Before selecting a broker or investment instrument, it is important to understand how money actually moves from India to an overseas brokerage account.

For Indian retail investors, the remittance process itself can materially impact long-term returns. A seemingly small FX markup of ~₹1.50 per USD compounds significantly over decades of investing.

This chapter focuses on sending money abroad efficiently under the Liberalised Remittance Scheme (LRS).

What is LRS?

The Liberalised Remittance Scheme (LRS) allows Indian residents to remit up to $250,000 (~₹2.4 Crores @ 94.55) per financial year for permitted purposes, including Indian investment abroad in equity capital (Purpose Code: S0001)

Every rupee sent to a foreign brokerage account passes through the LRS framework. Understanding this process is essential before investing internationally.

Tax Collected at Source (TCS) @ 20%

Under current LRS rules, once your total foreign remittances for investments in a financial year cross ₹10 lakhs, banks begin collecting TCS (Refundable) on the remittances above ₹10 lakhs @ 20%.

While this 20% levy is not an additional tax, it acts as a significant upfront cash-flow friction. It temporarily locks up capital that could otherwise be compounding in the market, holding it out of play until it can be adjusted against your overall tax liability during your annual return filing. In fact, concern over this exact opportunity cost was a major reason I initially delayed building my own international portfolio.

Next chapter, we will look at practical ways to reduce the impact of this cash-flow friction.

Key Takeaways: The Two Rules of Remittance

When planning your international asset allocation, your capital movement is governed by two fundamental constraints:

1. The Hard Cap: A maximum outward limit of $250,000 per person, per financial year.
2. The Friction Point: A 20% TCS applied on all outward remittances exceeding ₹10 lakhs in that same financial year.

How the Money Flows

The typical overseas remittance flow works as follows:

1. Indian Bank Account – Funds originate from your Indian savings account.
2. INR converted to USD – The bank converts INR to USD using the mid-market rate plus its FX markup, etc.,
3. SWIFT Transfer – The USD is sent internationally through the SWIFT banking network.
4. Broker’s Receiving Bank – The broker’s partner bank receives the incoming USD transfer.
5. Brokerage Account Credit – The funds are credited to your brokerage account and become available for investing.

Cost Components in an Overseas Remittance (LRS)

In practice, following 5 cost components are typically involved in converting INR to USD,

#	Component	What It Means	Nature of Cost	Notes
(1)	Mid-Market Rate	Base INR cost required to purchase USD at the interbank/reference rate	Baseline	This is the “fair” exchange rate before bank margins. When we google for USD to INR this is shown.
(2)	FX Markup	Bank’s margin added on top of the mid-market rate	Variable (Most Important)	Directly impacts long-term returns; even small differences compound significantly
(3)	SWIFT / Remittance Charges / Processing Fee	Bank’s fee for executing the outward remittance	Fixed	Some banks or relationship tiers or broker setup waive this
(4)	GST on Remittance Charges	GST applied on (3) @ 18%	Fixed (Tax Component)	Not applicable if (3) is waived
(5)	GST on Forex Conversion	GST applied on the FX conversion amount as per forex slab rules	Variable (Tax Component)	Calculated on the forex transaction amount (mid-rate + markup)

Usually for long-term investors, FX markup(2) dominates all other costs. You can use the RealValue FX Engine to do this break down.

Understanding the Different Remittance Levels

There are multiple avenues for remitting capital abroad, but they present a stark trade-off between convenience and FX efficiency. Private banks typically offer seamless, fully digital journeys, but this frictionless experience often comes at the cost of higher exchange rate spreads. Conversely, public sector banks generally rely on manual, branch-led processing—yet navigating this administrative friction is often the key to negotiating the absolute lowest FX markups.

There are broadly two kinds of rates,

• Bank Rate: Level 0 to Level 2 game is played by the bank, rates and discounts are set by the bank with hidden FX Markup
• Market Rate: Level 3 to Level 5 we switch over from bank rate to market rate with explicit FX Markup

Level 0 — Standard Bank Retail Card Rate

If your bank supports online remittance end to end for investments,

The simplest approach is:

• Log into your bank website
• Use the standard outward remittance flow
• Accept the bank-provided exchange rate

This is the default experience most retail users see.

