Foreign currency

Originally posted by : CA Hardik Bunha
	Tax payer is a NRI. He holds bank account in Hongkong. He transfer Rs.55 lakh to his father's bank account. Father shows Rs.55 lakh as unsecured loan and audited. tax payer wants to file ROI now. Issue (1) IT department will raise query from which source tax payer earn income? (2) Rs. 55 lakh taxable in india or not?

Borrowing in Foreign Exchange by Residents 

• The loan is free of interest
• The minimum maturity period of the loan is 1 year.
• The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender. 

Rs.55Lakhs is not taxable in the hands of either Father or Son. Son is Non-Resident and it is not Indian Income since first receipt is not in India (from the point of view of Tax payer being son). Coming to father, even son gifts it, it is not taxable as father come under the definition of "Relative" for Income tax purpose and Gift from relative is exempt irrespective of amount involved. Unless it is unexplained by your father the source from which he arrives Rs.55Lakhs, Department can not treat it as Unexplained Investment and can not treat it as Income. In my point of view, Department can not go to verify genuiness of source of Income of son