What is Remittance? Remittance Meaning for Money Sent to India

A remittance is money sent to someone in another country. It’s simply the term used for transferring money from one country to another.

You might also come across the terms ‘inward remittance’ and ‘outward remittance’. Don’t let them confuse you. They describe the same transfer from two different perspectives.

For example, for you, sending money from the USA, it’s an outward remittance because the money is leaving the country.

For the person receiving it in India, it’s an inward remittance because the money is entering the country.

That’s the only difference between Outward and Inward Remittance.

If you’re wondering how a remittance differs from other international payments, we’ve explained the difference between cross-border payments and remittances.

Now that we’ve cleared that up, let’s look at how remittances actually work when you send money to India.

How Does a Remittance to India Work?

Let’s say you’re working in the US and want to send $1,000 to your parents in India.

You could send it directly through your bank or use an online money transfer service that supports international transfers to India.

Regardless of which service you choose, the basic idea is the same: you send money in US dollars, the transfer is processed, and your parents receive the money in Indian rupees.

But how the money actually reaches India depends on the transfer method being used.

The Reserve Bank of India (RBI) identifies banking and postal channels, along with two other arrangements called the Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS).

Let’s look at how each works.

1. International Bank Transfers

One way to send money to India is directly through your US bank.

For example, suppose you have an account with Chase and want to transfer $1,000 to your mother’s SBI account in India;

• You initiate an international wire transfer, provide your mother’s bank details, enter the amount, and confirm the payment.
• Your bank then processes the transfer, often using the SWIFT network to exchange payment instructions with the receiving bank and any intermediary banks involved.
• Once the transfer is completed, your mother receives the money in her Indian bank account.

There are a few things to keep in mind:

• Your bank may charge an international wire transfer fee.
• The exchange rate determines how many rupees your mother receives.
• Intermediary or receiving bank charges may also apply.
• Delivery can take several business days, depending on the banks involved.

If you’re deciding whether to use your bank or a transfer service, our comparison of bank transfers and remittance apps explains the differences.

2. Rupee Drawing Arrangement (RDA)

RDA works a little differently from a direct international bank wire.

Under this arrangement, an authorised Indian bank (for example, HDFC) partners with an overseas exchange house (for example, Wise, Remitly, Xoom) to facilitate money transfers into India.

For example, imagine you’re sending money through an overseas exchange house that has an RDA arrangement with an Indian bank.

• You pay the exchange house in the US, and its Indian banking partner arranges for the equivalent amount in rupees to be credited to your recipient’s bank account.
• The recipient doesn’t necessarily need an account with the Indian bank that has the RDA arrangement. The money can also be credited to an account at another Indian bank through domestic payment systems such as NEFT or IMPS.

A few things worth knowing about RDA:

• It’s primarily used for inward remittances to India.
• RBI’s guidance doesn’t prescribe a general limit on the amount or number of personal remittances under RDA.
• The money must be credited to the recipient’s bank account. Cash payouts aren’t permitted under this arrangement.
• Other restrictions can apply depending on the purpose of the transfer.

3. Money Transfer Service Scheme (MTSS)

MTSS is an RBI-regulated arrangement that allows people living abroad to send money to recipients in India.

It’s primarily designed for personal transfers, such as sending money to family members in India.

Under MTSS, an overseas money transfer company (for example, Western Union) works with an authorised Indian agent to deliver the money to the recipient.

Unlike RDA, MTSS can also allow recipients to collect money in cash, subject to the applicable rules.

Let’s say you’re living in the US and want to send $500 to your mother in India through an MTSS service.

Here’s how it works:

1. You initiate the transfer: Visit a participating money transfer provider, provide your mother’s details, and pay $500 along with any applicable fees.
2. The provider sends the payment instructions: The overseas company communicates the transfer details to its authorised Indian agent.
3. The Indian agent processes the payment: The agent verifies the transaction and arranges payment in Indian rupees, following the applicable rules.
4. Your mother receives the money: Depending on the given instructions and the amount, she may receive the money in her bank account or collect it in cash from an authorised payout location.

For cash collection, your mother would generally need to provide the required identification and transaction reference.

However, MTSS has specific limits:

• You can send up to USD 2,500 per remittance.
• A recipient can receive up to 30 MTSS remittances in a calendar year.
• Cash payouts are generally limited to ₹50,000 per remittance

Does this mean you can’t send more than $2,500 to India?

