Tax Laws for Sending Large Money Transfers to India | Finder Canada (2024)

Sending money to India from Canada (or the other way around)? We break down what you need to know including the maximum limit for money transfers from Canada to India, limits on remittances from India and key tax rules.

Maximum limit for a money transfer from Canada to India

There is no maximum limit for money transfers from Canada to India. You can send as much as you want. But beware that if you’re sending more than ₹50,000 to someone in India who isn’t a blood relative (including spouses, children, grandchildren, siblings and in-laws), they’ll have to pay tax to the Indian government.

Tax on sending money from Canada to India

There is no tax for recipients on money transferred from Canada to India when it’s being sent to blood relatives. In general, “blood relatives” — including spouses, children and grandchildren, siblings or in-laws — do not pay tax on any amount that you send.

However, if you’re sending more than ₹50,000 to someone in India who isn’t a blood relative, they’ll need to report it on their taxes. No matter how you send the money, your recipient could be on the hook for a gift tax if they aren’t a blood relative, as regulated by the Indian Income Tax Act. If the money is sent as inheritance or as a wedding gift, however, there won’t be any taxes levied on it by the Indian Income Tax Department.

Maximum limit for a money transfer from India to Canada

Individual residents in India can transfer a maximum of USD$250,000 overseas each year (from April 1 to March 31 the following year), which includes transfers to Canada. You need a Permanent Account Number (PAN) to send funds. There is no limit to the number of remittances you can make from India, but the total amount can’t exceed USD$250,000 annually.

Tax on sending money from India to Canada

Prior to October 1, 2023, residents of India had to pay a 5% tax on remittances above ₹700,000 (around CAD$11,500). However, as of October 1, 2023, any money sent from India – except funds sent for medical or educational purposes – is subject to a 20% tax, including transfers to to Canada.

Medical and education remittances will continue to be taxed at a rate of 5%. Additionally, any transfers from India for education expenses paid from an education loan will continue to be taxed at a rate of 0.5%.

One other notable exception to the 20% tax rule is any payment by an individual India resident using their international Debit or Credit cards for amounts up to INR₹700,000 in a financial year.

Remittances from India can only be sent for certain reasons like gifts, donations, supporting close family members, business travel and studying abroad. You can’t send money from India for some purposes like buying lottery tickets or buying Foreign Currency Convertible Bonds (FCCBs) traded by Indian companies in overseas secondary markets.

CAD to Indian Rupee: Historical exchange rates

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Do I have to report and pay taxes to transfer money from abroad to India?

Unless your transfer has any sales tax applied to it, you don’t usually have to worry about reporting and paying taxes to the CRA for transferring money abroad. Additionally, India has signed agreements with many other countries — including Canada — to prevent “double taxation,” or being taxed on money you’ve already paid income tax on.

What are the penalties in India if my recipient fails to file?

If you don’t report a transfer on your taxes in India or report less than you should, you could be charged a penalty ranging from 10% to 200% of the taxes owed. The rate is determined by the circ*mstances of the case such as whether the offense was intentional.

With so much attention on money entering and leaving India, if you fail to report large sums, don’t know you have to report them or don’t report them correctly, it will likely be discovered. Make sure to declare any large remittance as income on your general tax return with the Indian Income Tax Department.

To avoid the severe penalties that could come with a failure to report large sums of money into the country, speak with a professional to guarantee that everything complies with the laws of both Canada and India.

How will my recipient in India get the money?

Your recipient can pick up the cash in person or have the money deposited directly into their bank account or mobile wallet. Not every provider will offer all 3 options, so check before initiating a transfer.

In general, your recipient will provide an ID or a confirmation number for the transaction to pick up the money in cash.

Bottom line

If you’re sending money to a blood relative in India, they won’t have to worry about taxes — but if you’re sending money to a friend, they’ll need to report anything over ₹50,000 as income.

As with all international money transfers, be wary of potential fraud and only send money to people you know. Using a reputable provider can safeguard you from potential scams.

Frequently asked questions about money transfers between Canada and India

• There is no money transfer limit on how much you can transfer to India from Canada, at least none imposed by the Indian or Canadian governments. However, the specific money transfer or banking service that you are using might impose limits on how much they can accommodate in a single transfer. If you're planning on initiating a large transfer, consider using a high-limit service like Xe.

• The CRA does not limit the amount of cash you can carry out of Canada. But you must declare amounts of CAD$10,000+ to the Canada Border Services Agency when travelling by air.

  Similarly, the Indian government does not limit the amount of cash you can carry into the country. But if you're bringing in more than US$5,000, you must declare it on a currency declaration form when you arrive.

  If you're receiving cash in India via money transfer service, you can only get up to ₹50,000. Amounts higher than this must be sent directly to a bank account in India or received via cheque, demand draft etc.

• Since India has a Double Taxation Avoidance Agreement with various countries, including Canada, you won't be double taxed in most cases. If you're double-taxed, speak with a international tax specialist to find out if you can get some money back by claiming tax credits.

• No, you don't have to report large transfers out of Canada. However, financial institutions such as banks, credit unions, loan providers and money transfer businesses must comply with Canadian laws designed to prevent money laundering and terrorist financing.

  This includes reporting transfers over CAD $10,000 to FINTRAC (the Financial Transactions and Reports Analysis Centre of Canada). FINTRAC coordinates with law enforcement agencies like the RCMP and local police to track down and prevent financial crimes.

• No, splitting transactions into smaller amounts is referred to as "structuring" and is a punishable offense when used to avoid the $10,000 threshold at which financial insitutions must report the transaction to FINTAC.

  Structuring is something money launderers do to avoid detection. Banks and money transfer services are trained to detect this and report it to FINTRAC.