My husband who is a resident india as he travels frequently to India. I am NRI as we have maintained that status. Since he travels a lot he couldn't maintain his NRI Status. I have following questions: 1. Does he automatically qualify to become NRI since I am an NRI? 2. He has a bank account in Dubai and so do I , every month he transfers 10000 DHS to me from his bank account which is funded by his salary account in India. He uses LRS to send the money to his bank account in Dubai. 3. I use the money for day to day expenses, some part to fund my trading account in Dubai ( I do F&O as well) and also used it to fund my company expenses - partially capital as well. Is there any restriction on that? Also, if incorrect what can I do now so we dont default with taxation?
1. In India the residential status of an Individual is dependent on number of days of stay in India. If your husband has crossed 182 days stay in Indi, he shall be resident of India during the year
2. He can send the money through LRS to his relatives. But one needs to ascertain the purpose code under which remittance is made as well as the accounts to which he is remitting.
Regards
NRI Status for Your Husband: NRI status is determined individually based on the number of days spent in India. Your husband cannot automatically qualify as an NRI based on your status. He must stay outside India for more than 182 days in a financial year to qualify as an NRI.
Transferring Money through LRS: Your husband can legally transfer money from India to Dubai using the Liberalized Remittance Scheme (LRS) for various purposes, including maintenance of relatives. It's important to ensure the transactions are correctly classified under the appropriate purpose code as per RBI guidelines.
Usage of Funds in Dubai: The funds transferred can be used for daily expenses, investment in trading accounts, and company expenses in Dubai. However, maintaining clear records and understanding the tax implications in both India and Dubai is essential.
To ensure compliance and avoid any taxation issues:
For detailed, personalized advice, consider a phone consultancy.
Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.
Thank you.
Shubham Goyal
Hi Shubham will be happy to leave a review. I have following clarification on your response: 3. Usage of Funds in Dubai: Since he got LRS and gave the money to me. He got it under the head family maintenance, and I invested in company here and stock markets, will that be acceptable? If not, then should I return back to his account in Dubai?
1) No. It depends on the no. of days he is in India during the relevant previous year and the purpose of each visit outside India
3) In the hands of husband, clubbing of income would be applicable
Also to check whether condition of 180 days for repatriation is applicable or not?
1 Your husband does not automatically qualify to become NRI since you are an NRI. He becomes a NRI based upon the number of days stayed in India and /or outside India. The test of residency is dependant upon the number of days stayed in India during the current financial year and previous financial years and further on the nature of income earned also. Even if he is a Resident he may be Resident but not ordinarily resident also. His tax liability will depend upon his residential status.
2 A resident holding a bank account outside India is subject to compliance with the RBI regulations.
He can transfer money to you to your account in Dubai under LRS as per RBI regulations for your family maintenance and savings.
3 If you are investing in stock markets on your own from your own savings from the funds remitted by your husband within reasonable limits, normally there should not be any issue. However, if the funds remitted by your husband are used substanilly for investment in securities, then it is advisable to give the purpose code as capital transactions for investment. This is to avoid any issues in FEMA.
You need not return your savings to your husband and you may retain them for your own personal or investment purposes, as long as the investments out of the savings are within the reasonable limits. Though there is no specific limit, probably an investment upto 10% of funds transferred by you should not be an issue.
1. No. The days rule should apply to determine the residential status.
2. Fine. There is a limit upto which amount may be transferred under LRS
3. In such a case, clubbing of income provisions may apply.
I assume you are talking about tax resident status here.
The tax residential status is purely dependent on the persons physical presence in India, hence your status do not have any relevance for his taxability.
I believe his salary income is tax deductible in India and he has paid tax on the same. The amount remitted from his bank account in India to his bank account in Dubai does not have any tax implications in India. The amount remitted to you is not taxable in India. But the catch is whether clubbing provisions are applicable. Ideally, to avoid tax implication at higher rate, a person remits money to close relative like father, mother etc. Then the father invests the money in stock or FD etc....In such case, while the amount given as gift to father is not taxable, but the dividend or interest income earned from that money given is technically taxable in the sons hand. Same is applicable when funds are given to wife and she earns income.
Practically, if the income earned by you is not much and depending upon your residential status and tax filing in INdia...you may take a practical approach. It can be discussed further depending on your actual status and amount involved.
Please find answers
1 No he is not automatically considered as NRI since status is based on individual capacity
2. There is no restriction on sending funds to your family member abroad and end use of that fund in the hand of relative is not relevant for transferor
For the funds transferred to you from your husband under the Liberalized Remittance Scheme (LRS) with the purpose of family maintenance, and subsequently invested in Dubai's stock market and company expenses:
Compliance with LRS and FEMA: Using funds for investments derived from LRS transfers meant for family maintenance is generally permissible within reasonable limits. Ensure these investments align with the guidelines of the Reserve Bank of India (RBI) regarding foreign investments by residents.
Reasonable Investment Limits: There's no explicit need to return the funds to your husband's account in Dubai, provided the investments made from these transfers are within reasonable limits and justified as personal investments from family maintenance remittances.
Documentation and Justification: Maintain detailed records of the fund transfers and investments to justify the use of funds if required. It helps in demonstrating compliance with the intended use under LRS.
In essence, your investments in Dubai using funds received under LRS for family maintenance should remain compliant with RBI guidelines. There’s no immediate requirement for fund reversal, assuming the investments are reasonable and well-documented.
For detailed, personalized advice, consider a phone consultancy.
Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.
Thank you.
Shubham Goyal