Home |Tax returns filing | I am an NRI based in Dubai. My friend’s daughter is getting married and I want to lend him INR 5 lakh. What will be the tax liability for this?

I am an NRI based in Dubai. My friend’s daughter is getting married and I want to lend him INR 5 lakh. What will be the tax liability for this?

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Kamaljeeth Kamaljeeth
Answered on February 05,2020

I am assuming that you are a tax resident of UAE and your friend is a resident in India. Giving a loan to your friend who is resident in India may have certain implications for him and for you as well.

The first thing to consider is whether this loan will be in Indian or foreign currency. You will have to comply with the Reserve Bank of India’s restrictions on borrowing and repatriation made in forex if the loan is in foreign currency.

With the implementation of The Banning of Unregulated Deposit Schemes Ordinance 2019, there are certain restrictions on deposits accepted, which are not regulated. However, it has been clarified that borrowing of money by individuals from their relatives or friends for personal reasons won’t attract penal provisions of the ordinance

Remember that cash transactions over INR 20,000 are specifically prohibited under the Income-Tax Act.

Also, if your friend is planning to repay the loan with interest, you will have to report such income in your tax return in India, assuming your taxable income in India exceeds  INR 2.5 lakh.

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