How to Transfer Money to an Indian Business Account from the United States: Process and Best Practices

Image Source: unsplash

When you conduct a transfer from the US to an Indian business account, compliance, cost, and efficiency are the three major challenges you must face. An incorrect process may put your funds at risk.

Common pitfalls include:

• High hidden fees
• Complex compliance reviews
• Unexpected transfer delays

This guide will provide clear steps and expert advice. You can learn how to complete transfers safely and at low cost, effectively avoiding these common issues and ensuring your business payments arrive smoothly.

Key Takeaways

• Choosing the right remittance service provider is very important. Traditional banks are secure but expensive and slow; online providers are usually cheaper and faster.
• Preparing all documents in advance can avoid transfer delays. Indian companies need FIRC documents to prove receipt of foreign funds.
• You must be extremely careful when filling in information. The recipient company name, bank account number, IFSC code, and remittance purpose code must all be correct.
• Transfer costs are not just about the transaction fee. Exchange rate markups and intermediary bank fees will also increase the total cost, so pay extra attention.
• Protecting fund security is very important. Be vigilant against fraud, enable two-factor authentication, and confirm recipient information by phone before remitting.

Core Process for Transferring Money from the US to an Indian Business Account

Image Source: pexels

Completing a transfer from the US to an Indian business account requires following a clear process. You can ensure the smooth progress of each transaction through four key steps: choosing a service provider, preparing documents, filling in information, and confirming receipt.

Choosing a Remittance Service Provider

Choosing the right remittance service provider is the first step in the entire process and the most critical one. Your choice will directly affect the cost, speed, and convenience of the transfer. There are mainly two options: traditional banks and online remittance providers.

1. Traditional Bank Wire Transfer

Bank wire transfers are renowned for their high security and are a traditional choice for many companies handling large transactions. However, you also need to understand their costs and timelines.

• Cost: Banks’ fee structures are usually quite complex.
  • Remittance transaction fee: Fees are typically between $30 and $50. If you process it offline or by phone, the fees may be higher.
  • Intermediary bank fees: If your bank does not have a direct partnership with the recipient bank, the funds will pass through one or more intermediary banks during transmission, and each will charge a fee.
  • Recipient bank fees: Local Indian banks may also charge an incoming fee when receiving the funds.
  • Exchange rate markup: Banks usually add a spread to the mid-market rate to profit, which means the recipient actually receives less.
• Speed: Wire transfers from the US to India typically take 5-7 business days to arrive. If holidays or information errors are encountered, it may take longer.

2. Online Remittance Service Providers

In recent years, online platforms like Wise and Remitly have provided companies with more flexible and cost-effective options. They are particularly suitable for businesses that need to make frequent international payments.

Business-level feature highlights Many modern remittance providers offer powerful tools for business customers. For example, Wise Business provides API integration to help you automate payment processes and connect with your business tools (such as accounting software). You can also use the batch payment feature to pay up to 1,000 recipients at once by uploading a simple spreadsheet.

The table below compares some featured functions that providers offer to business customers:

Which service to choose depends on your specific needs. If your primary consideration is security and the transaction amount is huge, a bank may be a safe choice. If you pursue efficiency, low cost, and high-frequency transactions, online providers have more advantages.

Preparing and Verifying Company Documents

The biggest difference between business-to-business transfers and personal transfers lies in the strict compliance document requirements. Preparing all documents in advance can avoid long delays due to incomplete materials. The Indian recipient bank needs these documents to verify the legitimacy of the funds.

One of the most important documents is the Foreign Inward Remittance Certificate (FIRC). This is a certification document issued by an authorized bank to confirm that an Indian company has received legitimate funds from abroad.

What is FIRC? FIRC is an important certificate for Indian companies receiving international remittances. It is not only a compliance requirement but also the basis for companies to file tax returns and enjoy relevant government preferential policies.