Not at all.

The $2,500 limit applies specifically to MTSS. It doesn’t mean every international money transfer to India has the same limit.

You can read more in our guide on how much money you can send from the USA to India.

4. Postal Remittances

Postal remittances are another way countries have traditionally allowed people to send money internationally through their postal services.

Instead of using a bank or money transfer app, the sender uses an international postal money transfer service where one is available.

For example, imagine you’re sending $200 to a family member in a country that supports international postal money orders.

Here’s how a traditional postal remittance works:

1. You visit a participating post office: You request an international postal money order and provide the recipient’s details.
2. You pay the amount: You pay $200, plus the applicable service charge, and receive a money order or transaction receipt.
3. The postal operators handle the transfer: Depending on the service, the money order or payment information is processed through arrangements between the participating countries’ postal services.
4. The recipient collects the money: The recipient presents the required document or identification to receive the payment through the supported postal service.

Can you use this method to send money from the USA to India?

Not through USPS international postal money orders today.

The United States Postal Service stopped selling international postal money orders on October 1, 2024, and completed the discontinuation of its international postal money order service in 2025.

Postal remittances are still worth understanding as a type of international money transfer, but they shouldn’t be treated as a currently available option for sending money from the US to India through USPS

What Affects the Cost and Speed of a Remittance?

Now that you know the different ways money can reach India, there’s another question worth asking: how much will the recipient actually get? and how fast?

When comparing remittance services, look at four things:

• Exchange rate: How many Indian rupees will your recipient get for each US dollar?
• Transfer fees: Does the provider charge a fee to send the money?
• Delivery time: Will the money arrive within minutes, hours, or a few business days?
• Amount received: After fees and currency conversion, how much will actually reach the recipient?

The last one is particularly important. A provider advertising a low transfer fee isn’t necessarily giving you the best deal if its exchange rate is worse.

You can learn more about how exchange rate margins affect your transfer.

If timing matters, see how long it takes to transfer money from the USA to India and what can cause delays.

Tax on Money Remitted from the USA to India?

When you remit from the USA to India, there are two sides to consider: the person sending the money and the person receiving it.

The tax rules are different for each. Let’s look at them separately.

Remitter in USA

If you’re sending money from the US to India, you should know about the 1% US remittance tax introduced on January 1, 2026.

But this tax doesn’t apply to every international money transfer. It depends on how you pay for the transfer.

When does the 1% tax apply?

The tax applies when you fund a qualifying international remittance using:

• Cash
• Money orders
• Cashier’s checks
• Other similar physical payment instruments

For example, let’s say you visit a money transfer agent in the US and hand over $1,000 in cash to send to your parents in India.

You’ll pay an additional $10 in remittance tax, bringing your payment to $1,010, plus any transfer fees.

What if you send money directly from your bank account?

The 1% tax doesn’t apply when the transfer is funded directly from a qualifying bank account. Transfers funded using US-issued debit or credit cards are also exempt.

So, if you send that same $1,000 from your US bank account to your parents in India, you won’t have to pay the 1% remittance tax.

Keep in mind that this is a tax on certain methods of sending money abroad. It’s separate from any income tax you already pay on your earnings in the US.

Also, if you’re making a large gift, separate US gift-tax reporting rules may apply depending on your tax status and the amount involved.

Recipient in India

The fact that money has crossed an international border doesn’t automatically mean the recipient owes tax in India.

What matters is why the money was sent and whether it is taxable under Indian law.

Sending Money to Your Parents or Family

Let’s say you send $1,500 to your mother in India to help with household expenses.

Under Indian income tax rules, gifts received from close relatives such as parents, children, and spouses, are exempt from gift taxation.

So, in this example, your mother generally wouldn’t have to pay Indian income tax just because she received the money from you.

Sending Money to a Friend

Now suppose you send the same amount to a friend as a gift.

The rules are different.

In India, if someone receives monetary gifts from non-relatives under ₹50,000, that won’t be taxed. If the amounts received from abroad exceeds ₹50,000 during a tax year, the entire amount becomes taxable and is generally included in their taxable income, not just the amount above ₹50,000.

That doesn’t mean every payment to a friend is a gift. For example, repaying money you borrowed or reimbursing shared expenses is different from giving someone money without expecting anything in return.

The reason for the payment matters.

Sending Money to Your Own Indian Bank Account

What if you’re an NRI transferring money from your US bank account to your own NRE or NRO account in India?

