Complete Guide: Inward Remittance Meaning, Benefit, and Procedure

Inward Remittance Meaning

To put it in very simple terms, whenever someone transfers money from a foreign country to someone staying in India, it is called inward remittance for the person receiving it.  Inward remittances can be for multiple purposes including personal and business. 

Inward remittances come under the ambit of the Reserve Bank of India(RBI) and the Foreign Exchange Management Act (FEMA). Both the apex bodies have issued certain guidelines that need to be adhered to while incurring such inward remittance.

Inward Remittance RBI Guidelines

It is important to be aware of certain guidelines for inward remittance that The Reserve Bank of India has issued. Let’s understand them in more detail:

• Purpose of Remittance

  There can be two types of inward remittance- personal remittances such as remittances towards family maintenance (education, medical treatments, etc.) and trade-related i.e. for business purposes.

• Arrangements for Inward Remittance

  There are two most common arrangements under which foreign inward remittance can be received. These are RDA or Rupee Drawing Arrangement and MTSS or Money Transfer Service Scheme.

• Limits Under RDA

  Under RDA, there is no limit on the amount of inward remittance and the number of remittances, if it is for personal reasons. However, there is a limit of INR 15 lakh for trade-related inward remittances.

• Limits Under MTSS

  There’s a limit on the amount of foreign inward remittance that an individual can receive i.e. USD 2,500. Further, an individual can receive up to 30 remittances in a calendar year. 

Also Read : Inward Remittance Limit in India for Foreign Transactions

Benefits of Inward Remittances

Whenever a monetary transaction is made between two countries, it brings multiple benefits both on the personal and national fronts. It can be explained in this below-mentioned manner:

• Benefits for Individuals and Families: It promotes the overall well-being of families. Foreign inward remittances have a positive impact on the purchasing power of families hence leading to a higher level of living status. 
• Benefits for the National Economy: Foreign inward remittances contribute to the Gross Domestic Product or GDP of the nation and per capita income of individuals. Foreign exchange reserves also get a boost with these remittances.

What Is the Foreign Inward Remittance Certificate?

A Foreign Inward Remittances Certificate or FIRC is a document issued by a bank (service provider) that acts as proof of a foreign transaction. It is a confirmation of receipt of foreign inward remittances. It includes details like the amount of transfer in Indian currency, foreign currency, and the source of transfer.

Further, there are two types of FIRCs- Physical FIRC and electronic of e-FIRC.

Physical FIRC: This is simply the paper form of FIRC. 

e-FIRC: It is the electronic form of Foreign Inward Remittance Certificate. The recipient’s bank completes the remittance process after receiving a declaration from the remitter’s bank. After all the necessary formalities and documentation are done, the home bank produces an Inward Remittance Message or IRM on the government portal which further becomes an e-FIRC number after proper validation.

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Process of Inward Remittances

The process of receiving a foreign inward remittance is not a very complex process. 

It starts with providing the below-mentioned details to the sender. Always make sure to provide accurate information as any discrepancy may act as a hindrance in the process.

• Full name
• Address
• Local bank account number
• Bank name and address
• Bank’s SWIFT code
• Purpose of the remittance

Please note that it is important to carefully define the purpose of the remittance as it may lead to tax implications.

Further, the receiver may have to produce certain documents to the home bank like invoices, and transaction agreements. 

After the fees and conversion charges are paid, the receiver will receive a confirmation of the amount being credited to this account.

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How Do You Use Inward Remittance?

Both the remitter and remittee use inward remittance in different ways.

The Remitter:

The remitter may choose any mode for remittances like bank transfers, cheques, international demand drafts, or online money transfer applications. But regardless of the medium he uses, he needs to have certain information related to the remittee which includes 

• Remiteer’s name and address
• Bank SWIFT Payment code
• Bank branch 
• Bank account number

Always make sure that the information is accurate as it may lead to the cancellation of the transaction. Once the remitter’s bank initiates the transfer, the sender gets an update via an email or an SMS. This update also includes the tracking number which can be used to track the transaction.

The Remittee:

When the amount is received in India, the remittee has to undergo a process to get access to the transferred funds. The bank does a compliance check and may ask the remittee to produce certain documents. These documents may include:

• Transaction agreement
• Remittance information
• Payment Invoice
• Purpose code indicating the type of transaction

It is advisable to obtain an e-FIRC since it acts as a record and reference for the future.

Bank Charges for Inward Remittance

The bank charges for foreign remittances vary from bank to bank and may depend on multiple factors like the amount being transferred, countries being involved, etc. Some common fees and charges charged by banks for foreign inward remittance are as follows:

• Conversion Charges: Whenever transactions are done from a foreign country and different currencies are involved, the recipient needs to pay currency conversion fees to convert the foreign currency into Indian Rupee.
• Service Charges: Home banks may charge certain fees for processing foreign inward remittances.
• GST (Goods and Services Tax): You may also have to pay GST on the service charges charged by the bank.

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Conclusion

Foreign Inward Remittance involves different countries and impacts the economies of the participant countries. Inward remittances are received for multiple purposes like personal and business. It is important to stay updated about the aspects related to foreign inward remittances as it helps to make informed decisions and to avoid certain legal consequences that may occur due to negligence.

FAQs of Inward Remittance