Every month, lakhs of Indians working in the Gulf, the US, the UK and elsewhere send money to India for parents’ bills, a sibling’s fees, a home loan EMI or their own savings. The channel you pick decides how much actually lands: a 1% difference in the exchange rate on ₹1 lakh is ₹1,000, every single time. Over a year of monthly transfers that adds up to a flight home.
This guide explains the legal routes RBI allows for money coming into India, how fees and exchange-rate margins work, which route suits which purpose, and the tax position of the person who receives the money. It also covers the paperwork, such as purpose codes and inward remittance certificates, that banks ask for.
The legal ways to send money to India
RBI says beneficiaries in India can receive cross-border inward remittances through banking and postal channels. Banks may tie up with other banks for remittance business. Besides these, RBI names two other arrangements as the most common: the Rupee Drawing Arrangement (RDA) and the Money Transfer Service Scheme (MTSS).
- Bank wire transfer: your bank abroad sends money to an Indian bank account, often through a correspondent bank.
- Rupee Drawing Arrangement: an exchange house or remittance company abroad, licensed in its own country, holds a rupee account (a vostro account) with an Indian bank and pays out from it.
- Money Transfer Service Scheme: an overseas money transfer company works with agents in India who pay the beneficiary, sometimes in cash.
- Postal channel: the post office route, which RBI says generally uses the Universal Postal Union’s International Financial System platform.
Many apps and remittance companies you see advertised are simply a front end for one of these routes. Before using one, check that it is licensed by the regulator in the country you are sending from and that it pays into an Indian bank account through an authorised Indian bank or agent. Avoid informal channels that work outside this RBI framework; you have no protection if money goes missing.
Rupee Drawing Arrangement: how most Gulf remittances arrive
Under RBI’s master direction on vostro accounts of non-resident exchange houses, updated as on 1 October 2026, Indian banks with RBI approval can tie up with exchange houses in Gulf countries, Hong Kong, Singapore, Malaysia and other FATF-compliant countries (for some of these only under a speed remittance procedure). The exchange house keeps a rupee account with the Indian bank and the bank credits the beneficiary.
The key rules for you as a sender:
- No cap on personal remittances. RBI’s FAQ says there is no limit on the amount or the number of remittances under RDA, but trade-related transactions are capped at ₹15 lakh each.
- Bank credit only. No cash payout is allowed; the money must go to a bank account. It can reach an account at a different bank through NEFT, IMPS and similar systems.
- Wide uses. Permitted payments include credit to your NRE account, payments to your family, insurance premiums, mutual fund and post office investments, school fees, hospital bills, utility bills, tax payments and loan EMIs to banks and NBFCs.
- Personal, not charity. Donations to charitable institutions must not be routed through exchange houses, apart from a few named relief funds such as PM-CARES and PMNRF.
Because RDA money can go into an NRE account, it suits NRIs who want to build repatriable savings in India.
Money Transfer Service Scheme: quick, small, family transfers
MTSS is meant for personal remittances such as family maintenance and money for foreign tourists visiting India. Under RBI’s master direction on MTSS, updated as on 29 September 2026:
- Each remittance is capped at USD 2,500.
- A single beneficiary can receive only 30 remittances in a calendar year under the scheme.
- Up to ₹50,000 may be paid in cash; anything more must be paid by account payee cheque, demand draft or payment order, or credited to the beneficiary’s bank account. Higher cash payouts are allowed only in exceptional cases for foreign tourists.
- Donations, trade payments, property purchases, investments and credit to NRE accounts are not allowed through MTSS.
So MTSS suits a parent in a village who needs cash quickly from an agent, but it is the wrong route for building savings or paying for a flat.
Whichever route you use, get the receiver’s details exactly right: the name as it appears in bank records, the account number and the branch IFSC, plus the Indian bank’s SWIFT code for a wire. A mismatch can hold up the credit for days or send the money back, and the exchange rate may have moved by the time it is resent. For a first transfer to a new account, many people send a small test amount before the full sum.
Comparing the routes
This table sums up the RBI rules for each way to send money to India.
| Feature | Bank wire | Rupee Drawing Arrangement | Money Transfer Service Scheme |
|---|---|---|---|
| Who handles it abroad | Your bank | Licensed exchange house with a rupee vostro account in an Indian bank | Licensed overseas money transfer company |
| Amount limit | Set by banks and the sending country | No limit for personal remittances; ₹15 lakh per trade transaction | USD 2,500 per remittance; 30 a year per beneficiary |
| Cash payout in India | No, bank credit | No, bank credit only | Up to ₹50,000 |
| Credit to NRE account | Yes | Yes | Not allowed |
| Typical use | Large transfers, property, savings | Regular family support, savings, bills, EMIs | Small, urgent family needs |
Exchange-rate margin and fees: the real cost
Most people compare only the transfer fee, but the bigger cost is usually hidden in the exchange rate. Providers buy foreign currency at one rate and give you a slightly worse one; the gap is their margin.
