How are dollars divided in India?

The idea that US dollars received via international money transfers or remittances in India are "divided" or split by law is a common misconception. The reality is that the recipient in India receives the full amount after any applicable taxes, fees, and the necessary conversion to Indian rupees (INR) at the prevailing exchange rate. There's no legal mandate to split the foreign currency itself among multiple parties upon receipt.

Here's how it generally works for someone receiving US dollars in India:

The foreign currency, like US dollars, is essentially converted into Indian rupees. While there are no import restrictions on the amount of foreign currency that can be received, amounts exceeding $5,000 USD equivalent must be declared to customs if someone is physically carrying cash into the country. For electronic remittances, which are the most common way money is sent internationally, this physical declaration isn't an issue. The key is that unless the recipient is a non-resident Indian holding a designated foreign currency account (like an EEFC account), the dollars must be converted into INR upon receipt. Banks and fintech providers like Wise or OFX handle this conversion, typically applying their own exchange rate, which includes a margin on top of the mid-market rate, along with any transfer fees.

Regarding deductions, there are a few things to keep in mind, but these are not about "dividing" the original dollar amount. First, there's the Tax Collected at Source (TCS). This applies to outward remittances from India, and recent rules indicate a 20% TCS on amounts exceeding ₹7 lakh (approximately $8,300 USD) for certain purposes. This is collected by the sender's bank in India, not directly from the incoming remittance, and it's generally refundable via income tax returns if eligible. Then there are provider fees, which are essentially the cost of the service. Fintech platforms like OFX or Wise often have competitive exchange rates and may charge a small fee or build their profit into the exchange rate itself. For example, OFX is known for competitive FX rates and sometimes low or no fees for batch payments, especially for business remittances. Finally, the recipient is responsible for any income tax on interest or gains from the received funds, though gifts from relatives are generally exempt. These are tax obligations, not a legal requirement to divide the principal amount.

The practical steps involve choosing a reliable provider. For large or business remittances, OFX is a solid choice as it supports many currencies and offers local-like FX rates. For general personal transfers, Wise is also popular, and they often recommend using cards or ATMs over cash to avoid risks. The Reserve Bank of India (RBI) guidelines ensure that the full amount, post-conversion and deduction of relevant fees, is credited to the recipient. It's always a good idea for recipients to declare large receipts for tax compliance purposes.

So, to reiterate, there's no legal requirement to split the US dollar amount received in India. The recipient gets the INR equivalent after conversion, fees, and any applicable taxes. The whole process is about converting and crediting the money, not about mandated sharing.