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Introduction
Sending money abroad from India often feels like a complicated process. Whether you’re an NRI, have sold property, or want to send money to relatives overseas, the maze of paperwork, declarations, and the dreaded 20% TDS (Tax Deducted at Source) can be overwhelming.
In such situations, you might hear about a quicker option: hawala. On the surface, it may seem like an easy way out. But here’s the truth: hawala is risky and illegal.
In this guide, we’ll break down what hawala is, why you should avoid it, and the safer, legal ways NRIs and others can send money abroad.
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What is Hawala?
Hawala is an informal money transfer system often used to send money between countries without involving banks or official channels. Here’s how it works:
- You give cash to a hawala operator in India.
- The operator provides you with a code or password.
- You share this code with the recipient in another country.
- The recipient uses the code to collect the money from the hawala operator’s counterpart abroad (minus a fee).
The key point? No money physically crosses borders. Instead, hawala operators balance their accounts by settling debts among themselves.
An Example of How Hawala Works
Imagine someone in India sends Indian rupees to a hawala operator. The operator’s counterpart abroad sends an equivalent amount in foreign currency to someone else in India. Over time, the operators reconcile these accounts.
Why Hawala is Risky
Using hawala may seem convenient, but it comes with serious dangers:
1. Links to Illegal Activities
Hawala networks are often tied to illegal operations like money laundering, drug trafficking, or terror financing.
If a hawala operator you used gets caught, your name may show up during investigations. Even if your intentions were innocent, you’ll have a tough time explaining your involvement.
2. No Paper Trail
Hawala transactions leave no official record. If questioned about the money’s source, you won’t have proof to show where it came from or where it went.
A Common Problem for NRIs
Many NRIs selling property in India receive part of the payment in cash, thinking it’s normal. But when authorities investigate, the lack of documentation can make it look like you’re involved in illegal activities.
3. Legal Consequences
Being linked to hawala transactions can land you in deep trouble, both in India and abroad. You could face:
- Frozen bank accounts.
- Legal action under anti-money laundering laws.
- Restrictions on future financial transactions.
4. Digital Hawala is Even Riskier
Hawala has gone digital, with operators using cryptocurrencies for anonymous transactions. This makes tracing funds harder and draws even more attention from law enforcement.
How NRIs Can Legally Send Money Abroad
Thankfully, sending money abroad legally isn’t as complicated as it seems. Here are the best ways to do it:
1. Selling Property as an NRI
If you’ve sold property in India, transferring the proceeds abroad is straightforward.
Already Paid Taxes? No Extra TDS Required
If you’ve cleared your taxes through a lower TDS rate or income tax filing, you don’t need to pay the additional 20% TDS to transfer the funds.
Steps to Transfer Funds
- Visit your bank and request the transfer.
- Complete the required forms and declare the source of the funds.
- Obtain a 15CA/15CB certificate from a chartered accountant. This confirms your tax compliance.
These steps ensure your transfer is transparent and compliant with Indian laws.
2. Sending Money to Relatives
When sending money abroad to relatives:
- Amounts up to ₹7 Lakh: No TDS applies.
- Amounts above ₹7 Lakh: A 20% TDS is deducted. However, this amount is treated as an advance tax and can be reclaimed when filing your income tax return.
3. Bank Wire Transfers
A bank wire transfer is the safest and most reliable way to send money abroad.
Why Use Bank Transfers?
- Transparency: Every step of the transaction is documented.
- Security: It’s compliant with legal requirements.
- Peace of Mind: Authorities won’t question these transfers.
Although banks may charge a small fee, the safety and clarity they offer are worth it.
Conclusion
Hawala may look like an easy option, but the risks far outweigh the benefits. From criminal investigations to frozen accounts, the consequences can be devastating.
On the other hand, legitimate channels like bank transfers might involve a little paperwork but guarantee transparency and safety.
If you’re an NRI or need to send money abroad, always choose the legal route. It might take more effort upfront, but it ensures your money—and your reputation—are protected.