Advantages

• The process is frictionless
• Zero interactions required with bank
• Zero overhead in any additional setup

Disadvantages

• This is the most expensive approach
• Easily 150 p/USD (varies by bank) above interbank/mid-market rates

I have used HDFC’s RemitNow facilities for this end to end online for a test transaction of $100.

Level 1 - Promoted Bank Card Rate

Same as Level 0 but with some discounts due to promotions. Typically when banks have tie up with the broker they offer this. Some banks also waive the (3) & (4) and cover it via (2).

Advantages

• Better rate than Level 0
• At lower volume, this plays a significant role.

Disadvantages

• Still, when investment scales the FX Markup (2) will become a significant component.
• Promotions always will have an expiry date. Suddenly one day bank will remove the promotion code

Backstory: When I started remitting to IBKR, ICICI Direct Global provided a promo code for ICICI Bank Money2World. This waived the ₹1,000 + GST processing fee [(3) & (4) removed] and gave a 40p/USD discount on the bank’s retail card rate [(2) reduced], effectively reducing the overall transaction costs.

I initially used Money2World with this promo code and was satisfied with the cost. However, the promotion was later withdrawn, which pushed me to explore alternative remittance options to reduce overall transaction costs.

Level 2 - Negotiated Bank Card Rate

As you are scaling your volume over time, reach out to the bank branch or relationship manager to set up preferred rates. They can setup some discount based on overall relationship value and recurring monthly volume.

Advantages

• Better rate than Level 0 or Level 1
• No additional system setup required

Disadvantages

• This also will have an expiry date
• So, the problem here is to keep asking them again and again!

While in pursuit of Level 3 option with ICICI Bank, they offered me ~90p/USD discount on retail card rate based on relationship value/transaction volume. Where I used upto 5 figure USD after a hard rebalancing. This brought down markup to ~45p/USD

Level 3 - FX Retail + Private Banks

Level 3 to Level 5 primarily driven by Market Rate.

Let me introduce you to RBI and CCIL’s FX Retail system which is bringing transparency for USD/INR currency conversion with a pre-configured FX Markup (2) for customers. Customer can buy/sell USD at market rate +/- pre configured FX Markup rates. Rates are not managed by the bank, it is based on the market movements of USD/INR.

Steps involved in setting up or using FX Retail is explained in: Chapter 4: FX Retail - A Deep Dive

Once I learned about this system, I started discussing with banks where I had accounts (HDFC Bank & ICICI Bank). ICICI Bank onboarded me with absurd 1.75% default rate (which is even higher than the Level 0) while HDFC Bank did a reasonable job of onboarding me @ 50p/USD. I tried hard to get ICICI Bank to setup the rates in FX Retail system, but they didn’t do so far (3 months passed!). But, I found a better way via Level 4!

Advantages

• USD/INR is market priced not managed by the bank
• Transparent markup setup, it is shown explicitly
• Significantly can reduce the markup and overall cost
• Typically, rate setup is long term here

Disadvantages

• Need to onboard to FX Retail (one more system to work with)
• Again, negotiate the markup rates with the bank
• Generally bank staff are not aware of this system and show high resistance to set it up especially the private sector ones
• Definitely better than bank’s hidden markup but not the absolute bottom

I used FX Retail + HDFC RemitNow online @ 50p/USD markup for my 4 figure USD monthly investment.

Level 4 - FX Retail + Bharat Connect / Forex + Private Banks

While exploring various option, I found that FX Retail also supported via Bharat Connect Forex option where we can “BUY” the USD using the new age apps. I used BHIM app > Bills & Recharges > Finances > Forex option to buy USD. The most interesting thing about this option is that, banks are limited to 20p/USD markup. Best one without even negotiating with the bank.

Advantages

• 20p/USD default rate
• No negotitation with the bank required
• Pretty fast, you just need to spend few minutes extra per remittance

This is the fastest way of sending money abroad at the speed of the private bank but at the cost of a public bank without any negotiations with the bank!

Disadvantages

Few limitations though,

• Need to use a third party app such as BHIM, CRED or Mobikwik
• It supports only upto 10k USD per transaction. If done via UPI it is limited to 5 lakhs INR per transaction.
• Another limitation is that it can only be used for buying USD not for selling it.