To enable the recipient to successfully apply for FIRC, you need to provide accurate information during the remittance. The recipient bank usually needs the following key information to process FIRC requests:

• Unique transaction reference number (UTR Number) of the remittance
• Name and country of the remitter (your company)
• Remittance amount (foreign currency and Indian rupees)
• Remittance date
• Accurate remittance purpose code (Purpose Code)
• Name and bank account information of the recipient (Indian company)

Setting Up the Transfer and Filling in Information

When setting up a transfer on your chosen remittance platform or bank website, the accuracy of the information is crucial. Any minor error can cause the transfer to fail or be delayed.

Information that must be filled in accurately:

• Recipient company full name: Must exactly match the name on the bank account.
• Recipient bank account number: Double-check to ensure no digit errors.
• IFSC code (Indian Financial System Code): This is an 11-digit code used by India’s domestic electronic fund transfer systems (such as NEFT, RTGS) to identify specific bank branches. An incorrect IFSC code will directly cause the transfer to fail.
• Remittance purpose code (Purpose Code): This is a key piece of information that must be provided when remitting to India.

Why is the remittance purpose code so important? This code, established by the Reserve Bank of India (RBI), is used to classify all inbound funds. It directly affects the processing method and taxation of the transaction.

• Transaction processing: The correct code ensures the bank processes your remittance smoothly. An incorrect code may trigger manual review, causing unnecessary delays.
• Tax impact: Different purpose codes correspond to different Tax Collected at Source (TCS) rates. Choosing the wrong code may lead to tax calculation errors.

Avoid common errors The most common errors include spelling mistakes or extra spaces in the recipient’s name, and digit errors in the bank account. Before submitting the transfer, it is strongly recommended that you confirm the accuracy of all information with the Indian recipient again. If the information is incorrect, the bank may reject the transaction and return the funds, a process that may take several days.

Confirming Receipt and Obtaining Certificates

After you complete the transfer from the US to the Indian business account, the final step is to track the funds and ensure the recipient has successfully received the money and obtained the necessary certificates.

1. Tracking Your Transfer

• Bank wire transfer: You can request a Federal Reference Number (Fed Number) or MT103 document from your bank to track the funds. Please note that banks may charge extra fees for this service.
• Online providers: Most online platforms (such as Wise) provide free online tracking. You can view the transfer status in real-time via the website or app and receive email or push notifications.

2. Recipient Obtaining FIRC Certificate Once the funds arrive, the Indian recipient company needs to apply for FIRC from its bank. The process is usually as follows:

1. Submit application: The recipient needs to submit an FIRC application form to its bank (such as HDFC, ICICI, SBI, and other authorized banks).
2. Provide information: When applying, provide the transaction reference number, remittance date, amount, and accurate purpose code.
3. Pay fees: The bank will charge a certain FIRC issuance fee.
4. Obtain certificate: After processing, the bank will issue a physical or electronic FIRC. The processing time is usually 3-10 business days.

Some modern remittance platforms simplify this process. For example, if your funds are received through Wise Business account information, the e-FIRC will be automatically generated and sent to the recipient’s registered email within 3 business days after the funds arrive, and the recipient can also log in to the account to download it at any time.

By following the above four core steps, you can handle transfers from the US to Indian business accounts more confidently and efficiently, ensuring your business funds flow smoothly.

Key Considerations and Best Practices

Image Source: unsplash

After mastering the core transfer process, the next step is to deeply understand the key factors affecting transaction costs, compliance, and security. By following the best practices below, you can minimize risks and maximize the value of each fund.

Cost and Exchange Rate Analysis

The total cost of a transfer is not just the fixed transaction fee you pay. The real costs are hidden in exchange rates and various additional fees.

1. Beware of Hidden Exchange Rate Markups

The exchange rate you see online is usually the mid-market rate. This is the “real” rate used when banks trade with each other. However, most banks and remittance providers add a spread (markup) to this when quoting you to profit.

