We, family owned Indian Unlisted Public Ltd Co ,have a wholly owned subsidiary and gave loan to Mauritiis based WOS . As per agreement, 5% interest to be charged. However, this is not done in books of accounts since 2022. WOS is loss making unit and ultimately even if interest is charged, the loss would go up and it will be passed on to Indian Parent. Both are related party. Can Indian Co waive interest on loan on its own? Is there any violation of FDI/FEMA? Kindly guide.
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FDI-FEMA-Interest on Loan to Mauritius based wholly owned subsidiary by Indian Unlisted Public Co
Replies (1)
FDI/FEMA Regulations: Loans from an Indian company to a foreign WOS are subject to FEMA regulations.
Under FEMA, Indian companies can extend loans to foreign WOS if compliant with RBI guidelines on external commercial orrowing ( ECB) or overseas investments.
Waiving interest might raise questions on the nature of the transaction and compliance with arm's length principles.
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