Outward Remittance Explained: Meaning, Process, & RBI Guidelines for India

In our increasingly globalised world, the need to send money from India to other countries is more common than ever. Whether you’re a parent funding your child’s education abroad, a business paying global vendors, or a traveller booking an international tour, outward remittance is a vital banking function

According to the Reserve Bank of India, India’s outward remittances under the Liberalised Remittance Scheme (LRS) have seen significant growth, driven by international travel, education, and overseas investments.

In this blog, we’ll explain:

• The meaning of outward remittance 
• How the process works from India Key
• RBI and FEMA guidelines for outward remittance 
• Purpose codes and taxes like TCS 
• How Razorpay can help make remittances seamless

What is Outward Remittance? 

Outward remittance refers to the transfer of money from an individual or business in India to a recipient outside the country. It is a foreign outward remittance where funds originating from India are sent across borders, typically involving the conversion of Indian Rupees (INR) into a foreign currency through authorised channels like banks or fintech platforms.

Simply put, Outward remittance is the process of sending money from India to a foreign country in compliance with RBI and FEMA guidelines. It is used for personal needs like education and travel or business purposes like import payments.

Key Characteristics of Outward Remittance

• Cross-border money movement from a sender in India to a recipient abroad.
• INR to foreign currency conversion is a mandatory step.
• Regulated by the RBI under strict FEMA guidelines.
• Requires KYC and purpose code declaration for all transactions.

Outward vs. Inward Remittance

Related Read:

• What is Remittance?
• What is Inward Remittance?

Why Outward Remittance Matters for Indian Businesses

While the Liberalised Remittance Scheme (LRS) often highlights individual needs, outward remittance is a fundamental pillar of modern Indian commerce. For businesses, sending money abroad isn’t just for travel or investments; it’s a critical operational function that fuels growth, innovation, and global trade.

Here’s how different sectors rely on outward remittance:

• For Importers and Manufacturers: This is the most traditional business use case. With India’s merchandise imports reaching nearly $677 billion in 2023-24, outward remittance is the essential mechanism for paying international suppliers for raw materials, machinery, and finished goods that drive the domestic economy.
• For Tech Companies and Startups: The digital economy runs on global tools. Indian businesses make regular outward remittances to pay for essential services like international software subscriptions (SaaS), cloud computing (e.g., AWS, Google Cloud), and digital marketing campaigns run by foreign agencies.
• For Businesses with a Global Workforce: As companies expand their reach, they often hire international talent. Outward remittance is used to pay salaries to overseas employees and fees to foreign consultants and freelancers, enabling businesses to access the best skills from anywhere in the world.

For these businesses, a fast, compliant, and cost-effective outward remittance process is vital for maintaining strong supplier relationships, accessing critical technology, and managing a global team efficiently.

How Outward Remittance from India Works: Step-by-Step Process

The journey of an outward remittance from India involves several key steps to ensure compliance and successful delivery of funds.

1. Sender’s Initiation in India: The sender selects an authorised provider (their bank, a fintech platform, or an AD-II category dealer) 14 and submits the recipient’s details, including their name, account number, and the foreign bank’s SWIFT/BIC code. Declaring the correct purpose code is a mandatory part of this step.
2. Regulatory Checks & Compliance: The remitting institution verifies the transaction against FEMA and RBI rules. This includes checking the sender’s LRS limit, verifying KYC documents (PAN, Aadhaar), and ensuring the purpose is permissible.
3. Transfer via Banking or Fintech Network: Once cleared, the funds are routed internationally. Traditional banks use the SWIFT network, which may involve intermediary banks. Modern fintech rails often provide a more direct and faster route.
4. Credit to Foreign Account: The recipient’s bank abroad receives the funds, performs its own checks, and credits the amount in the local currency to the beneficiary’s account.
5. Processing Time: Traditional bank transfers take 2–5 business days, while modern fintech platforms can deliver funds within 48 hours.

RBI & FEMA Guidelines for Outward Remittance

All outward remittance from India is strictly governed by the RBI and the Foreign Exchange Management Act (FEMA).

Liberalised Remittance Scheme (LRS)

Under the LRS, a resident individual can send up to $250,000 per financial year abroad  for permissible purposes, including:

• Education and medical expenses 
• Family maintenance and gifts 
• Investment in foreign shares or real estate 
• Travel and personal expenses 

Business Outward Remittance

Businesses can remit funds for current account transactions like import of goods/services, licensing fees for software, and inter-company payments. These transactions require supporting documentation like invoices and contracts.

Understanding Purpose Codes for Outward Remittance

A purpose code for outward remittance defines the exact reason for the transfer. RBI mandates these codes for:

• Tracking India’s foreign exchange outflows.
• Auditing, taxation, and maintaining Balance of Payments data.
• Preventing the misuse of remittance routes.

Declaring an incorrect purpose code can lead to transfer rejection, delays, and penalties.

Common Purpose Codes

Outward Remittance Charges & TCS: What You Pay

Typical Charges

• Bank/Provider Fee: A service fee of ₹500–₹1,500 per transaction.
• Intermediary Bank Fee: A hidden charge of $15–$30 when using the SWIFT network.
• Currency Conversion Markup: A margin of ~2–3% over the real market exchange rate.
• GST: 18% GST is levied on the provider’s service fees, not on the remitted amount itself.

TCS on Outward Remittance (Tax Collected at Source)

TCS on outward remittance is a tax collected by the provider when you send money abroad under LRS.

Important: TCS is not an extra tax. It is adjustable against your total income tax liability and can be claimed back when you file your income tax return for the same year.

Tips for Safe & Cost-Effective Outward Remittance

• Double-Check Beneficiary Details: Always verify the recipient’s name, account number, SWIFT/BIC, and address to avoid delays.
• Ask for the All-Inclusive Cost: Ensure you are aware of all bank fees, FX rates, and applicable TCS before proceeding.
• Declare the Right Purpose Code: An inaccurate declaration poses a compliance risk and can lead to the wrong TCS rate being applied.
• Track & Record Transactions: Maintain transaction IDs and payment proofs for your records.

Stop Navigating Outward Remittance Alone. There’s a Smarter, Razorpay Way.

Razorpay provides a modern, streamlined solution for outward remittance, built specifically for the needs of businesses across the world. Here’s how we compare to the traditional bank process:

Don’t let compliance headaches and hidden fees slow down your global ambitions. Make your outward remittances seamless, compliant, and cost-effective.

Explore Razorpay’s International Payments Solutions Today!

Frequently Asked Questions

1. What is the purpose code for outward remittance?

It is a mandatory RBI classification code that defines why the money is being sent abroad (e.g., S0304 for education, S0202 for software services).

2. What are the RBI guidelines for outward remittance? 

Key RBI guidelines for outward remittance mandate KYC, purpose declaration, limits under the Liberalised Remittance Scheme (LRS) for individuals, and compliance with FEMA.

3. How does TCS on outward remittance work? 

TCS (Tax Collected at Source) is levied on certain outward remittance transfers above ₹7 lakh/year. Rates vary by purpose, and the amount is adjustable against your annual income tax.

4. How long does it take to remit money abroad from India? 

Banks typically take 2–5 days for a foreign outward remittance, while modern platforms like Razorpay can offer delivery within 1–2 days.

5. Is there a limit on outward remittance from India? 

Yes. Under the LRS, resident individuals can send up to USD 250,000 per financial year for permitted purposes.