Query related to FEMA and IT

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This discussion clarifies fund transfer rules under FEMA for Non-Resident Indians (NRIs). It confirms that a resident individual can transfer funds to their NRI spouse's savings account, even if it hasn't been converted to an NRO account, and that past transactions do not necessarily incur penalties. The advice also covers transferring funds for business purposes, distinguishing between loans and gifts, and confirms that relatives can use the Liberalised Remittance Scheme (LRS) to send gifts directly to an NRI's foreign bank account.

Ritik Jain

Ritik Jain (Querist)
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18 August 2021 A) Can Resident Individual transfer fund to his Spouse Resident Savings account (Spouse is NRI from last 1.5 year). She is not converted our saving account into NRO account. In Last 1.50 year they have done many transactions. It is mandatory transfer fund to his NRO Account?? B) If Same Resident Individual wants to transfer fund to NRI NRO A/C for the purpose for business of NRI. Can He provide the loan as a Loans & Advances (Assets) Or it will have to be considered as a gift.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 August 2021 A It's mandatory to convert it within 6 months as NRO account. You can transfer the funds no problem.
B In case of relatives treat it as gift.

Ritik Jain

Ritik Jain (Querist)
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19 August 2021 Ok Thanku so Much. Sir, In last 1.5 year many transactions have been done (approx. 10 lakh). According to FEMA will we have to pay any penalty.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 August 2021 No need to pay any penalty.

Ritik Jain

Ritik Jain (Querist)
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19 August 2021 Ok Thank You So much Sir for help & Kind response. and Sir can we directly transfer fund (Remit) to his foreign bank account, as a gift. Sir In the above case NRI Wants to setup business outside india. Therefore She is taking funds in the form of loan or gift from his relatives.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 August 2021 Yes, relatives can transfer funds to foreign account under liberalised remittance scheme (LRS) as gift.

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