Detailed walkthrough is documented here for my setup.

This one I used with BHIM + ICICI Bank @ 20p/USD markup for my 4 figure USD monthly investment

Level 5 - FX Retail + Public Sector Banks

While I couldn’t succeed setting up better than 50p/USD markup with private banks. I started exploring better markup rates with public bank. I approached the Bank of Baroda over email and for the given volume, they were ready to setup 10p/USD. Eventually, I setup the account with them and onboarded for 10p/USD markup.

Advantages

• Absolute best markup rates you can get in the country
• Inward/Outward remittances are not limited. (Outward limited by LRS though)

Disadvantages

• Unlike private banks, this is not fully online
• Manually need to coordinate with the bank staff (though it all happened remotely in my case)
• It can take upto 2 days for processing compared to 2 hours with private banks
• Opportunity cost also should be considered not just rock bottom markup

I did a test transaction of $100 @10p/USD via FX Retail + Bank of Baroda

Conclusion

I concluded to use Level 4 for monthly invements till I hit the limits. Only when I have to remit capital back to India or have to send beyond Level 4 limits, I am planning to use Level 5.

For upto 5 lakhs INR transaction via UPI, I see Level 5 is saving only couple of USD. Not much.

The Remittance Efficiency Ladder

From worst to best FX efficiency:

Level	Method	Typical Markup
Level 0	Standard bank card rate	~150p/USD*
Level 1	Promoted bank rate	~95p/USD*
Level 2	Negotiated bank rate	~45p/USD*
Level 3	FX Retail + Private Sector Banks	50p/USD*
Level 4	FX Retail + Bharat Connect / Forex	20p/USD
Level 5	FX Retail + Public Sector Banks	10p/USD*

*Typical Markup varies by private/public bank, customer relationship value and transaction volume.
But, Level 4 is capped at 20p/USD irrespective of any of these parameters.

Why this matters?

Let’s us compare Level 0 vs Level 4 for 1 lakhs vs 5 lakhs remittance.

	₹1L Level 0	₹1L Level 4	₹5L Level 0	₹5L Level 4
INR Amount Sent (₹)	99,949.46	99,957.24	4,99,958.41	4,99,921.63
USD Amount Received ($)	1,027	1,042	5,190	5,265
Extra USD vs Level 0	–	+15	–	+75
Effective Rate	97.32	95.93	96.33	94.95
Bank Rate (₹/$)	96.00	94.6255	96.00	94.6255
Interbank Rate (₹/$)	94.4255	94.4255	94.4255	94.4255
(1) FX Interbank (₹)	96,974.98	98,391.37	4,90,068.34	4,97,150.25
(2) FX Markup (₹)	1,617.02	208.40	8,171.66	1,053.00
(3) Processing Fee (₹)	1,000	1,000	1,000	1,000
(4) Processing Fee GST (₹)	180	180	180	180
(5) FX Conv GST (₹)	177.46	177.47	538.41	538.38
Total Charges (₹)	2,974.48	1,565.87	9,890.07	2,771.38
Transaction Cost via RealValue FX Engine	3.07%	1.59%	2.02%	0.56%

Transaction cost decreases significantly when we move from
Level 0 to Level 4 and ₹1 lakh to ₹5 lakhs.

Saving just $15 per month by getting a better FX rate may look trivial, but over long periods it compounds meaningfully. If that $15/month is invested for 20 years, assuming 16% annual returns (including INR depreciation) and increasing the contribution by 10% every year, the total amount invested would be about $10,320. This could grow to roughly $41,516, or about $36,836 after taxes. Adjusted for 6% inflation, the real purchasing power would still be around $11,486 (₹10,84,571.29).

In other words, a small monthly saving from FX optimization—like moving from Level 0 to Level 4 in the example above—can quietly compound into a five-figure USD amount over time.

Projected using RealValue SIP Engine (Read INR as USD while looking at the projection). You can play around with various parameters to project your savings.

Bank Experience Comparison

ICICI Bank

ICICI has been the fastest in my experience.

I have seen:

• Money credited to Broker account(IBKR) within a couple of hours
• Same-day deployment possible into European markets (Typically I have to wait for markets to open up)
• Clean PDF with breakdown of charges
• Notification of amount credited into Broker account

Operationally, ICICI feels closest to a modern real-time remittance workflow.

