Summary of this article
Passport, visa, PAN required for foreign currency purchase
Air ticket and travel proof commonly required by banks
Forex cards involve issuance, reload and conversion charges
Travellers planning foreign trips usually buy foreign exchange in cash, forex cards or travel cards prior to their departure. Banks and authorised dealers (ADs), however, ask for certain documents from the traveller before processing these transactions, according to Reserve Bank of India (RBI) regulations.
All currency conversion transactions are regulated by the Foreign Exchange Management Act (FEMA), 1999, and the Liberalised Remittance Scheme (LRS). The LRS allows a resident individual to remit up to $250,000 in a financial year for specific permitted purposes, including travel, education and medical costs.
Main Documents Required
The main documents required may vary, depending upon conditions, such as the purpose of visit, the amount of foreign currency being purchased, and types of forex products being purchased.
The basic document required to acquire foreign currency is a valid passport. Self-attested copy of the passport is also mandatory by many banks and currency exchange partners.
Travellers are generally required to apply for a visa for the country they wish to visit. Forex providers could also request forex itinerary, travelling plans, hotel reservations, or evidence of travel, for those who are granted visas on arrival.
International air tickets, and for students who plan to study abroad, university admission letters, fee schedules or student ID documents often serve as important documents prior to issuing forex cards and processing remittances.
Under the current Income Tax rules, a valid Permanent Account Number (PAN) is mandatory for all foreign currency purchases and outward remittances under RBI’s Liberalised Remittance Scheme (LRS). The PAN tracks the annual $250,000 remittance limit. Transactions are tax-free up to an aggregate threshold of Rs 10 lakh per financial year, beyond which a mandatory 20 per cent tax is collected at source (TCS).
Some banks might also require Aadhaar card, driving license or any authoritative valid document as address and identity proof.
Understanding Forex Fees And Charges
Aside from preparing documents, travellers should also research forex charges before buying foreign currency or topping up prepaid cards.
According to industry estimates, the issuance fee for forex cards cost around Rs 100-500, and Rs 50-100 per reload. ATM withdrawal charges in most foreign countries cost around $2 and $2.50 per withdrawal, which again depends upon the card issuer.
Those who use international credit and debit cards should also be aware of forex mark-up fees. The industry average for mark-up fees generally lies between 1 per cent and 3.50 per cent of the transaction value, along with 18 per cent goods and services tax (GST) on the fee itself.
One fee that travellers are often unaware of is Dynamic Currency Conversion (DCC). This occurs when overseas merchants offer to convert the transaction amount into rupees during checkout. Travellers should always try to pay in local currency rather than rupees, because DCC may levy additional conversion fees ranging from 3-5 per cent.
When travelling abroad, travellers can use a mix of cash, forex cards and digital payment options to avoid payments hassles abroad.
