Q657. Income tax query on NRIs source of funds to buy property in India

Question: Sir, Thanks for all ur efforts in putting up imprtant info for NRIs world over in ur website.

I have been living and working in Singapore for over 5 years now. However I have'nt had much knowledge regarding the

taxation,banking processes requirements for an NRI. Seem to be getting some idea as I 've been browsing ur

website.Thanks again.

At the moment ,I need ur guidance wrt the following:

In 2009 I bought a small property in India for which I had to pay the buyer as cheque.

As I had been working in Singapore,I had taken the Singapore dollars to India and changed it to INR from a Govt approved

money changer in India.

I deposited about 10 lacs(INR) in an Indian bank (as cash which I had got from the moneychanger) and then paid the buyer

as a cheque.

Now I have recieved a query from the Inidan Income Tax Dept asking for the source of the cash.

How should I be answering this query?

Your help is very much appreciated in this matter.

Thanking you,

Raj J

Answer: Money laundering is a concern for governments across the globe. Generally, banks in just about every country are bound by their countries law to notify tax authorities of cash deposits over a certain set amount of money. A cash deposit of Rupees 10 lakh would naturally raise a red flag! Since the tax authorities have sent you a notice, not responding and ignoring the income tax query, I doubt will result in the Indian tax department simply closing your file. NRI buying property in India is not an illegal act. Had the money been sent by you through banking channels to India, then source of funds would not have been a problem. Cash transactions are indeed questionable. If as you say, you took Singapore dollars to India; exchanged the money at a government approved money changer in India, this act would not be illegal, you could have taken any amount of money in cash to India. However such an act does raise some questions: • In the year 2009, I beleive the exchange rate for a Singapore dollar for Indian rupees was about Rupees 34 for 1 Singapore dollar. So you would have taken about 29,400 Singapore dollars to India in cash to get converted to Rupees 10 lakh. o This would lead to the question, did you declare this amount of cash on arrival in India? This is because the currency was way over the $5000 US cash limit allowed without a Currency Declaration Form. If you indeed did make this declaration, then you can provide this as proof. o On the other hand if the cash was taken to India, over a period of time, in amounts of less than $5000 denominations, then the currency declaration form would not come into play. You should consult a chartered account in India, explain the exact method and circumstances on how the money was taken to India from Singapore and seek guidance on how to respond to the query you have received, from the income tax department. To see a sample of Currency Declaration Form click HERE.

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Q657. Income tax query on NRIs

source of funds to buy property in

India

Question: Sir, Thanks for all ur efforts in putting up imprtant info for NRIs world over in ur website. I have been living and working in Singapore for over 5 years now. However I have'nt had much knowledge regarding the taxation,banking processes requirements for an NRI. Seem to be getting some idea as I 've been browsing ur website.Thanks again. At the moment ,I need ur guidance wrt the following: In 2009 I bought a small property in India for which I had to pay the buyer as cheque. As I had been working in Singapore,I had taken the Singapore dollars to India and changed it to INR from a Govt approved money changer in India. I deposited about 10 lacs(INR) in an Indian bank (as cash which I had got from the moneychanger) and then paid the buyer as a cheque. Now I have recieved a query from the Inidan Income Tax Dept asking for the source of the cash. How should I be answering this query? Your help is very much appreciated in this matter. Thanking you, Raj J Answer: Money laundering is a concern for governments across the globe. Generally, banks in just about every country are bound by their countries law to notify tax authorities of cash deposits over a certain set amount of money. A cash deposit of Rupees 10 lakh would naturally raise a red flag! Since the tax authorities have sent you a notice, not responding and ignoring the income tax query, I doubt will result in the Indian tax department simply closing your file. NRI buying property in India is not an illegal act. Had the money been sent by you through banking channels to India, then source of funds would not have been a problem. Cash transactions are indeed questionable. If as you say, you took Singapore dollars to India; exchanged the money at a government approved money changer in India, this act would not be illegal, you could have taken any amount of money in cash to India. However such an act does raise some questions: • In the year 2009, I beleive the exchange rate for a Singapore dollar for Indian rupees was about Rupees 34 for 1 Singapore dollar. So you would have taken about 29,400 Singapore dollars to India in cash to get converted to Rupees 10 lakh. • This would lead to the question, did you declare this amount of cash on arrival in India? This is because the currency was way over the $5000 US cash limit allowed without a Currency Declaration Form. If you indeed did make this declaration, then you can provide this as proof. • On the other hand if the cash was taken to India, over a period of time, in amounts of less than $5000 denominations, then the currency declaration form would not come into play. You should consult a chartered account in India, explain the exact method and circumstances on how the money was taken to India from Singapore and seek guidance on how to respond to the query you have received, from the income tax department. To see a sample of Currency Declaration Form click HERE.

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