I have been a non-resident for the last ten years. I am buying a property in India for investment purposes. I have an NRO account in India. Can I borrow from my relatives and deposit the same in my NRO account? Is it necessary to show proof of the source of the funds I am getting from relatives to NRO? Are there any tax regulations I need to comply with?
Under the provisions of FEMA non-resident Indians and persons of Indian Origin (POI) are allowed to buy residential properties in India without having to take any specific permissions from the Reserve Bank of India.
Under the FEMA provisions, there are some restrictions on the money that can be credited to an NRO account. As per the RBI guidelines gifts and loans received from specified relatives can be deposited in the NRO account. The amount that each of the specified relatives can lend you is restricted to 2.50 lakh USD every year. The specified relatives are those relatives that are specified under the Companies Act, of 1956.
The following persons are included in the definition of specified relatives for this purpose. It includes members of your HUF. It also includes your spouse, your parents & grandparents, parents of your spouse, your siblings and their spouses, your children and their spouses. Even it includes your grandchildren and their spouses.
So you can borrow from the above relatives. There are no tax implications in respect of loans taken from your relatives but the income tax department can ask for the sources of funds lent by your relatives. So it is advisable to obtain such documents as bank statements, and copies of ITR well in advance while borrowing the money.
Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.
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Updated: 25 Nov 2023, 10:56 AM IST