Rapid globalisation has driven startups, SMEs and ambitious individuals to shatter geographic borders and expand all over the world. Such expansions mandate global transactions and cross-border payments frequently.
In recent times, Indian businesses and startups have levelled up to their global counterparts. Let's look at how Indian citizens and companies can accept foreign payments easily and efficiently.
Factors to keep in mind while making international transfers to India
International payments can be carried out in many ways, but they don’t come without costs. Here are a few things to consider so that cross-border payments do not cost a bomb.
Amount of money to transfer
As an early-stage startup, if you are to receive payments from abroad, some tax will be levied depending on the amount of money. The taxable amount will be discussed further after a few sections. It is recommended that SMEs or startups accept payments from abroad in a single tranche rather than several smaller payments to minimise the bank commission and GST slabs imposed on currency conversion.
Delivery time
The time taken to make cross-border payments is extremely crucial. When finalising the mode of international payments, do not forgo the urgency of money requirement, if any. When a sender and a receiver agree upon a transaction approach, the number of days that would be taken to complete the transaction should be prioritised. Be aware that money transfers do not occur either on the weekends, i.e. Saturdays and Sundays, or on public holidays.
Exchange rate
The foreign exchange market never shuts down, so the exchange rates keep changing. When making cross-border payments, it is ideal to lock a rate at favourable numbers to avoid sending money overseas at exorbitant rates.
Transfer fee
When international payments are received in India or any country, a fee is charged by the money transfer provider to execute the transfer successfully - both from the sender and the receiver. Banks and transfer companies markup prices at high rates. So, one must confirm any such fee associated with the cross-border payment.
Ways to receive international payments to India
With the world merging into a global community, we can send and accept payments from abroad in numerous ways. Here are some of the most popular ways to receive international payments to India:
Wire Transfer
Wire transfer is a popular method for SMEs and corporations to receive payments from abroad. Essentially, a wire transfer is transferring money from one bank account to another electronically without moving actual cash. For an international wire transfer, the required details to be submitted are:
Recipient's details - name, address and bank account number
IFSC code of the recipient bank
SWIFT (Society for Worldwide Interbank Financial Telecommunication) /BIC (Business Identifier Code) number of sender and receiver bank
Know more about wire transfers for cross-border payments.
Multi-Currency Account
With a multi-currency account, individuals and companies can receive payments from abroad in several currencies without incorporating their business abroad.
Normal bank accounts may be unaffordable for SMEs and startups due to their high fees and tedious money transfer periods. With a multi-currency account like Salt you can receive payments in foreign currencies like USD, GBP, EUR, SGD, etc at a flat fee of 1.75 % of the amount only.
Salt provides a multi-currency account service for free and online convenience that aptly meets the demands of SMEs and early-stage startups. Learn more about the ABCs of multi-currency bank accounts for international money transfers here.
Payment Gateways
Online payment gateways like PayPal offer simple, transparent and lightning-fast fund transfer services. It is advisable to check out their technology and other supported features in addition to costs. Many payment gateways offer a variety of payment methods and support integration with third-party services and apps like credit or debit cards, other currencies, and even cryptocurrencies. Additionally, they offer recurring billing services, point of sale assistance, and subscription services.
However, payment gateways are known to add extra costs like - outrageous exchange rates, fixed fees or transfer fees per transaction, which is confusing and overwhelming for SMEs or early-stage startups. Also, there is not much support for customers looking for guidance during international payments.
Is money transferred from abroad to India taxable?
According to India's Foreign Exchange Management Act (FEMA), money received in India from a relative living overseas as a gift or for family support is not subject to tax.
However, international money from global clients and investors for SMEs or corporations does not fall under the above-mentioned category.
Money transferred from abroad to India as funds or payments is taxable. For instance, if freelancers receive payments from abroad, the amount is added to their annual income for the year and taxed accordingly. Taxes are imposed on any amount over Rs. 50,000 received by an individual from a client.
If a business, startup, or SME receives cross-border payments, income tax is levied on the company's profits, not the credited amount.
Conclusion
Receiving payments from abroad is one tricky and complicated process to see through. There are plenty of methods to ensure a secure money transfer across borders. Salt offers truly borderless solutions for global banking. With Salt, companies in India can collect payments from across the globe in different currencies in less than 24 hours at the most affordable rates.
Certainly, delving into the intricacies of global transactions and cross-border payments is a subject I'm well-versed in, drawing on a depth of knowledge and experience in the field. My expertise extends to understanding the nuances of international finance, payment systems, and the challenges faced by startups and SMEs navigating the global marketplace.
Now, turning our attention to the key concepts mentioned in the article, let's break down the information provided:
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Globalization and Cross-Border Transactions: Rapid globalization has prompted startups, SMEs, and individuals to expand globally, necessitating frequent global transactions and cross-border payments.
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Accepting Foreign Payments: Indian businesses and startups have grown to match global counterparts. The article aims to guide Indian citizens and companies on accepting foreign payments efficiently.
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Factors for International Transfers to India:
- Amount of Money to Transfer: Tax implications vary based on the transferred amount. It's advised for startups to receive payments in a single tranche to minimize commission and GST slabs.
- Delivery Time: Urgency is crucial; the time taken for cross-border payments should be considered, excluding weekends and public holidays.
- Exchange Rate: Fluctuating exchange rates necessitate locking in favorable rates to avoid excessive costs.
- Transfer Fee: Fees are charged by money transfer providers, and banks may mark up prices.
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Ways to Receive International Payments to India:
- Wire Transfer: A popular method involving electronic transfer between bank accounts, requiring recipient details, IFSC code, and SWIFT/BIC numbers.
- Multi-Currency Account: An alternative for receiving payments in multiple currencies, offering cost-effective solutions for SMEs and startups.
- Payment Gateways: Online gateways like PayPal provide quick, transparent fund transfer, though they may have additional costs.
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Tax Implications:
- Taxable Amounts: Money received from relatives overseas as a gift or family support is not taxed. However, funds or payments from global clients and investors are taxable, including amounts received by freelancers and businesses.
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Conclusion:
- Secure Money Transfer: The conclusion emphasizes the complexity of receiving payments from abroad and introduces Salt as a solution, offering borderless global banking with the ability to collect payments in different currencies within 24 hours at affordable rates.
In summary, this article provides a comprehensive guide for Indian startups and SMEs on navigating the intricacies of international transactions, covering aspects from taxation to efficient payment methods, ultimately recommending Salt as a borderless solution.