How does the exchange rate markup affect your costs? Banks and traditional providers typically add a 3% to 6% markup to the mid-market rate. This means that if you transfer $5,000, the bank may quietly earn $200 in profit through the exchange rate, not including any explicit transfer fees. Even if a service advertises “zero fees,” its costs may already be hidden in poor exchange rates.

The table below clearly shows the exchange rate characteristics of different providers:

2. Identify Various Additional Fees

In addition to exchange rate markups, you need to be aware of a series of potential extra fees, especially when using traditional bank wire transfers:

• Intermediary bank fees: Before your funds reach the Indian bank, they may pass through one or more intermediary banks, each deducting a fee, usually $10 to $30.
• Recipient bank fees: Local Indian banks may also charge an incoming fee when receiving funds.
• Tracking fees: If you need to track your remittance, some banks charge extra for this service.

A real example: You remit $1,000 from a US company account. The funds pass through two intermediary banks, each deducting a $14 “lifting fee.” Ultimately, your Indian partner only receives $972, and this $28 deduction is usually not clearly listed on either party’s bank statement.

3. Lock in Exchange Rates to Avoid Risk

The exchange rate market fluctuates sharply. To avoid reduced recipient amounts due to exchange rate drops, you can choose services that allow locking in rates. Some platforms (such as OFX, Convera) offer tools like forward contracts, allowing you to lock in a future transaction rate in advance, valid for up to one year. This helps you accurately forecast cash flow and maintain stable pricing with suppliers.

Compliance and Tax Requirements

Cross-border transfers are strictly regulated by both the US and India. Ignoring any party’s regulations can lead to fines or transaction delays.

1. Compliance Points for Indian Recipients (FEMA)

The Foreign Exchange Management Act (FEMA) of India has clear regulations for companies receiving foreign funds. Your Indian partner must comply with the following requirements:

• Investment routes: Foreign investment in most industries falls under the automatic approval route, requiring no prior government approval. However, certain restricted industries (such as defense, broadcasting) need to go through the government approval route.
• Reporting requirements: After receiving your investment and allotting shares, Indian companies must submit Form FC-GPR to the Reserve Bank of India (RBI) within 30 days. In addition, an annual Foreign Liabilities and Assets (FLA) return must be submitted.
• Pricing guidelines: To prevent money laundering, RBI requires that the share issuance price not be lower than the fair value determined by internationally recognized methods.

2. Tax Reporting for US Remitters (FBAR)

As a US business, if you hold financial accounts overseas, you may need to report to the Financial Crimes Enforcement Network (FinCEN) of the US Treasury.

3. Impact of Indian Goods and Services Tax (GST)

The good news is that if your Indian partner provides services to you (such as software development, consulting), this transaction is usually considered a “service export.” Under Indian tax law, service exports are zero-rated supplies, meaning Indian companies do not need to pay GST on the received funds, provided the following conditions are met:

• The service provider is located in India.
• The service recipient (your company) is located outside India.
• The payment is received in convertible foreign currency (such as USD).

Security and Risk Avoidance

With the popularity of international payments, payment fraud targeting businesses is also increasingly rampant. The FBI reports that business email compromise (BEC) scams alone have caused more than $26 billion in global losses.

“People are used to having technical solutions, but social engineering bypasses all technology, including firewalls. Technology is crucial, but we must focus on people and processes.” — Kevin Mitnick

1. Identify Common Payment Fraud Methods

Fraudsters constantly update their tactics. Here are some of the most common types:

• CEO fraud/business email compromise (BEC): Fraudsters impersonate your company’s executives (such as CEO or CFO) and authorize an urgent, seemingly legitimate payment via email.
• Fake invoice fraud: You may receive an email that appears to be from your Indian partner, claiming their bank account has changed, and attach an invoice with new account information. In 2019, a Toyota subsidiary lost $37 million due to this type of scam.
• Beware of danger signals:
  • Sudden requests for urgent payments.
  • Unannounced notifications of bank account information changes.
  • Poor quality of received invoices or inconsistent with previous formats.

