I am an Indian citizen and I run a semi-drop shipping business. The details are:
- I deposited 10 lakh through cheque/cash into my Indian savings bank account (PAN not submitted during account opening; only form 60 was submitted). This money was borrowed from several relatives.
- I then deposit this amount into a 'Foreign online account' using my bank's debit card (billed as purchase). All my business activities are carried out using this 'Foreign online account.'
- In about a month, I make a profit in foreign currency of the equivalent of 2 lakh.
- I then withdraw 10 lakh from this foreign account back to my Indian debit card (billed as merchant refund). The 2 lakh profit is NOT withdrawn.
In short, technically, it looks like a purchase of 10 lakh and a merchant refund of 10 lakh (every month). Hence I am not making any profits. The money just keeps jumping between the Indian and foreign account every month. Can I get slapped by an income tax notice? If yes, then how do I proceed?
EDIT: The 'Foreign online account' is 'Neteller' http://www.neteller.com/ .This account can be opened by anyone having a debit card.