USDT is a popular informal alternative to traditional remittance (SWIFT, Wise) for moving money abroad from India. The mechanics are simple; the legal/tax implications take care.
The flow
Step 1: Buy USDT on Indian P2P (Binance/Bybit). Step 2: Withdraw USDT to your own wallet on TRC-20 ($1 fee). Step 3: Send to recipient's wallet anywhere in the world ($1 fee, 1-3 minutes).
Total time: 30-60 minutes including P2P. Total cost: ~$2-3 in fees, plus the India premium baked into the P2P rate.
Tax
The buy of USDT is your acquisition. The send to abroad is technically a 'transfer' under VDA tax — gains are taxed at 30% under 115BBH.
If you bought and sent on the same day, gains are usually small (rate didn't move much). But the technical taxable event triggers, so keep records.
FEMA / LRS considerations
RBI's published view is that crypto isn't 'foreign exchange', so LRS limits don't apply. But the conservative interpretation (and one some CAs use) is that large outbound USDT is FEMA-equivalent and should be tracked under LRS.
If you send <$10k equivalent, you're effectively safe. Above that, conservative practice is to log and disclose as if it were LRS.
Practical alternative — Wise
Wise (formerly TransferWise) is fully regulated, FEMA-compliant, costs less than USDT for most retail amounts, settles in 1-2 days. For sums under ~$5k, Wise is usually cheaper after factoring in the India premium on USDT.
USDT becomes useful only when (a) recipient prefers crypto, (b) you're doing business-to-business cross-border at scale, or (c) speed and irreversibility matter more than rate.
Key takeaways
- USDT cross-border = simple flow but real tax + FEMA implications.
- 30% on gains; LRS treatment grey but conservative practice is to track.
- Wise often cheaper for small retail amounts.
- USDT wins on speed, irreversibility, and recipient flexibility.