A useful benchmark is the reference rate RBI shows on its website, sourced from Financial Benchmarks India (FBIL), for currencies including the US dollar, pound, euro, yen and dirham. The live market moves through the day, so treat it as a yardstick rather than a promise.
Here is an illustration. Say the benchmark is ₹95 to the dollar and you send USD 1,000.
- Provider A charges a USD 10 fee and gives you ₹94.50 to the dollar. You get 990 × 94.50 = ₹93,555.
- Provider B charges no fee but gives you ₹93.60. You get 1,000 × 93.60 = ₹93,600.
- Provider C charges a USD 5 fee and gives you ₹94.80. You get 995 × 94.80 = ₹94,326.
The “zero fee” offer was not the cheapest. Always compare the rupee amount the receiver will finally get. Also ask whether an intermediary or receiving bank will deduct its own charges, which can happen with wire transfers. The currency converter helps you check the rate you are offered against the market.
A few habits help: send larger amounts less often if fees are flat, check whether the rate is locked or can change before the transfer completes, and keep the confirmation receipt.
Purpose codes and inward remittance certificates
When money comes into India, the bank records the reason for it with an RBI purpose code. For personal remittances, common codes include P1301 for family maintenance and savings sent by Indians living abroad, and P1302 for personal gifts and donations. Choosing the right one keeps your records clean, especially if a large amount is later questioned.
The receiving bank can also give a certificate or advice showing the money came from abroad, often called a FIRC (foreign inward remittance certificate) or FIRA (advice). RBI’s RDA rules, for instance, let banks issue certificates so that people receiving money through exchange houses can prove the external source of funds where needed. Keep these for large transfers, money used to buy property, and any amount you may want to send back abroad later.
Tax on money received in India
Sending your own money home is not income. If you are a non-resident, your salary earned and received abroad is outside Indian tax, and moving it into your own NRE or NRO account does not change that. What matters is what the money earns after it arrives: NRO interest is taxable, while NRE interest is exempt for people who are non-residents under FEMA.
When you send money to India for someone else, it is usually a gift in the receiver’s hands. Under section 92 of the Income-tax Act, 2025, money received without consideration is taxable as “income from other sources” if the total from all such givers in a tax year exceeds ₹50,000. But the Act (section 92(3) in the text as published) excludes money received from a relative, on the occasion of the receiver’s marriage, or under a will or inheritance.
“Relative” for this rule covers, for an individual: spouse; brother or sister; brother or sister of the spouse; brother or sister of either parent; any lineal ascendant or descendant; any lineal ascendant or descendant of the spouse; and the spouse of any of these people. So money from a son to his parents, or from a sister to her brother, is tax-free in the receiver’s hands, whatever the amount. Money from a friend or a cousin above ₹50,000 in a year is taxable for the receiver, because cousins are not on the list.
Once the money is in the receiver’s account, any interest, rent or gains it earns are taxed in the receiver’s hands as usual. If your parents put your gift into a fixed deposit, the FD interest is their income. The FD calculator shows what a deposit might earn.
Checklist before you send money
- Pick the route by purpose: RDA or a bank wire for savings and NRE credits, MTSS only for small family transfers.
- Check that the provider is licensed where you live and pays through an authorised Indian bank or agent.
- Compare the final rupee amount, not just the fee.
- Give the correct purpose code and keep the FIRC or advice for big amounts.
- Send gifts to relatives covered by the tax rule; gifts above ₹50,000 a year from non-relatives are taxable for the receiver.
- Remember that interest on money in NRO accounts or in your family’s deposits is taxable.
Key takeaways
RBI allows money to come in through banks, the post office, exchange houses under RDA and money transfer companies under MTSS. RDA has no limit on personal remittances and can credit NRE accounts; MTSS is capped at USD 2,500 a transfer and 30 transfers a year per receiver. The exchange-rate margin often costs more than the fee. And gifts from close relatives are tax-free for the receiver, while gifts from others above ₹50,000 a year are not. This is general information, not personal advice; check the latest charges with your provider.
