Treatment in Accounts in case of NRE A/c

This query is : Resolved

sachin (Querist)
Follow

15 October 2007 "A" a non resident in india has a NRE A/c and his wife "B" is resident in India and runs a buisness ..A has given a Power of Attorney to B to operate his account. B as given power of attorney pay her buisness expens from NRE A/c i.e payment made directly from A a/c for her buisness..
I want to Know wat is 1.Nre A/c 2. Purpose of Nre a/c 3.this expenses paid by B from A's a/c wat will be tax implication 4. Fema Regulation 5. wat will be benefical wheather to show as loan given by A to B or Gift given by A to B..nd case of gift wheather clubbing provision will applicable??Pleze tel me any beneficial mode to assessee within Fema regulation??Any case laws or circulars??

R.V.RAO

R.V.RAO (Expert)
Follow

21 October 2007
NRE ACCOUNT IS EXPLAINED BELOW AS GIEN IN www.nritaxservices.com(WHICH YOU MAY ALSO VISIT FOR ALL YOUR OTHER QUERIES)
Designated Currency Rupees
Nature of Bank A/c Current Account Saving Bank Account, Recurring, Fixed Deposit Account
Operating the Account -
Who is eligible to open the Account? Non-Resident Indian
Joint Account Opening of these with a resident is not permissible. However, joint account in the name of two or more non-resident individual may be open.
Who can operate the Account? Non Resident Indian Account holder. Also the Power of Attorney holder only for local payments. The Power of Attorney holder cannot give gift, repatriate or transfer to another FCNR/NRE account.
Whether Nominations permitted? YES In favour of any Non Resident Indian or Resident Indian. On death of Account holder, NRI nomiee is allowed repatriation. However, resident nominee has to take RBI approval for remittance of funds outside India for meeting the liabilities of the deceased person or for similar purpose.
Transfer of Funds between one Non Resident Indian to another Non Resident Indian YES
Source of Depositing Money Inward Foreign Exchange remittance Funds from Local source of a repatriable nature.Income from specified Assets, which is repatriable.Can also deposit personally unlimited Foreign Currency notes or Travellers Cheques brought to India as Traveller.Refund of application/ earnest money together with interest if any on the deposits paid by Housing Board or Private Agencies may also be allowed to be credited provided the original payments was made out of NRE/FCNR account of holder or from Direct remittance from outside India through normal banking channels and authorised dealer is satisfied about the genuineness of the transaction
Rate of Interest The interest rates are revised frequently. At request, the current interest rates shall be made available.
Taxation of Interest Income Tax free
Loans / Overdraft in RupeesAgainst security of funds to Account holder in India. Permitted for personal purposes or for business activity (subject to certain conditions and its end utilisation).
Repayment From inward remittance or from local Account i.e. NRE/FCNR/ NRO/ RFC account.
Loans / Overdraft in ForexAgainst security of funds to Account holder in India. Permitted for personal purposes or for business activity (subject to certain conditions and its end utilisation).
Liquidity Premature withdrawal is allowed in all the Accounts
Third Party Loans against Security of funds. Loans/overdraft can be granted to resident third parties.
Loan outside India Authorised dealers may allow their branches / correspondents outside India to grant any type of fund/non-fund based facilities to or in favour of Non-resident depositor, or to third parties.
Tax Deducted at Source on Interest NO
Repatriation Principal ALLOWED
Repatriation of Interest ALLOWED
Change of resident status of Account holder from Non-Resident to Resident. On becoming resident in India, the Account should be redesignated as resident account or the funds held in these accounts may be transferred to the RFC account at the option of the account holder.
Miscellaneous An account may be opened in the name of an eligible NRI during his temporary visit to India against tender of foreign currency travellers cheques or foreign currency notes and coins tendered, provided the authorised dealer is satisfied that the person has not ceased to be a non-resident.
Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, upto a limit of Rs. 50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within the said period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE / FCNR accounts.
I SHALL TAKE A LITTLE MORE TIME TO ANSWER YOUR OTHER QUERIES.BUT PL. COME BACK AFTER YOU VISIT THE SITE I SUGGESTED ABOVE WITH ANY QUERIES REMAIN UNCLARIFIED .ALSO PL . VISIT www.taxworry.com
REGARDS,
R.V.RAO