Q580. Bank asking purpose of

money sent to India from Germany

Question: I am a Indian Born person who changed his nationality 7 years ago from Indian to German. I have OCI card from India and my wife is Indian national. I have NRE account in India. In two Weeks I am going to India. To fulfil my needs in India I borrow some money( Friendly Loan ) from my 2 German Friends ( aprox 7000 euro , 5000 euro one and 2000 euro from second ). Due to safety I requested both the Friends to remit the money to India in my NRE account. They remitted the money from their bank A/C to my bank A/C in India. Now my bank is asking me to clear the purpose of this Money. I told my Bank that this is a friendly Loan but Bank is not accepting this term. the bank manager told me, I should write that" THIS IS A GIFT" Please suggest me, what should I do? Is gift for me in India from foreigner is Taxable ( I am also a Foreign National ) With warm Regards Answer: Banks are required to follow guidelines set by the RBI. They probably have a set of reasons that are acceptable when it comes to a third party sending funds from abroad to a bank account in India. Money laundering is a big concern today for Governments worldwide and any transactions of money above a certain amount, as set by the authorities, coming into a bank account where the account holder is not the remitter, may require that the account holder provide the reason for such a transfer. Gift may be one such acceptable norm that allows the bank to complete the required paper work and stay in compliance of rules and this may be the reason they have asked you to specify the transfer as a gift. Funds sent to NRE accounts for whatever reason are not taxable. Two foreigners sending a large amount of money to an account in India where the account does not belong to them, would definitely cause concern to a bank in India. Perhaps telling the bank the money is a loan from two friends and adding the reason why you got the loan or how the money would be used may have been more appropriate.