I am an NRI with some cash balance maintained in my Savings Accounts (NRE and NRO accounts) in India. The source of funds is remittance from my salary income received outside India. I have paid tax on this salary income abroad (via TDS in that country). Interest received on the funds in NRO account is also taxed in India via TDS.
Now, I am facing two problems:
1. My NRO and NRE accounts become inactive/dormant from time to time as I don't have regular transactions in India.
2. As an NRI, the minimum term of FDs is 1 year. I don't want to lock up the funds for so long, so I am currently leaving this cash in my savings account, which is giving me very little interest
I am considering transferring these funds to my parents (either father or mother, or partially to both) and they can then make payments for any of my ad hoc expenses that arise in India. They can also keep the funds in FDs for shorter duration and at higher interest rate as senior citizens.
What are the tax implications in this sort of transfer?
1. Will my father/mother have to pay tax on the amount that I transfer to them?
2. Should I transfer this as a gift or as a loan (maybe interest-free) so they have proof of origin of the funds? If yes, does this need to be done via gift deed or a loan agreement on stamp paper?
3. If my father/mother return the money to me at a later date, will I need to pay tax on this as I will be the recipient of funds?
4. Considering tax implications for me (e.g. if parents return the money in the future), is it preferable to document my transfer to parents as a gift or is it better to do it as a loan to my parents (so that any future transfer from them to me will be clearly seen as a return of this amount)?
5. Is there any limit to the amount of cash that can be transferred like this?
Thank you for your guidance on this.
CAclubindia
