Fema guidance

Dear Rajesh,

Though you may structure the transaction in a manner to circumvent FEMA, the fact is that under LRS resident individuals are allowed to spend on $ 200K annually for investment outside India.

In my view, even if the husband is making the transfers on behalf of wife, you are still breaching the conditions under which the investment account was opened by the wife.

As far as income tax is concerned, as long as the disclosures are made in the return and appropriate taxes are paid, there should not be an issue.

For FEMA breach, it would be prudent to bring the issue to the notice of the AD and be guided by him for request for condonation.

Thanks Nikhil for your views...

further to existing situation If husband claiming that he has reptraiated the NRE funds to wife's invetment account overseas as his GIFT to her, then what will be the consequences ?

Dear Rajesh,

In my understanding, the wife is entitled to receive the gift by opening a Resident Foreign Currency Account with an AD.  There is no limit to the amount that can be received in this account as a gift.

But receiving the same in an overseas investment account should normally be a violation of FEMA.

Further, the $ 200,000 limit shall remain violated in any case as the wife, being a resident is not permitted to invest beyond this amount annually.  The way to circumvent this limit is to first move the money in RFC account and then invest outside India.  To quote RBI on this

" The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India."