fiogf49gjkf0d
This Circular permits a resident individual to give an interest-free loan with a minimum maturity period of one year under the Liberalised Remittance Scheme (LRS) to Non-Resident Indian (NRI)/Person of Indian Origin (PIO) close relative (means relative as defined in section 6 of the Companies Act, 1956) by way of crossed cheque/electronic transfer. The loan is subject to the following conditions:
(1) The loan amount must be within the overall limit under the LRS of US $ 200,000 per financial year. The lender has to ensure that the amount of loan is within the LRS limit.
(2) The loan can be utilised for meeting the borrower’s personal requirements or for his own business purposes in India.
(3) The loan must not be utilised, either singly or in association with other person(s), for any of the activities in which investment by persons resident outside India is prohibited, namely:
(a) The business of chit fund, or
(b) Nidhi Company, or
(c) Agricultural or plantation activities or in real estate business, or construction of farm houses, or
(d) Trading in Transferable Development Rights (TDRs).
Explanation: For the purpose of item (c) above, real estate business shall not include development of townships, construction of residential/commercial premises, roads or bridges.
(4) The loan amount must be credited to the NRO account of the NRI/PIO.
(5) The loan amount must not be remitted outside India.
(6) Repayment of the loan must be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)/Non-resident External (NRE)/ Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.