Setting up FX Retail rates, I couldn’t succeed at all. Still at absurd 1.75% markup for me.

Used it for Level 1, Level 2 and Level 4. Level 4 worked very well!

HDFC Bank

HDFC generally processes remittance by end-of-day.

Even then, I was still able to:

• Receive funds on the same day
• Trade in European market before closing on the same day

They didn’t provide PDF documents for the transaction rather we have to rely on the bank statement directly. There were multiple debit entries.

Used it for Level 0 and Level 3.

Bank of Baroda (BoB)

BoB provided excellent FX pricing, but the operational flow was slower.

It is a 3 step process

1. Get approval from the bank backend team via branch forex team
2. Create deal in FX Retail system and forward to branch forex team
3. Wait for processing to happen by EoD

In my case 1 and 2 happened on two subsequent days. I am hopeful that this can be compressed to a day.
But, process is dependent on forex team availablity which can add delays.

In my test run:

• Processing here as well seemed like end of day processing like HDFC
• Interestingly funds reached the broker on the same date
• But after European markets had closed (~10 PM IST)
• This delayed deployment until the next trading session.

Effectively deployment can take 2-3 days and there is opportunity cost towards that as well.

Used it for Level 5.

Execution Flow

1. Register your brokerage account details in the remittance portal.

For example:

• HDFC RemitNow
• ICICI Money2World

You will need:

• Beneficiary bank name
• SWIFT code
• Broker account number
• Broker address

Obtain this information directly from the broker portal. Ensure details are precisely entered in.

2. Do a Small Test Transfer First

Before sending a large/regular amount, do a small test remittance.

Example:

• USD 100 or whatever the platform’s minimum.

This validates:

• Beneficiary details
• SWIFT routing
• Broker credit workflow

Do not judge FX efficiency from the test transfer.

Small transfers look expensive because:

• Fixed processing fees dominate
• Percentage cost appears artificially high

Once validated, proceed with larger/regular transfers.

Important: Typically need to add brokerage account id and account name as part of transaction message. Message field is used by the broker to match the incoming amount into a specific brokerage account.

For regular remittance flows, the RealValue FX Engine can be used to determine the exact USD amount that can be sent based on the INR amount allocated for the transfer. Also, it can be used for computing the transaction cost.

3. Notify the Broker on the upcoming deposit

Brokers like IBKR offer a mechanism to notify them of the incoming deposit via wire transfer. This Deposit Notice includes deposit amount, bank name and bank account number. This will significantly improves matching speed.

Earlier in the days I didn’t know this, it took a while for money to be credited in the brokerage account.

What You Should Track

Maintain a remittance log containing:

Field	Description
PDF File	Link to the remittance debit advice PDF
Bank used	Bank used to execute the remittance
Debit Date	Date when the amount was debited from the bank account
Reference Number	Bank remittance reference number
Remittance Amount	USD amount remitted; used for tracking utilization of the LRS limit
Exchange Rate	USD/INR rate applied for the transaction
Amount Debited	Total INR debited from the bank account
INR for USD	INR value of the USD remitted; used for tracking the ₹10 lakh TCS-free threshold
GST	GST charged on remittance fees
TCS	Tax Collected at Source under LRS (typically 20% after the threshold)

Example

File Name	Bank Name	Debit Date	Reference Number	Remittance Amount	Exchange Rate	Amount Debited	INR for USD	GST	TCS @20%
2025-05-05_DEBIT_ADVICE.pdf	ICICI	May 5, 2025	M2WRI0000000	$10	85.63	901	856.30	45.00	0

This becomes useful for:

• Tax reporting
• Auditing remittance efficiency over time

Key Takeaway

• Reducing FX markup from 150p/USD to 20p/USD creates a meaningful long-term compounding advantage. The difference becomes substantial when investing consistently over decades
• FX conversion efficiency matters far more than most people realise
• At higher volume Level 4 works very well. At lower volume, Level 1 with promotions may work better. Always pick an option that has lower transaction cost
• Speed of deployment matters as well, especially when there is high volatility

Notes:

• 10p/USD markup means 10 paise per USD markup