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December 2024

Gifts and Loans — By and To Non-Resident Indians – II

By Harshal Bhuta | Naisar Shah, Chartered Accountants
Reading Time 18 mins

Editor’s Note:

This is the second part of the Article on Gifts And Loans — By and to Non-Resident Indians. The first part of this Article dealt with Gifts by and to NRIs, and this part deals with Loans by and to NRIs. Along with the FEMA aspects of “Loans by and to NRIs”, the authors have also discussed Income-tax implications including Transfer Pricing Provisions. The article deals with loans in Indian Rupees as well as Foreign Currency, thereby making for interesting reading.

B. LOANS BY AND TO NRIs

FEMA Aspects of Loans by and to NRIs

Currently, the regulatory framework governing borrowing and lending transactions between a Person Resident in India (‘PRI’) and a Person Resident Outside India (‘PROI’) is legislated through the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (‘ECB Regulations’) as notified under FEMA 3(R)/2018-RB on 17th December, 2018.

PRIs are generally prohibited from engaging in borrowing or lending in foreign exchange with other PROIs unless specifically permitted by RBI. Similarly, borrowing or lending in Indian rupees to PROIs is also prohibited unless specifically permitted. Notwithstanding the above, the Rese

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