2. Adopt Multi-Layer Security Measures

Protecting your funds requires dual technical and procedural safeguards.

• Enable two-factor authentication (2FA): Enable 2FA for your bank and remittance platform accounts. Compared to SMS verification, using authentication apps (such as Google Authenticator) or physical security keys provides stronger protection because they are less susceptible to phishing attacks.
• Establish recipient verification process: Before remitting to a new or changed account, must contact your Indian partner through an independent, trusted channel (such as phone) to verbally confirm the accuracy of the recipient account information. Never change payment information based solely on an email.

3. Response Measures After Fraud Occurs

If you unfortunately become a victim of fraud, time is critical. You should immediately take the following steps:

1. Contact your bank: Immediately notify your bank or remittance provider and request to freeze or cancel the transaction.
2. Report to law enforcement: Submit a written complaint to your local police cybercrime department. Also, submit an online complaint to India’s national cybercrime reporting portal (www.cybercrime.gov.in).
3. Preserve all evidence: Save all relevant emails, chat records, transfer screenshots, and invoices to support your case.

Under Indian law, identity theft and cyber impersonation fraud are criminal offenses punishable by imprisonment and fines.

Transfer Limits and Frequency

Different remittance channels have different limits on the amount of a single transaction and the frequency of daily transactions. Understanding these limits is very important before making large transfers from the US to Indian business accounts.

1. Understand Limit Differences Across Platforms

Traditional banks and online providers have huge differences in limits. Bank ACH transfer limits are usually more conservative, while platforms designed for B2B payments can provide higher flexibility.

• Traditional banks: As shown in the figure above, daily ACH transfer limits for mainstream US banks are typically between $2,500 and $25,000, depending on your account type and customer relationship.
• B2B payment platforms: Some modern payment platforms (such as Nickel) are designed for large transactions, with single transaction limits up to $1 million and no daily transaction count restrictions.

2. How to Increase Your Transfer Limit

If your single transaction amount exceeds the default limit, you can actively apply to increase the limit. The process is usually simple:

1. Register recipient: Add your Indian partner as a registered recipient in your online banking or remittance platform.
2. Apply for adjustment: Log in to your account, find the limit adjustment option in the transfer settings, and submit an application to increase the limit.
3. Split transactions: If the limit still does not meet your needs after increasing, you can consider splitting a large transfer into multiple smaller transactions over several days.

Through careful planning and choosing the right tools, you can ensure that even large or high-frequency payment needs are met.

To successfully complete a transfer from the US to an Indian business account, you need to focus on three core elements:

• Choose a compliant service provider
• Prepare all necessary documents
• Understand tax and foreign exchange regulations in advance

Following these steps can help you avoid delays due to information errors or compliance checks, significantly improving transfer efficiency and security.

Before handling large or complex transactions, be sure to consult your financial and tax advisors to ensure full compliance.

FAQ

How to avoid transfer delays?

You need to provide accurate recipient information. Be sure to verify the bank account number, IFSC code, and remittance purpose code with your Indian partner. Any error may cause the transaction to fail or be delayed for a long time.

How can I get the best exchange rate?

You should compare different providers. Look for platforms that offer the mid-market rate to avoid exchange rate markups. Even if the fee is zero, poor exchange rates will increase your hidden costs.

What exactly is FIRC? Why does my Indian partner need it?

FIRC is the Foreign Inward Remittance Certificate. Your Indian partner needs it to prove to the Reserve Bank of India that the funds are from a legitimate source. This document is also an important basis for their tax filing and enjoying policy preferences.

What if my transfer amount exceeds the limit?

If your transfer amount exceeds the platform’s default limit, you can try the following methods:

1. Contact the provider to apply for an increase in your transfer limit.
2. Split the large amount into multiple smaller transactions over several days.