Forex Trading through NRI

Can anyone tell me what are the legal and tax implications if I trade forex market through my NRI brother’s or friend’s account and he sends me profits regularly through bank transfer??

@DB1494 There would be applicable taxes that you would have to pay according to the tax bracket that you fall into. Any profits that you make from this sort of arrangement would be considered as a business income and would be taxed.

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Since it is someone else’s account you are not liable to pay taxes on profits. But they are, unless it is in Dubai or Singapore or some other country where there’s no capital gains tax. If they send you money Income Tax could ask you why they are transferring the amount to you, so you should have an answer. If your blood relative is sending you money there is no tax implication. If you are being transferred money by your friend or non-friend relative, then there is a tax liability over INR 50k. In any case you must know, and I’m presuming you do, that Indian residents cannot trade in margin instruments abroad. It’s prohibited under FEMA. So why do it? You have so much opportunity here within the Indian markets, so why look elsewhere?

Since trades are happening through your NRI brothers account, and if he is allowed to trade forex in the country of residence, there is no legal implications. But this will still not be in sync with spirit of law set by RBI/SEBI which disallows Indian residents to trade forex or any kind of derivatives.
If you anyways decide to trade, the money transferred to your brother could be shown as a loan and if you take back principal+ returns, you’d have to pay taxes on your profits as per the tax slab you fall in. Since he is your brother, you can show this as a gift to him and a gift back (which has no tax liability). But your brother will have to pay taxes on the profits in country of residence as per the tax slabs there.

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Thank you for replying. I am looking into this prospect because for me EOD trading is the only feasible option as I have a full time job. But the overnight gaps are something which I am not able to digest and do not want to risk with them. If i go without F&O trades, I have only one option ie to trade the cash segment which means long only trades and that too without any help of collateral margin. What i have seen is 1 lot of Futures with most of the liquid F&O stocks excluding Indices carry a risk of 15-20k per trade if EOD swing trading is done which is too much considering a capital of 5 lakhs. Also, more often than not, stock will gap open the day u wanted to buy /sell it. This sends Risk to Reward completely out of equation. Options for most of F&O stocks are too illiquid to trade properly with any sort of combination strategies. That’s why I was looking for a 24hr continous market where atleast overnight risk can be avoided and mini and microlots can be bought for good volatile pairs to keep risk down. The only thing to consider will be spikes which can be dealt with a stop loss.
I would request @nithin sir and other experienced traders who take EOD swings to help me get this concept down and let me know how much of this is true and if there’s any way of dealing with this overnight gapping situation apart from arranging a capital upside of 10 lakhs (i know options can be bought to offset risk, but will I do it everyday till my position is open??)