Tax Implications when Sending Money to India

By Remitbee - Jan 23, 2024

According to the Canadian International Development Platform, India was among the largest recipients of remittance outflows from Canada in 2018, with figures pushing $3 billion. A large part of it can be attributed to the immigration dynamics between the two countries. Canada currently has over 1.3 million people of Indian origin, according to the 2021 census, with 319,130 international students pursuing higher studies in the country.

Sending Remittances from India to Canada

Sending remittances from Canada to India involves using various methods, each with advantages, disadvantages, and associated costs. Here are some standard methods for sending money from Canada to India:

  • Bank Wire Transfer:

    • Pros: Secure and reliable. Direct transfer from one bank to another.
    • Cons: It may involve high fees, and exchange rates offered by banks may not be the most favorable.

  • Online Money Transfer Services:

    • Pros: Companies like Western Union, TransferWise (now Wise), and others offer online platforms for quick and convenient transfers. Some provide competitive exchange rates.
    • Cons: Transfer fees may apply, and exchange rates can vary between services.

  • Mobile Wallets:

    • Pros: Some mobile wallet services, like PayPal or Skrill, allow international money transfers.
    • Cons: Fees may be higher than other methods, and the recipient may need an account with the same mobile wallet service.

  • Cryptocurrency Transfers:

    • Pros: Cryptocurrencies like Bitcoin can be used for cross-border transfers, potentially offering lower fees and faster transactions.
    • Cons: The volatility of cryptocurrency prices can pose a risk as not all recipients may be familiar with or comfortable using cryptocurrencies.

  • Cheques and Demand Drafts:

    • Pros: Traditional method, often used for larger transactions. It can be mailed to the recipient.
    • Cons: It takes time for the cheque or demand draft to reach and clear in India. Exchange rates may not be as competitive.

Sending funds to India with Remitbee

Remitbee offers competitive exchange rates and low transaction fees, making them an ideal fit for sending remittances to India. The service aims to deliver funds promptly, with a focus on transparency of fees and exchange rates involved.

Users can initiate money transfers through the Remitbee website or mobile app.

The complete fee structure is as follows:

  • Payment Type
    • Transfers less than 500 CAD: 2.99 CAD
    • Transfers greater than 500 CAD: Free
  • Remitbee Wallet (including E-transfer and bill payment)
    • Transfers less than 500 CAD: 2.99 CAD
    • Transfers greater than 500 CAD: Free
  • Direct withdrawal EFT
    • Transfers less than 500 CAD: 2.99 CAD
    • Transfers greater than 500 CAD: Free
  • Interac
    • Transfers less than 500 CAD: 2.99 CAD
    • Transfers greater than 500 CAD: 2.99 CAD
  • Visa Debit/ Mastercard Debit
    • Transfers less than 500 CAD: Starts from 2.99 CAD
    • Transfers greater than 500 CAD: 8.99+ CAD

Before choosing a method, it's crucial to consider factors such as transfer fees, exchange rates, speed of transfer, and convenience for both the sender and the recipient, in addition to staying informed about any regulatory requirements and tax implications.

Tax Implications of Sending Money from Canada to India

In Canada, sending money to another country does not usually trigger tax liabilities. However, if the funds sent generate income, such as interest or capital gains, that income may need to be reported on the sender's Canadian income tax return.

The two countries also share a Double Tax Avoidance Agreement that prevents individuals residing in the other country from being taxed doubly.

However, it is a different story when sending money from India to Canada. As of October 1st, 2023, remittance outflows from India that are not educational or medical expenses will incur a 5% to 20% tax if the amount exceeds INR 700,000 annually.