> I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months

From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide [here][1] and [here][2] for more details. There are some conditions;

> (iv) Scheme for raising loans from NRIs on repatriation basis  
>Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that -
> 
> a) the loan is free of interest;   b) the minimum maturity period of
> the loan is seven years;   c) The amount of loan is received by inward
> remittance in free foreign exchange through normal banking channels or
> by debit to the NRE/FCNR account of the non-resident lender;    d) The
> loan is utilised for the borrower's personal purposes or for carrying
> on his normal business activity but not for carrying on
> agricultural/plantation activities, purchase of immovable property or
> shares/debentures/bonds issued by companies in India or for
> re-lending.

Although it is mentioned as Seven years, this is revised to one year.

> Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account.

A repatriate-able loan as above can be deposited into NRE Account.

> Is there any illegality here doing such transaction?

No. Please ensure proper paper work to show this as loan and document the money trail.
 
> Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited?

This question does not arise.


  [1]: https://rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=157
  [2]: http://www.incometaxindia.gov.in/Documents/Provisions%20for%20NR/provision-for-non-resident-fema-borrowing-and-lending-in-rupees-regulations-2000.htm