When is the Right time to send money to India?

By
Hemant Beniwal
23

When is the Right time to send money to India?
A lot of our clients are NRIs – so this question is a FAQ for us – “When is the right time to send money to India?” Clients who have spent some time with us know the answer but they still probe ahead like – “I would like your outlook on the Indian Rupee vs Dollar in the next few months. Is Rupee going to depreciate further? How far do you think it will fall? No one can predict due to the numerous factors but I want your feedback.”

New clients have more expectations “Some quick help needed. I need to transfer some funds from UK to India. Can you suggest when should I initiate that transfer? Is it the right time to send money to India or should I wait for a while.”


The cheapest way to send money to India

When is the Right time to send money to India

With domestic interest rates peaking and showing a sign of reversal, NRIs have this question in their minds- should they be remitting money to India for investment purpose or not, at this time?

A few figures just to tell what kind of money we are talking about:

  1. NRI Remittance
    The remittance to India is increasing constantly. Indian bourses did not do well in 2008 to 2011 but the remittances were constant.
  2. Money remitted to India in 2011 was $57 billion where as China received $56 billion. India has the largest 12.5% share of the total worlds remittances followed by China (11.6%) and Mexico (5%).
  3. These remittances exclude the NRI bank deposits hence this is the money that goes into local markets for consumption and benefits the economy. For example, the Money Transfer industry in India itself is growing at an average of 20%.

Tax Planning for NRIs

Why do NRI transfer money to India?

  • NRI remit money to their families for sustenance in India. Inflation has been on upside here so we can see NRI will send more money for consumption.
  • They send money to invest in India. Major investment goes to Bank deposits and property. These are sometime done due to emotional reasons also as they feel their roots are here and there is chance that they may return in future to avail benefits arising out of these investments.

Note: Effective December 2011, the RBI has deregulated the interest rate that was payable on NRE (Non Resident External) accounts. Hence banks can interest rate of their choice. Following this liberty the rates on these deposits have gone up from a level of 3.7%-3.8% to a level of 7% to 10% for different maturity deposits. Hence these NRE accounts have become more lucrative as NRIs can catch the peak deposit rates as FD rates in India will go down in future.

NRI Savings Account

Now the million dollar question – Is it the right time to send money to India?

Benefits of transferring money to India Now:

  • A PE multiple of 15X for March 12 and a GDP of 7% to 7.5% in more than enough to attract money and capital markets will reflect the solidity. NRIs from developed countries are already struggling with the returns that their markets are giving. Also they will take time to come out of the recent turbulence. They can look for good tax free returns from India.
  • RBI’s deregulation on NRE deposits is providing a good opportunity to NRIs from country that have lower rate of deposits. Since the principal and the earnings are repatriable and convertible this is a good bet for deposits ranging from 1 year to 5 years.Develop countries still have deposit rates in range of 1% to 5% – which are very low in comparison to Indian deposit rates for NRIs.

Tip: RBI has allowed that now NRE/FCNR (Foreign Currency Non Resident) accounts can be hold with a close relative in India on former and survivor basis. This means your relative can also operate the account as Power of Attorney.  This will smoothen the banking process and funds can be managed even in case the NRI himself is not present for transactions.

NRI DTAA

Caveat of transferring money to India Now:

  • The biggest fall back is the exchange rate risk. Rupee as a currency has shown it weakness in Nov-December 11 periods. Expert say it will take time before it goes into stable range. The rupee depreciation will be beneficial when you are getting funds in India as you will get more rupee per unit the foreign currency and vice versa. Check out the recent volatility as Depositor has to face this during the time he is invested.

Dollar Vs Rupee Chart

Dollar Vs Rupee Chart

Euro vs Rupee Chart

Euro Vs Rupee Chart

  • Although the returns on FCNR and NRE are tax free in India but they are taxable as per the structure of the country where NRI lives. This can be as high as 55% for some countries and this will bring the actual returns lower. For this please consult the tax advisor before investing in India.
  • The rules and caps over investments in foreign currency keep on changing on frequent basis. These rules are covered in various acts like RBI Regulations, FEMA and different banking regulation acts and guidelines. NRI needs to be proactive and informed in this matter.

Our take at present – on sending money to India for Investments:

At present times it makes sense that NRIs should remit more money for investment purpose in India. The overall returns from India looks promising as Indian Growth Story will continue going forward and will be an exception to many countries. Also rupee will appreciate against dollar in long term, so during maturity you will have more number of dollars to take home. But again each country is different in terms of regulations and tax implications. Do no invest without pondering over these and taking expert’s advice.

TDS for NRIs

Disclaimer: The data related to capital markets or bank rates as mentioned in article in no way should be considered as advice for investing in Debt or Equity securities, directly or indirectly. Readers are requested to consult their Financial Advisor for any investment decision they take.

Feel free to ask any question or share your experience regarding transferring money to India, add it in the comment section.

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23 COMMENTS

  1. Hi Hemant
    My brother who is US citizen is visiting me this month.I have decided to gift him some money.I would like to know what is the best way to deal with it.What type of account he can open here to park the money and what are tax implications for him if any?

