The income tax department has launched a verification exercise into suspicious outward foreign remittances identified over the past three years. These remittances are estimated to exceed Rs 30,000 crore. V Shunmugam explains what led the department to flag these transactions
l What is the income tax dept investigating?
THE INCOME TAX (I-T) department launched a nationwide verification exercise on August 18, 2026 into suspicious outward foreign remittances identified over the preceding three years. The exercise covers about 394 entities, including 117 entities located in land-border states and 36 professionals who had issued Form 15CB certificates for such transactions.
The investigation began by focusing on fictitious charitable trusts allegedly providing accommodation entries
in exchange for fake donations. Ground checks revealed that many remitters were non-filers or had reported turnover figures inconsistent with the amounts remitted. The declared purposes—such as freight, software imports, and consulting services—are difficult to verify and easy to falsify.
Subsequent media reports citing government sources estimated that remittances linked to entities under examination exceeded Rs 30,000 crore, with several entities connected to jurisdictions including Mauritius, the UAE and Singapore.
l What are the laws governing remittances?
IN TAX AND foreign exchange contexts, remittances encompass any cross-border payment such as payments for imports, freight, software licences, or consulting services. The Foreign Exchange Management Act is the main legislation. Under the Rupee Drawing Arrangement, there is no limit on personal receipts, but trade receipts are limited to Rs 15 lakh per remittance transaction. The Money Transfer Service Scheme, part of the cash channel, permits transactions of up to $2500 (maximum 30 remittances per beneficiary).
Foreign contributions to non-profit organisations are regulated by the Foreign Contribution (Regulation) Act. The Liberalised Remittance Scheme allows resident individuals to remit up to $250,000 a year. Companies use trade and overseas investment rules instead. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, governs the treatment of money after it enters the country.
l How much is moving & who counts it?
INDIA’S PRIVATE TRANSFER receipts reached $155.12 billion in 2025-26, up 14.5% from $135.43 billion in 2024-25, as per the Reserve Bank of India (RBI). The World Bank reports India’s personal remittances at about $150.71 billion in 2025, a 9.5% rise from $137.67 billion in 2024, making it the world’s largest remittance recipient. Outward remittances under the Liberalised Remittance Scheme (LRS) were $28.98 billion in 2025-26, down about 2% from $29.56 billion in 2024-25. Travel was the largest category, while spending on studies abroad declined nearly 21%.
Meanwhile, investments in equity and debt rose 56%, property purchases increased 64%, and deposits grew about 7%, indicating a shift toward investing or parking funds overseas, though travel still dominates outward remittances. These flows are reported through different channels: Authorised dealer banks submit foreign-exchange and LRS transactions to the RBI, while the I-T department, Financial Intelligence Unit–India, and Directorate of Enforcement oversee or examine transactions for tax compliance, suspicious activity, and law enforcement under relevant foreign-exchange and anti-money-laundering laws.
l Why is the I-T dept interested?
IN 2020, TAX collected at source was introduced to align what individuals send abroad with their declared income, serving more as a data collection tool than a revenue generator. Unreported income must be remitted abroad to be useful and, once it leaves, it becomes a foreign asset. Hidden foreign assets invoke the 2015 Act, which carries more severe consequences than typical penalties. Therefore, the last point at which the domestic system can track the money is during outward payments. Currently, the government has access to various data sources: bank statements dating back to 2016, automatic information exchange with other countries up to 2017, and this year, approximately 25,000 individuals were flagged for discrepancies between their returns and foreign holdings.
l What should an honest remitter do?
A SMALL GROUP of chartered accountants issued a disproportionate number of certificates, prompting the Central Board of Direct Taxes (CBDT) to question whether proper due diligence was followed. The certifier is now under investigation, not just a witness.
For everyone else, the advice is straightforward: keep the invoice, contract, and proof of purchase; ensure the sent amount matches declared income; reconcile the Annual Information Statement with bank withdrawals; disclose foreign assets on your return; and respond to notices rather than ignore them. While broad scrutiny can include legitimate transactions, keeping thorough documentation helps support your case.
The writer is partner, MCQube
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial advisor before making investment decisions.
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