RBI places restrictions on borrowing, repatriation made in foreign currency

I am an NRI based in Dubai. My friend’s daughter is getting married and I want to lend him ₹5 lakh. What will be the tax liability for this?

—Arvind Krishnan

I am assuming that you are a tax resident of UAE and your friend is a resident in India. Giving a loan to your friend who is resident in India may have certain implications for him and for you as well.

The first thing to consider is whether this loan will be in Indian or foreign currency. You will have to comply with the Reserve Bank of India’s restrictions on borrowing and repatriation made in forex if the loan is in foreign currency.

With the implementation of The Banning of Unregulated Deposit Schemes Ordinance 2019, there are certain restrictions on deposits accepted, which are not regulated. However, it has been clarified that borrowing of money by individuals from their relatives or friends for personal reasons won’t attract penal provisions of the ordinance.

Remember that cash transactions over ₹20,000 are specifically prohibited under the Income-tax Act.

Also, if your friend is planning to repay the loan with interest, you will have to report such income in your tax return in India, assuming your taxable income in India exceeds ₹2.5 lakh.

I am an NRI based in Singapore. I have a flat worth ₹65 lakh in Bengaluru. I now wish to sell it and buy another property worth ₹1.2 crore. Do I have to pat tax deducted at source (TDS)? Can I apply for a nil TDS certificate?

—Sathish Pai

For NRIs, receipts from sale of your house property would attract TDS based on whether there are long-term capital gains (taxed at 20% plus cess plus surcharge) or short-term gains (taxed at slab rates plus cess plus surcharge).

If your gains are below the taxable limit or you make a loss, or a lower tax rate applies to you, you can apply for a certificate for nil or lower rate of TDS. Based on the certificate, TDS will be deducted by the buyer accordingly.

Archit Gupta is founder and CEO, ClearTax. Queries and views at mintmoney@livemint.com