How to Legally Bring Money From India to the USA

Transferring money across international borders requires understanding financial regulations in both the originating and receiving countries. Individuals moving funds from India to the United States must understand specific rules to ensure compliance. This process involves attention to permissible transfers, remittance methods, and U.S. tax and reporting obligations. Adhering to these guidelines is paramount for a smooth and lawful transfer.

Indian Regulatory Framework and Permissible Transfers

India’s foreign exchange regulations govern the outward flow of money, setting purposes and limits for remittances by resident individuals. The Liberalised Remittance Scheme (LRS) is a key mechanism, permitting residents to remit up to USD 250,000 per financial year for various current and capital account transactions.

The LRS covers purposes such as private visits, gifts, donations, overseas education, medical treatment abroad, and maintenance of relatives overseas. It also allows investments in shares, debt instruments, and foreign property. Each LRS remittance requires submitting Form A2 with a declaration of purpose. Banks and authorized dealers ensure funds are legitimate and adhere to LRS limits.

Beyond the LRS, other funds can be transferred without LRS limits, depending on their source. These include income earned in India, proceeds from asset sales, or gifts and inheritance from Indian residents, with proper documentation. Funds in Non-Resident External (NRE) accounts, maintained by Non-Resident Indians (NRIs) for foreign earnings, are fully repatriable. Non-Resident Ordinary (NRO) accounts hold income earned in India and are also repatriable, though subject to Indian tax deductions.

Indian tax implications, such as Tax Deducted at Source (TDS), may apply to certain remittances before they leave India. Banks typically deduct this tax at the source as per Indian income tax laws. The specific TDS rate depends on the nature of the income being remitted, such as interest, dividends, or professional fees.

Choosing a Transfer Method

Individuals transferring money from India to the United States have several common mechanisms. A widely used method is a bank wire transfer, facilitated by most commercial banks in India. To initiate a wire transfer, the sender needs the recipient’s full name, address, bank name, account number, and the receiving bank’s SWIFT/BIC code.

The bank wire transfer process involves completing an outward remittance application, often Form A2, and providing supporting documents for the remittance purpose. Banks generally process these transfers within 1 to 5 business days. Associated fees and exchange rates are determined by the bank at the time of transfer.

Non-Resident Indians (NRIs) can also utilize funds held in NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts. NRE accounts, holding foreign earnings, allow full repatriation of principal and interest to the USA without restrictions. NRO accounts hold income earned in India, such as rent or dividends. Funds from NRO accounts are repatriable but are subject to Indian taxes and an LRS limit of USD 1 million per financial year for NRIs.

International money transfer service providers offer an alternative to traditional bank transfers. Companies like Wise, Remitly, and Xoom allow users to send money digitally from India to the USA. These services generally have lower fees than traditional banks, but comparing their exchange rates is important as they can impact the final received amount.

US Tax and Reporting Requirements

Upon funds arriving in the United States, individuals must understand U.S. tax and reporting obligations. U.S. tax residents, including citizens, green card holders, and those meeting the substantial presence test, are taxed on their worldwide income. Income generated in India, if not already taxed or eligible for foreign tax credits, could be subject to U.S. income tax.

Distinguishing between taxable income and non-taxable capital is crucial when bringing money into the U.S. Income, such as salary, business profits, interest, or dividends earned abroad, is generally taxable. Capital transfers, like repatriated savings, proceeds from personal property sales, or certain gifts and inheritances, are typically not considered taxable income to the recipient.

Beyond income tax, U.S. individuals have specific reporting requirements for foreign financial accounts and assets. The Foreign Bank and Financial Accounts Report (FBAR), FinCEN Form 114, must be filed annually by U.S. persons with a financial interest in or signature authority over foreign financial accounts if their aggregate value exceeds $10,000. This includes bank accounts, brokerage accounts, retirement accounts, and certain life insurance policies held in India. The FBAR is an informational report filed electronically with FinCEN.

Another reporting requirement is Form 8938, Statement of Specified Foreign Financial Assets. This form is required if the total value of specified foreign financial assets exceeds certain thresholds, which vary based on filing status and residency. Specified foreign financial assets include:
Foreign bank and brokerage accounts
Foreign stocks or securities not held through a U.S. financial institution
Interests in foreign partnerships, corporations, or trusts
Foreign mutual funds
Foreign pensions

For large gifts or inheritances from foreign persons, U.S. persons may need to file Form 3520. This informational form is required if an individual receives gifts exceeding certain thresholds from a nonresident alien individual, foreign estate, foreign corporation, or foreign partnership.

Non-compliance with these U.S. reporting requirements can lead to significant penalties. Failure to file an FBAR can result in civil penalties, with higher penalties for willful violations. Penalties for failing to file Form 8938 can also be substantial, with additional penalties for continued failure. Similarly, penalties for not filing Form 3520 can be significant. Understanding and fulfilling all U.S. reporting obligations is crucial when bringing money from India.