Is it legal to give money(USD) to a friend in USA and take equivalent amount in India?

My friend is planning to buy a house and he wants some money in USA. He has the equivalent amount in India.

Can I pay him here and take equivalent amount in India? We both are on H1-B visas.

Is it legal?

  • What is the dollar amount of the exchange? It's probably legal in any case, but the implicit question relates to how much scrutiny it will invite. – NL - Apologize to Monica May 7 '15 at 20:13
  • Thanks for the response. It is ~20K USD. Is there any document/forms i have to fill or my friend need to fill? – Raj Kumar May 7 '15 at 20:26
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    Why would you think it to not be legal? Are you asking about the legality in the US (no currency restrictions) or in India (has currency restrictions)? – littleadv May 8 '15 at 5:31
  • @littleadv This is know as hawala and is illegal in India and in some US states too. – DumbCoder May 8 '15 at 13:24
  • @DumbCoder are you sure this is hawala? As the transaction which is taking place is of all white money and will be bank transactions both in US and India? – Raj Kumar May 8 '15 at 15:38

In short getting funds converted outside of the Banking channel is illegal in India as Foreign Exchange is still regulated.

If you show only a credit from your friend's NRE account to your NRO account [note it can't be your NRE account], it would be treated as GIFT and taxed accordingly, else you would have to show it as loan and pay back. You may show the payback in USD. But then there is a limit of Fx every individual can get converted/repatriate out of India and there is a purpose of remittance, all these complicate this further.

  • you said it is illegal in India, is it illegal under US laws ? – puzzled Jan 20 '20 at 15:58

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