Are NRIs allowed to take loans from their siblings in India?
—Name withheld on request A resident individual is permitted to provide a rupee loan to any of their siblings in their NRO (non-resident ordinary) account under the LRS (Liberalized Remittance Scheme) framework. However, the loan arrangement is subject to certain conditions such as minimum tenure, end use negative list, mode of repayment, etc. One of the conditions also state that the loan amount cannot be remitted outside India.
Additionally, a resident individual is not permitted to lend to any person outside India in foreign exchange. Therefore, unfortunately you won’t be able to receive loan in any manner from your sibling who is a resident in India. However, you may accept the funds by way of a gift from your sibling.
Your sibling can gift the funds to you in your NRO account in India or in your foreign bank account whichever suits you. Either mode of receipt would come under the LRS framework that will be applicable to your sibling. Also, the transfer of funds would be subject to TCS (tax collected at source) payment in India for your sibling and such TCS can be claimed by your sibling as a credit towards eventual tax liability.
The transaction would not be subject to tax in India for you since gifting between siblings does not attract tax in India. Harshal Bhuta is partner at P.R. Bhuta & Co. Chartered Accountants.Milestone Alert!
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