Navigating international money transfer for education: 5 critical things to know

International education has its appeal. It can add to the student’s academic achievements and help them get ahead in life. Moreover, if you or your child secures admission to an Ivy League institution, there’s no looking back.

If you or your child have secured admission to an international university, congratulations! The hard part is done. Now, the next step is funding the degree and living expenses, for which you might be using your savings or an education loan. But how to transfer this money internationally?

The answer is simple - through international money transfer. This is where IDFC FIRST Bank steps in as a reliable partner with its Pay Abroad service, simplifying the process of outward remittance and making international education more accessible and financially efficient.

Understanding international money transfers
 

An international money transfer involves sending funds from India to another country. The Liberalised Remittance Scheme (LRS), specified under the Foreign Exchange Management Act (FEMA), allows international money transfers from India for different purposes. As a resident individual, you can transfer up to $250,000 in a financial year. However, if funds are specifically being remitted for education purposes, this limit can be exceeded by providing proper documentation.

Thanks to technological advancements, international money transfers have become very easy, and you can even transfer funds from the comfort of your home. However, certain factors should be considered when transferring funds abroad. Let’s explore what these factors are.

5 Factors to consider in international money transfer
 

Whether it is sending funds to cover tuition fees or accommodation expenses, here are five essential things to consider –

  1. Documentation

Students may require multiple time of remittances overseas depending upon the country of their travel –

1. GIC payment–

If you have applied for a Canadian educational institution, you will be required to maintain CAD 20700 in a Guaranteed Investment Certificate (GIC), ensuring sufficient liquidity for your expenses throughout the year. A predetermined amount is transferred from the GIC account to your checking account every month.

2. Blocked account–

In case you are seeking a degree in Germany, you are required to deposit EUR 11208 with a bank in Germany, which works similarly to the GIC account in Canada.

3. Payments of fees to college/university through educational intermediaries –

Many colleges/universities are tied up with educational intermediaries like Flywire, Convera, PayMyTuition, etc., to pay the university fees. Here, the payment is settled with the intermediary, which in turn pays out to the college/university.

4. Payments towards hostel/accommodation ––

Students looking to travel overseas for educational purposes look for safe and affordable accommodation overseas. This is where wire transfers become helpful in paying for these living expenses.

5. Payments for day-to-day expenses of the students –

Living expenses of students studying overseas include groceries, transportation, leisure activities, etc., and are categorised as under education purposes. Here, the funds are transferred by a close relative to the student’s personal checking/savings account overseas.

Proper documentation must be provided for international money transfers to ensure a smooth process. For education remittances, a student’s admission letter or fee structure from the foreign institution/university serves as proof of purpose. Some of the important documents include –

1. Passport of the student (in case of purpose – Travel for education)

2. Offer letter from the university (in case the beneficiary is other than the university or college)

3. Cost estimate from the university (only if the amount of remittance exceeds USD 250000 for the financial year)

4. Bank details of the university, etc.

Pro tip – Select a mode that allows the fastest and most secure money transfer. Keep the required documents handy to ensure the funds are transferred without delays.

2. Costs involved

A transfer fee applies to almost all modes of international money transfer. The fee depends on the mode selected and the financial institution’s pricing policies. Some of the types of fees that might be charged on the transfer are as follows –

Pro tip – These fees and charges are an added cost, and you will need to make a provision for them. To save on these costs, compare fees across banks and remittance providers before transferring. Look for providers that offer low fees, competitive exchange rates and no hidden charges. IDFC FIRST Bank also offers special promotions or discounts for education remittances, so it’s worth checking for any available offers to reduce costs.

3. Exchange rates

The most important factor when transferring funds abroad is getting the best exchange rates. The exchange rate determines how much INR is exchanged for foreign currency.

Education costs can be significant. Even a small difference in the exchange rate can result in major savings when transferring such considerable amounts.

Pro tip – Compare the exchange rates across financial institutions that allow international money transfers. Choose an institution offering the best rate for maximum savings. For instance, IDFC FIRST Bank offers attractive exchange rates, which can help you save on foreign transfers.

4. Applicable taxes

When you remit funds abroad, you may incur a tax collected at source (TCS) on the funds remitted. The rules of TCS are as follows –

1. No TCS is levied if you remit up to ₹7 lakhs in a year for education-related expenses

2.  If the remittance is more than ₹7 lakhs, the rate of TCS will depend on how the funds are sourced and will be –

- 0.05% if the funds are sourced through a loan from a financial institution

- 5% if the funds are not sourced through a loan

3. For TCS, education-related expenses include the following –

- Tuition fee

- Cost of the ticket for commuting from India to the country where the university is located (if paid in foreign currency)

- Other living expenses, such as accommodation, food, transport, etc.

Pro tip – Assess the amount of funds you have to send. If funded through an education loan, the TCS rate is typically lower for education-related remittances. Consult a tax professional if you’re uncertain about tax implications.

5. The right financial institution

Choosing the right financial institution for international money transfer from India is essential for the following reasons –

1. underlying costs

2. exchange rates

3. Effortless and convenient process involved

4. Ease of availability of education loans, if needed, etc.

Pro tip – Besides the charges involved, compare the financial institution's digital efficiency. Choose a bank that offers a seamless online platform for convenient transfers.

IDFC FIRST Bank: Your partner for seamless fund transfers
 

IDFC FIRST Bank's Pay Abroad service offers a comprehensive solution to make international money transfers seamless for you. With a focus on competitive exchange rates, zero transfer fees, and a user-friendly digital interface, the bank ensures that every outward remittance is smooth, transparent, and cost-effective.

1. Competitive exchange rates

When transferring large sums of money for tuition and living expenses, even minor differences in exchange rates and fees can have a significant impact. IDFC FIRST Bank offers some of the most competitive exchange rates in the market, ensuring that you get the best value for your money.

2. Zero processing fees

With IDFC FIRST Bank’s Pay Abroad service, enjoy zero processing fees on your remittances, ensuring every rupee goes towards your academic goals without hidden costs. Any intermediary charges involved in the transaction are absorbed by IDFC FIRST Bank.

3. Quick and secure transfers

Time is of the essence when making international payments. With IDFC FIRST Bank’s Pay Abroad service, you can be confident that your remittances will reach their destination swiftly and securely. The bank's robust digital platforms allow you to initiate transfers and track them in real-time at your convenience.

4. 24X7 seamless digital experience

IDFC FIRST Bank’s online banking and mobile make it incredibly easy to manage your international remittances. Starting from setting up beneficiaries, the entire process is designed to be user-friendly, reducing the burden on students and their families.

5. End-to-end tracking

IDFC FIRST Bank’s Pay Abroad service lets you track your outward remittance transactions end-to-end using the SWIFT GPI feature. This provides real-time updates and transparency, ensuring your funds reach their destination securely and efficiently.

6. Support for multiple currencies

With support for 14 currencies, students can easily remit funds to beneficiaries worldwide.

7. Dedicated customer support channel

IDFC FIRST Bank provides personalised assistance for all your international money transfer needs, ensuring prompt and reliable guidance.

With these facilities and conveniences, you can remit money anytime, anywhere, and save on costs.

Fund higher education without hassles
 

With multiple modes of international money transfers that facilitate online remittances, sending money abroad has become simpler. However, keep the pointers above in mind when remitting funds abroad so that you know the process and the costs involved.

Choose the IDFC FIRST Bank Pay Abroad feature and enjoy competitive exchange rates on forex services. Plus, with a seamless online platform and 24X7 availability, you can get secure money transfers without hassles.