    • Hi Anil,
      US citizenship is the most complicated thing if we talk about finance. So you are in any part of the world you have to follow US rules – I am not sure what are the gift tax rules in the US.
      Just to share – if someone is US citizen but still holds some property in India. If he plans to give up US citizenship for any xyz reasons – he have to pay capital gain tax on Indian Property, even if he is not planning to sell it. 🙂

      • Hi Hemant
        Thanks!My brother had visited me only for a week.I got NRE and NRO account opened for him.He also applied for the PAN Card.
        My sister also opened NRE and NRO accounts during her last visit.Initially she was thinking of investing in mutual funds in India but gave up the idea after seeing tax implications involved.
        I don’t think most Persons of Indian Origin would like to give up their US citizenship even though they may like to stay in India for a longer period of time.

  2. Hii Sir
    My uncle resides in France. Currently the euro is around 63 rupees and he is coming to india next month so i want to know that at what rate it is expect to grow. When we will be beneficial when it goes up? or when it goes down? as i don’t have any knowledge in exchange rate.

    • Hi Hussain,
      Predicting forex is like predicting equity markets or even tougher. But falling rupee is good if you are converting foreign currency in Indian Rupee. As you will get more rupees for every dollar or euro.

  3. Hello Hemant,

    Really nice catch of the topic.

    Well i wanted to know few things, What if transfer my foreign currency to an NRE Account in INDIA and then transfer it to my Savings account in INDIA as my current investment are linked to my savings account.

    – thus would there be any tax on my savings account ?
    – after i sell my investment money would be deposited back to my savings account n then NRE account ….thus any tax ?

    – Or i should directly start my investment via NRE directly , If yes then can i whatever income i earn out of my investment in INDIA i can repatriate back to Dollars ??? I doubt i can…..

    Sorry to confuse you.

    • Dear Sam,
      i think you are not allowed to have an NRE as well as a Savings account at the same time as your status cannot be both NRE and resident Indian at any point of time. In case you wish to maintain a savings account in India it will have to be NRO account–interest on this account is taxable, most banks do TDS and credit only the balance interest to your account. Also transfer from NRE to NRO account is possible but not vice-versa. Whatever investment you do from your NRE savings account such as any MF or stocks investment , the proceeds will be credited back to your NRE account itself whenever you redeem/sell ( of course assuming you are still NRI at that point of time). Funds in the NRE account are fully repatriable so you can convert back to USD whenever you wish and repatriate. regds

      • Hi Sam,
        Shreedhar is 100% right – NRIs are not allowed to continue their savings bank account. You should convert them to NRO asap.

  4. Dear Hemantji,
    The article brings to light the sentiment of NRI, I have been and NRI since 23 years now, but did nto have a clue about money matters.
    One day I was surfing the internet and came across the term called SIP and Mutual Fund back in 2008.
    Slowly I started to read more about investment and money management, I came across your article in 2009 end, from that day till today i m following Your advice and trying to learn more from it.
    Most of my question get answered by you or from one of the comment posted on ur article.
    Thanks for the article and keep posting
    regards

  5. Hi All,
    I think, when we will do big Fix Deposits in NRE accounts, the govt will do the FDs taxable for NRIs.

    • Hi Ashok,
      We can’t gaze the future but if something happens like this, you can think of Plan B.

  6. hi sir pls advice me wear do i invest my money for one year. have 2 lakh
    stock market or mutural fund. and which stock or fund .but it should be
    balance sa bale .no more risk i want to take . hard earn money

  7. I have a NRI a/c with SBI . When I asked them to make a FD from this a/c. They opened the FD and I saw it mentioned as NRO in the website. Also , I had a tax deduction in my statement @ 10 %. Now , I heard, NRI a/c are not taxable. So how come the interest on my FD got taxed ?

  9. Dear,

    I am doubtful about the current indian market and feel the rupee might slip even further in future. With this in mind I believe if i put my saving in an NRI account in india, it will eventually depreciate in value with the falling currency rate. Therefore I would like to know the feasibility and practicability of maintaining a Dollar account (If such an account is available.) Looking forward to your valuable reply.

    Regards

    Jinsu

  10. Hello Hemant,
    Im an avid reader of your articles.
    Not sure if you could assist me with this one.
    I’m an NRI currently holding an NRE account.
    I am expecting a lump sum amount in Indian rupees from a relative of mine in India.
    My bank in India informed me that this lump sum cannot be deposited into my existing NRE account and to open an NRO account
    Would you suggest i open an NRO account and would any tax be deducted from this lump sum if i do so?
    Any other route i should be adopting to minimise tax implications on this lumpsum?

    Regards,

  11. Hi,
    I am on an official deputation to Maldives. I want to transfer my non-taxable foreign allowance to my Savings Account in India. Will it account for tax deductions at India? And, when should I transfer; I mean should the Buy rate apply or sell rates apply? For eg now USD -= 54.85 buy rate and 52.50 for selling.
    Kindly guide in simple language…

    • Dear Murlijs,
      Its simple – the rates which is not in your favor is the the rate that applies so in this case 52.50.
      Hope you are talking about NRO/NRE A/c not normal savings account.

  13. Hello,

    My friend wants to remit a big amount from Saudi Arabia to India,

    So please advice when is the best time to send the remittance.

    Thanks….

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