What is Inward Remittance?

The International Monetary Fund describes inward remittances as the sum of employees’ compensation and personal transfers. Employees’ compensation is the revenue earned by temporary migrant workers, and earnings by individuals working at embassies, foreign companies, and international organizations. Personal transfers are transactions between non-residents and residents, who can either be migrants or non-migrants.

Common Uses for Inward and Outward Remittances

An inward remittance occurs when you receive money, while an outward remittance happens when you send money to a foreign bank account. Let’s go through when each type of remittance transaction might be used.

Inward Remittance Use Cases

• International Transfers – Receiving money from individuals or businesses in a foreign country.
• Gifts and Inheritances – Receiving money as gifts or inheritances from individuals located overseas or in another country.
• Service Payments – Receiving money for services you or your business provided to international clients or companies.

Outward Remittance Use Cases

• Family Support – Sending money to family members located in a different country to live on.
• International Payments – Paying for goods or services from a company located in a different country.
• Investments – Sending money to businesses overseas for investment purchases, like venture capital.

Inward Remittance Process

There are two main parties involved in an inward remittance: the remitter and the remittee. The remitter is the party sending the money, while the remittee is the beneficiary of the inward remittance. Before the remitter can send funds, they will need the remitter’s name and address, the bank’s nationality, the branch details of the bank, the bank account number, and the bank swift code.

Once the remitter has this information, they can go to the bank and request money to be sent. The remittee’s bank will hold onto the funds to check compliance. The remittee will need to provide their bank with the contract, payment invoice, the purpose of the transaction, the remitter’s name, and the amount in foreign currency.

What is a Foreign Inward Remittance Certificate?

A foreign inward remittance certificate, known as FIRC, is a document that outlines all transactions entering your bank account from foreign countries or nations. Most government agencies will use a FIRC to confirm that payments were received in foreign currency. If you do not automatically receive a FIRC, you may need to request one through a broker.

Additionally, a FIRC is important to request because it contains crucial information about the money transfer. For one, it identifies the involved parties. Second, this document provides information about the actual amount of foreign direct investment and the current prevailing exchange rate. This can help you determine the total contract amount and the amount in your local currency.

Types of Foreign Inward Remittance Certificates

There are two types of foreign inward remittance certificates. Let’s explore each of these types in more detail.

Physical Foreign Inward Remittance Certificate

This is a physical copy of a foreign inward remittance certificate. You can obtain this document by contacting your bank and requesting one. Before the bank issues a physical FIRC, they will ask for your account number, fund transfer date, transfer amount, the reason for the transfer, the details of the recipient, and the unique transaction reference number. Your bank might also impose a small fee for providing this document.

E-Foreign Inward Remittance Certificate

An e-foreign inward remittance certificate contains the same information as a physical FIRC; however, the document is furnished electronically. An e-foreign inward remittance certificate will be completed electronically once your bank receives a declaration or advice from the remitter’s bank.

The bank will automatically produce an inward remittance message through the government’s money remittance portal when documents meet certain criteria. Each country and government will have different guidelines for issuing an e-foreign inward remittance certificate.

Charges Associated with Inward Remittances

Banks will usually impose fees for inward remittance services. These fees vary by institution and on the amount of the foreign remittance. Expect to pay the following fees:

• Conversion Charge – If your remittance must change currencies before being deposited into your bank, you might incur a conversion charge.
• Service Charges – Banks charge fees based on each remittance transaction. Your bank should have a stated fee list for this type of money transfer.
• Correspondent Bank Charge – In some situations, the remitting or correspondent bank will deduct their charges from the money sent to your institution. The fee amount depends on your contract.
• Goods and Service Tax (GST) – Depending on the countries involved, GST might be applicable.

Before you complete a foreign outward remittance or receive an inward remittance, it’s important to be aware of the fees involved. Other payment methods might be more cost-effective.

The Safety of Inward Remittances

There are a few other ways you can secure your inward and outward remittances. First, have a contract in place that identifies all terms, including the amount to send, the overseas bank information, and other details about the money transfer. Be sure all parties have read and understand the contract and the payment method.

Foreign inward remittances can open the door to fraud; however, you can secure your payments by working with a reputable provider like Eftsure. When choosing a provider, be sure they have the correct infrastructure to carry out inward and outward remittances safely. This includes built-in fraud protection and payment tracking capabilities.

Summary

• An inward remittance is a transfer to your bank account from a foreign source, such as an overseas business or individual.
• An outward transfer occurs when you send money to another country.
• Inward remittances are used for international transfers, gifts, inheritances, and service payments, while outward remittances are used to send money for family support, international payments, and investments abroad.
• Working with a secure payment provider is the best way to safeguard your funds from fraud.