Generally, moving money you already own between your accounts isn’t taxable in India simply because you’ve transferred it.

For example, let’s say you’ve saved $10,000 while working in the USA and want to transfer it to your NRE account in India. The transfer itself doesn’t create new income, so you don’t automatically owe Indian income tax on that $10,000.

However, your tax obligations depend on your residential status, where the income was earned, and whether that income is taxable in India.

This is where the Double Taxation Avoidance Agreement (DTAA) between India and the USA becomes relevant.

If you’ve already paid tax on that money in USA, then you’d be eligible for tax relief in India, such as a credit for taxes paid in the other country.

However, DTAA relief isn’t automatic, and you must apply for it.

For more details, read our guide on the tax implications of sending money from the USA to India

If you’re managing money in both countries, our NRI guide to managing money between the USA and India covers some of the practical considerations.

How RBI Purpose Codes and Sender-Receiver Relationship Determine Tax on Inward Remittance

When you send money from the USA to India, your bank or transfer provider may ask why you’re sending it.

This is because the Reserve Bank of India (RBI) requires banks to classify foreign exchange transactions using purpose codes. These codes identify the nature of the payment and help banks meet regulatory reporting requirements.

Two common purpose codes for personal remittances are:

For example, if you send $1,500 from the USA to your mother in India for household expenses, the transfer may be classified under P1301. If you send the same amount to a friend as a gift, P1302 may apply.

Does the Purpose Code Determine Tax Liability?

Not in itself. RBI purpose codes classify transactions; It is the Indian income tax laws that determine their tax treatment.

Under the Income-tax Act, 2025, two provisions are particularly important:

• Section 92(2)(m)(i): Monetary gifts from non-relatives become taxable when their aggregate value exceeds ₹50,000 during a tax year. The entire taxable amount is included in income, not just the excess.
• Section 92(3)(a): Gifts received from qualifying relatives, including parents, children, spouses and siblings, are exempt from this gift-tax provision.

Previously, these rules were covered under Section 56(2)(x) of the Income-tax Act, 1961.

What Does This Mean in Practice?

Let’s say you want to send ₹20 lakh from the USA to India.

• To your mother: If it’s a gift, she generally won’t owe Indian gift-related income tax because she’s a qualifying relative under Section 92(3)(a).
• To your friend: If it’s a gift without an applicable exemption, the entire ₹20 lakh would generally be included in your friend’s taxable income under Section 92(2)(m)(i), not just the amount exceeding ₹50,000. If you’re repaying a genuine loan or reimbursing expenses rather than giving a gift, different tax rules may apply.
• To your own NRE account: Transferring your existing savings doesn’t automatically create taxable income. The source of those savings and your tax residency may still matter.

What Should You Check Before Sending Money to India?

Whether you’re sending money to your parents, paying a family expense, or transferring your savings, a few simple checks can help you avoid surprises.

1. Check the recipient’s bank details.

Make sure you have the correct account number, account holder’s name, and IFSC code where required.

For other details worth double-checking, see our guide to common mistakes when sending money to India

2. Compare the amount they’ll actually receive.

Don’t look only at the advertised exchange rate or transfer fee. Check the final amount in Indian rupees after conversion and charges.

You can also learn how to identify hidden fees when comparing money transfer services before choosing a provider.

3. Understand any applicable transfer limits.

Limits depend on the provider, payment method, and applicable regulations. Don’t assume that a limit you see for one transfer service applies to every method.

4. Choose the correct reason for sending money.

If your provider asks for a transfer purpose, choose the option that accurately describes the transaction, whether you’re supporting family, sending a personal gift, or transferring your own funds.

5. Keep your transfer confirmation.

Save the receipt or transaction reference so you can track the payment and provide supporting details if your bank or tax adviser needs them.

If you’re sending money internationally for the first time, our first-time guide to transferring money from the US to India walks you through the process.

You may also be asked for the sender’s or recipient’s address. Our guide explains what a remittance address means and how it differs from other details requested on transfer forms.

Final Thoughts

A remittance is simply money sent from one country to another. Whether you use your bank, an exchange house, or an online transfer service, the purpose is the same: getting money to someone in another country.

What changes is how the transfer is processed, what it costs, how long it takes, and which rules apply.

Before remitting money to India, compare the amount your recipient will receive, check any applicable limits, and make sure you’re choosing a transfer method that suits your needs.

