Indian Banks Block NRIs from Repatriating Profits from LLPs

In recent months, some Indian banks have blocked NRIs from repatriating profits from LLPs. This is a significant change, as profits from LLPs were previously considered current income and could be repatriated without restriction.

There are a few reasons why banks may be blocking the repatriation of profits from LLPs. One reason is that some banks are now classifying profits from LLPs as capital account transactions. Capital account transactions are subject to an annual limit of $1 million, while current account transactions are not.

Another reason why banks may be blocking the repatriation of profits from LLPs is that they are concerned about abuse. In the past, some NRIs have used LLPs to circumvent foreign exchange regulations. For example, some NRIs have sold assets in India and then used the proceeds to set up an LLP. The LLP would then sell the assets and repatriate the proceeds to the NRI, without the NRI having to go through the proper foreign exchange channels.

It is unclear whether the recent changes in bank policy are due to pressure from the Reserve Bank of India (RBI) or if they are simply a response to abuse by some NRIs. However, NRIs who want to repatriate profits from LLPs will need to be more careful in the future.

Way Forward for NRIs

There are a few things that NRIs can do to ensure that they are able to repatriate profits from LLPs without difficulty. First, they should make sure that the LLP is properly registered with the RBI. Second, they should ensure that the profits from the LLP are genuine and not the result of any abuse. Finally, they should be prepared to provide documentation to the bank to support their claim.

By following these steps, NRIs can help to ensure that they are able to repatriate profits from LLPs without difficulty.

Here are some additional details about the recent changes in bank policy:

• The changes in bank policy were first announced in March 2023.
• The changes apply to all NRIs, regardless of where they live.
• The changes are intended to prevent abuse of foreign exchange regulations.
• NRIs who want to repatriate profits from LLPs will need to provide documentation to the bank to support their claim.

If you are an NRI who is considering setting up an LLP, it is important to be aware of the recent changes in bank policy. By following the steps outlined above, you can help to ensure that you are able to repatriate profits from the LLP without difficulty