based on the amount you are transferring.
While choosing a transfer service provider, make sure to check whether this service tax is listed in the total cost or if it’s separate.
Failing to file your transfer could lead to taxation troubles for both you and your recipient
If you are transferring funds more than 50,000 INR, to someone in India, who isn't your blood relative, then they have to mention it in their income tax filing. Moreover, you (being the sender) have to include it in your IRS, irrespective of how you know that person.
Now, that you are aware of the various transfer regulations and taxation laws let’s take a look at the different ways you can send money to India from Canada.
Methods of money transfer from Canada to India
If you are wondering how to send money to India from Canada, no worries – you’ve got plenty of choices. The best method for you depends on several factors like – how fast you want the transfer to be processed, the fees you are willing to pay, the current exchange rates and so on.
Here are the most common transfer methods:
- Online money transfer services – These providers offer you competitive exchange rates and can transfer amounts directly to your recipient’s bank account in India.
- Bank Transfer – Most Canadian banks allow you to transfer money to bank accounts in India. However, this method costs high transfer fees and poor exchange rates.
- Transfer with Cash Pickup – This method allows the recipient to visit the nearest branch of the transfer service provider to collect the money in cash. While fast, this method may not provide you with the best exchange rates.
- Transfer via international cheques – You can write a physical cheque and post it to your recipient. The recipient then cashes the amount in his/her bank. This is one of the slowest methods to send money and is not commonly used.
Tip to keep in mind before initiating transfers
Make sure to review the exchange rates, commissions, and other fees before choosing a transfer method, so that you know exactly how much the transfer is costing you.