Loan by NRI/PIO to Indian relative resident

[Vinay Sharma]

An NRI/PIO located at USA has made payment of ₹ 6 Lacs thru his debit card, directly to the account of car sellers for purchase of a car which is purchased in the name of his his real brother in India. The understanding is that this a interest free Loan to the Indian Brother and he will repay this loan by way of deposit of small amounts as per his convenience to his NRE/NRO accounts in India.

Queries

1- Should they sign a formal loan agreement for this purpose.

2- Any RBI or other approval required for entering into such transaction.

3- Is there any income tax obligation on any of the brothers.

4- Can the Indian brother deposit repayments into NRE account of the NRI/PIO

5- Can the USA brother repatriate this amount.

AI Summary

NRI's Car Purchase in India: Loan Agreement, RBI Approval, and Tax Queries Addressed An NRI/PIO in the USA paid 6 lakhs via debit card to purchase a car in India for his brother, intending it as an interest-free loan. Queries were raised about the necessity of a formal loan agreement, RBI approvals, tax obligations, and repayment methods. The response advised that payments should not be made directly via debit card, and the loan should not exceed three years with a maximum interest of 2% over the bank rate. Repatriation of the amount is not allowed, but repayment can be made to the NRO account and repatriated under specific FEMA regulations.