us dollar remittance

How to transfer up to $1 million to the US at 5% TCS?

An important component of smart investing is keeping track of changes in market trends and other micro- and macro-economic factors. By doing so, you can make the most of time-sensitive investing opportunities. And right now, you have one such opportunity available to you — you can transfer up to $1 million to the US at only 5% TCS (Tax Collected at Source). 

The TCS rate is increasing to 20% 

The Union Budget 2023 proposed that the TCS rate for overseas funds transfers be increased from the current 5%* to 20%, starting from October 1, 2023. It also proposed eliminating the minimum threshold limit of ₹7 lakh, beyond which TCS was applicable. 

For instance, say you want to transfer ₹15 lakh to the US to invest in tech stocks. If you do so before October 1, 2023, 5% TCS will be levied on ₹8 lakh (₹15 lakh – the ₹7 lakh threshold limit); this will amount to ₹40,000. But if you transfer the same amount after October 1, 2023, 20% TCS will be levied on the entire sum of ₹15 lakh, which will amount to ₹3 lakh. 

This means that in the latter scenario, you will have to pay an additional ₹2.6 lakh as TCS. And while you will be able to adjust the TCS paid against your tax liability when you file your annual returns, it will still tie up a significant sum of money. That sum could have been used more fruitfully: to make more investments, for instance. 

*For those who did not file their ITR in either of the previous two financial years or do not have a valid PAN, the TCS rate applicable is 10% instead of 5%.

Avoid getting your funds locked up

As of today, you do have a window of opportunity that can let you move your funds to the US at only 5% TCS. By taking advantage of this window, you can avoid having to lock up 15% of your transferred amount in the form of TCS. This means that you will be free to invest that sum (which can be quite substantial) in the securities of your choice, whether they be stocks, mutual funds, or real estate. In effect, you won’t have to incur an opportunity cost due to 15% of your transferred amount being withheld by the tax authorities.

A few golden months to transfer money at 5% 

Under the Liberalised Remittance Scheme (LRS), all Indian residents, including minors, can transfer up to $250,000 overseas in a financial year. So assuming you have four members in your immediate family, you can collectively transfer $1 million every financial year: $250,000 per family member. 

This means that you have the opportunity to transfer up to $1 million (your maximum transferable amount for FY 23-24) at only 5% TCS, provided that you do so by September 30, 2023.

Two key reasons why you might want to transfer funds to the US are: paying for your children’s education and investing in the US markets. But why should you invest your money in the US? Let’s take a look. 

Park your money in US investments 

When Indian investors think of investing internationally, the first country they think of is probably the US, and for good reason. Investing in American markets can bring you several benefits, such as diversification, access to companies that are global leaders, and a depreciating rupee. 

  • Diversification 

The US and Indian stock markets are not perfectly synced. Hence, dips in one market may not be accompanied by dips in the other, or at least not to the same extent. This means that by investing in both markets, you can hedge against stock market volatility and improve your investment portfolio’s overall performance. 

  • Higher returns

The global leaders of most industries are listed US companies. Many such companies, such as Amazon, Tesla and Apple, are consistently disruptive and innovative. This means, they are well-placed to beat the broader market by a significant margin. So, if you want to set up your portfolio for high returns, investing in US equities is definitely a good idea. 

  • US dollar appreciation 

Over the last 10 years, the US dollar has been appreciating against the Indian rupee at an average rate of 4.1% every year. In 2022 alone, the rupee fell by over 11% compared to the dollar. If you’re investing only in the domestic stock market, such appreciation does not directly benefit you in any way. However, when you invest in the US stock market, your money is first converted into US dollars and then invested. Hence, you are investing not only in US securities but also in the value of the dollar. 

So when the dollar goes up against the rupee, so does your investment value: you get more rupees per dollar invested when you sell your investments. And as per a study by the International Monetary Fund (IMF), the dollar-to-rupee exchange rate could be 94.4 by 2028 (as of the date of this writing, it stands at around 83).

Hence, the US is a lucrative market for parking your investible corpus for the long term. The process of investing in the US can also be straightforward and easy if you have the right investment platform at your disposal. 

Opportunity knocks but once: send money to the US easily, now!

Remember: the LRS regulations that will come into effect on October 1, 2023 are unlikely to change for a long time. So if you do believe that there are several benefits to investing in US securities, or if you know your children will attend an American university in the near future, then you shouldn’t wait for the new regulations to kick in.

This window from now to September 30, 2023 is undoubtedly a major opportunity, but is also a time-sensitive one. So, seize the day! 

Regardless of the reason you wish to transfer funds to the US (investing / education / leisure), Appreciate can make overseas funds transfers a frictionless experience for you. 

The funds you transfer via Appreciate will initially be used to invest in the US securities of your choice (including cash-equivalent securities, which minimise investment market risk). You can then liquidate those US investments and use the funds freed up for approved secondary purposes (such as funding your child’s education).

Here are the special benefits Appreciate offers:

  • The best-negotiated forex rates in the market 
  • Zero fixed fees for funds transfers
  • Complete transparency, with no hidden costs 
  • FEMA- and RBI-compliant LRS processes
  • A Personal Remittance Manager
  • Virtual or home visits for the completion of formalities 

There’s no time to lose: to avoid a TCS rate that’s 15% higher, you MUST act right away. Transfer your funds with Appreciate today to take advantage of this singular opportunity!

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