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I am a US permanent resident and I loaned some money to my father in law in India early last year. I transferred US dollars from my US bank account to my NRI (Non resident Indian) account (Indian Ruppess) in India and then transferred the money out to my father in law's account in India. The source for this money is my savings from my salary and I have already paid US taxes on it. Now he is ready to pay the money back and I was wondering how I could bring it back to US. Since i have already paid taxes on it, will I be asked to pay taxes again in US or in India? How can I show that this is the money I loaned to my father in law?

All your help is really appreciated.

Thank you.

  • The money being repaid by your f-i-l can go only into an NRO account even if you sent the money from an NRE account. If you did not have a loan agreement duly stamped and registered, it may be hard to convince the Indian income tax authorities that the money is not just a gift from f-i-l or rental income to you etc and so taxes are due. It is also just a little harder to convert money in an NRO account into US dollars. Funds in an NRE account are readily convertible, but deposits into an NRE account must be from nonIndian funds. Indian rupees cannot be deposited into an NRE account. – Dilip Sarwate Sep 8 '14 at 3:16
  • How about using bitcoin as the intermediary? In the USA, you can receive gifts up to $14,000 USD: irs.gov/Businesses/Small-Businesses-&-Self-Employed/… – Sun Sep 8 '14 at 16:36
  • @dilip-sarwate, are you saying that a gift from FIL is taxable? – GJ13 Oct 6 '14 at 21:30
  • @GJ13 I do not have direct knowledge as to whether a gift from a father-in-law is taxable in India or not. Dheer's answer, which you have accepted, says gifts from f-i-l to s-i-l are tax-free, and since he is a lot more knowledgeable about taxes in India, I would suppose that it is not. – Dilip Sarwate Oct 6 '14 at 22:37
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From an India Tax perspective, someone may add the US aspect;

As you have given your Father-In-Law [FIL] some money, and do not have loan documents, the amount your FIL has repaid will be treated as GIFT to you. Gift Tax by Father-In-Law to Son-in-Law is 100% tax free and there is no limit of amount.

The funds can be got into NRO account and not in NRE account. There is limit of USD 125,000 that can be reptriated outside India. Refer the RBI Q&A 56

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India and the United States have a tax treaty, so if you pay tax in the United States, YOU DO NOT HAVE TO PAY TAX IN INDIA OR VICE VERSA. Your father in law can wire the money back to your US bank account if you provide him with your routing number and swift code. He might be charged a little fee depending on the amount he is sending(It is usually Rs.1000/-), but once the money comes back it is absolutely tax free. If it is a lot of money, you might get an inquiry, but assuming you have already payed taxes on it, it should reflect on your W2, so you do not have to pay any further taxes. Cheers!

protected by Chris W. Rea May 7 '16 at 3:49

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