Tax on foreign transaction

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An Indian citizen is seeking advice on a US friend's proposed FDI in India, specifically concerning the transfer of $10 million USD. The friend initially tried to send money to the Indian citizen's SBI account, but faced RBI restrictions. The funds were then transferred to an online HSBC account in the Indian citizen's name, and the question is whether transferring this to their regular SBI account is legal and what taxes apply. Advice suggests setting up a company with both individuals as directors, highlighting manufacturing sectors like lithium-ion batteries and solar panels as good investment opportunities with government support and tax benefits. While the transfer could be seen as a gift, it's advised against due to high tax rates. Transferring funds through banking channels is deemed legal and not money laundering, and FDI is encouraged.

smit shah

smit shah (Querist)

31 May 2020 Sir i am Smit , my friend from USA wants to do FDI in india so which sector is good for investment in India? he wants to transfer 10MUS$ in my account but due to RBI monetary restriction his HSBC bank in USA have refuse to transfer his 10mUS$ in my account in S.B.I, so he created to my online account in his HSBC BANK USA , he transfer his 10MUS$ money from his HSBC bank regular account into My HSBC bank online account now his bank (HSBC) says that i will transfer this money from my online account at HSBC bank into my regular saving account in SBi through online way. So sir is this transaction is legal in India, as per Income tax laws and banking laws ,if it is legal what percentages of TAX will be levy on this transaction by Income tax department.?
Note- Sir i am Indian citizen not NRI and my friend is USA citizen)

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

31 May 2020 Sectors of manufacturing of lithium-ion battery and solar panels are the best for investment.
Start a company with you and your friend as directors lot of opportunities and government support and tax benefits available.
Such remittance will be treated as gift and taxed at slab rates upto 30%.

smit shah

smit shah (Querist)

09 June 2020 but sir it is not sent by my relatives/mother/father /wive although this transaction treated as giftt? can i transfer this money from my online account in HSBC bank USA into sbi saving account , if this will done can i prosecuted for money laundering? Note - I am not NRI .

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 June 2020 Transfer of money through banking channel will not be treated as money laundering.
Don't opt to treat it as gift high tax payable.
Foreign direct investment is encouraged. Start a company get investment from your friend and include him as non resident director.

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