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I am an Indian citizen and future UK postgraduate student (September 2023). To fund my studies and living expenses in the UK, I have applied to for a local government scholarship, the result of which will be available in Mid-August (too late for visa). In the event my scholarship application is not successful, my sibling, who is a US tax resident, has agreed to sponsor my studies.

Here's the gravy. To apply for a UK Student visa, I am going to need about 40,000 USD in my Indian savings account as evidence to show that I can support my studies and living expenses in the UK. I am going to ask my sibling to transfer this amount to me so that I can begin with my visa process. If my scholarship application is not successful, I will be using this amount to fund my studies. However, if my scholarship application is successful, I'd like to return the 40,000 USD back to my sibling in the US.

What I want to know is, is there any tax payable on the following money transfers:

  • tax payable to the US authorities by my sibling on the money transferred from US to India.
  • tax payable to the Indian authorities by me on the receipt of the same money transfer.

(and for returning money back to my sibling if my scholarship is successful):

  • tax payable to the Indian authorities by me for transferring the money back to the USA.
  • tax payable to the US authorities by my sibling on receipt the same money.

I know this is a very roundabout way of paying for my studies, but my circumstance calls for it.

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  • Similar to home purchases in the USA, it may be needed to show the source of recent funding in your account. You should verify that what you're considering doing won't violate a regulation WRT your visa. You can check this here.
    – GOATNine
    Jul 10, 2023 at 20:59

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As @GOATNine has rightly pointed out, you might be violating some visa regulations. So please make sure you are not putting your visa application in jeopardy by doing so.

As for taxes, I cannot comment on US tax laws on this. However, you will definitely pay taxes in India if you have to transfer the money back to your brother. All foreign remittances (with some exemptions), are subject to a tax of 5% for transactions exceeding INR 7 lakhs in a financial year. After Oct 1, 2023, this is going to jump to 20%. 40k USD easily exceeds INR 7 lakhs.

As for the incoming transaction being subject to taxes, the usual GST will apply along with any service fee charged by your bank. Also, if in the event the interest from all your savings account exceeds INR 10,000, then you are liable to pay tax depending on your tax slab. Since you are a student, I would speculate that you are not earning at the moment, or not so much that you have to pay taxes on it.

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