If it’s your first send, the first transfer from the US is where most of the setup happens. Your family can also check how to receive money in India on their side.

Send money to India with Xpat →

Frequently Asked Questions

1. What’s the Difference Between a Payment and a Remittance?

A payment is a broad term for money paid to someone, usually for something you owe or have purchased.

A remittance often refers to money sent from one country to another, especially money sent to family or friends.

For example, paying your electricity bill in the US is a payment. Sending $500 to your parents in India is both a payment in the broad sense and an international remittance.

2. Which Countries Send the Most Remittances to India?

According to the RBI’s survey of remittances received in India during 2023–24, the five largest source countries were:

• United States — 27.7%
• United Arab Emirates — 19.2%
• United Kingdom — 10.8%
• Saudi Arabia — 6.7%
• Singapore — 6.6%

The United States accounted for the largest share, contributing more than a quarter of the money India received through remittances that year.

3. Can I Send ₹20 Lakh to a Friend in India?

Potentially, yes. But whether you can make the transfer depends on your provider’s limits, the payment method, and any applicable regulations.

If you’re giving ₹20 lakh to your friend as a gift, they may have to pay income tax in India because gifts from friends generally don’t qualify for the relative exemption.

If you’re repaying a loan or making another type of payment, the tax treatment may be different.

For a transfer of this size, it’s sensible to confirm the purpose, documentation, and tax implications before proceeding.

4. What Is a SWIFT Payment?

SWIFT is a secure messaging network that banks use to communicate payment instructions.

When you send an international wire transfer, your bank may use SWIFT to communicate with the receiving bank and any intermediaries.

SWIFT itself doesn’t hold or transfer your money. It helps banks exchange the information needed to process the payment.

5. Is Sending Money to India the Same as an Inward Remittance?

Yes, from India’s perspective.

When you send money from the US to India, it’s an outward remittance from the US and an inward remittance into India.

They’re two ways of describing the same transfer.

6. Is a Remittance the Same as a Bank Transfer?

No. A bank transfer is simply money moved from one bank account to another, whether within the same country or internationally.

A remittance generally refers to money sent from one country to another.

For example:

• Bank transfer: You send $500 from your Chase account to a friend’s Bank of America account in the USA. That’s a domestic bank transfer, not an international remittance.
• Remittance: You send $500 from your Chase account to your mother’s SBI account in India. That’s both an international bank transfer and a remittance.

7. Can I Remit Money from the USA to My NRE or NRO Account in India?

Yes. As an NRI, you can generally remit money from your US bank account to your own NRE or NRO account in India through permitted channels.

Both accounts can receive money from abroad, but there are important differences.

• NRE account: Primarily used for funds originating abroad. The balance is freely repatriable, and interest is generally exempt from Indian income tax while you meet the applicable conditions.

• NRO account: Commonly used to manage income earned in India, such as rent or dividends. It can also receive inward remittances, but different tax and repatriation rules apply.

8. How Long Does a Remittance from the USA to India Take?

An international remittance can arrive within minutes or take several business days, depending on how you transfer the money.

For example, some online money transfer services offer fast deposits into Indian bank accounts, while traditional international bank wires may take longer.

The delivery time also depends on banking hours, payment methods, identity verification, and whether additional checks are required.

9. Is There a Maximum Amount I Can Remit from the USA to India?

There’s no single maximum amount that applies to every remittance from the USA to India.

The limits depend on the provider, transfer method, purpose, and applicable regulations.

For example, under RBI’s Money Transfer Service Scheme (MTSS), each remittance is limited to USD 2,500, and an individual recipient can receive up to 30 MTSS transfers in a calendar year.

However, those restrictions don’t apply to every international bank transfer or other permitted remittance arrangement.

For larger transfers, check the limits and documentation requirements of the method you’re using.

10. Can Someone in India Receive a Remittance Without a Bank Account?

Yes. Certain authorised remittance services allow recipients in India to collect money in cash without having a bank account.

For example, under RBI’s Money Transfer Service Scheme (MTSS), recipients can generally collect up to ₹50,000 in cash per remittance, subject to identification and other requirements.

Amounts exceeding this limit must generally be paid through an approved banking instrument or credited to a bank account, with limited exceptions.

Not all transfer providers offer cash collection, so check the available payout options before you remit money.

For recipients using a bank account, here’s how to receive money from the USA directly into an Indian bank account.