Master prompt
Source of funds + FEMA / LRS compliance for §21 Germany applications
Trace fund flow India to Germany: RBI Liberalised Remittance Scheme (LRS USD 250K/FY), ODI for corporate route, 15CA/15CB, blocked-account interplay, and Ausländerbehörde documentation.
GermanyInvestorFEMALRSODISource of funds15CA 15CBRBI
Map the source-of-funds documentation chain for [CLIENT_NAME]'s §21 AufenthG application. Ausländerbehörden and IHKs increasingly scrutinise fund provenance; Indian-side FEMA compliance must align with the German-side documentary record.
CONTEXT
- Client: [CLIENT_NAME]
- Total deployment: [TOTAL_FUNDS_DEPLOYING_EUR]
- Source: [PRIMARY_SOURCE]
- Flow: [BANK_FLOW]
- Route: [CORPORATE_ROUTE]
- ITR status: [INCOME_TAX_STATUS]
- Existing offshore: None
§1 — TWO COMPETING REGULATORY REGIMES
India side — RBI / FEMA (Foreign Exchange Management Act 1999):
• Outflows of foreign currency by Indian residents are regulated
• Two relevant schemes:
— Liberalised Remittance Scheme (LRS): personal route,
USD 250,000 per individual per financial year (1-Apr to
31-Mar)
— Overseas Direct Investment (ODI): corporate / regulatory
route for "Bona Fide Business Activity" abroad
• TCS (Tax Collected at Source) on LRS remittances above
INR 7 lakh / FY: typically 20% on most heads (5% for
education/medical, 0% under specific cases) — verify current
Finance Act // 2026-05 — verify
• Form 15CA / 15CB required for most foreign remittances
Germany side — Ausländerbehörde + Bank KYC + GwG (Geldwäschegesetz):
• Geldwäschegesetz (anti-money-laundering) compliance for
Geschäftskonto opening at any German bank
• Ausländerbehörde wants traceable fund chain documenting
"Finanzierung gesichert" (§21(1)(iii) AufenthG)
• Steuerberater wants clean chain for German tax filings
§2 — PERSONAL LRS ROUTE (most common Indian individual founders)
If [CORPORATE_ROUTE] is personal LRS:
Limits:
• USD 250,000 per individual per Indian financial year (Apr-Mar)
• Spouse and adult children can each remit USD 250K — multi-
person aggregation allowed
• For [TOTAL_FUNDS_DEPLOYING_EUR] under USD 250K equivalent: single
LRS sufficient
• For [TOTAL_FUNDS_DEPLOYING_EUR] above: multi-FY phased remittance
OR family-aggregation OR ODI route
Approved purposes under LRS Schedule:
(i) Private visits / tourism
(ii) Gift / donation
(iii) Employment abroad
(iv) Emigration
(v) Maintenance of close relatives abroad
(vi) Travel for business / conference / training
(vii) Medical / education abroad
(viii) INVESTMENT IN EQUITY / DEBT INSTRUMENTS abroad
(ix) Acquiring immovable property abroad
(x) Studies abroad
For §21 AufenthG founder funds, the typical LRS heads are
(i) emigration, (viii) investment, OR (ii) maintenance.
CRITICAL: LRS cannot be used for "remittances by Indian residents
for any prohibited purposes" — e.g., margin trading, lottery, FATF
non-compliant jurisdictions. Germany is fully compliant; no issue.
Documentation chain:
(a) Form A2 (BBR Reporting) at remitting bank
(b) Self-declaration on LRS purpose
(c) PAN card mandatory
(d) ITR copies (last 3 FYs) — banks increasingly insist
(e) Form 15CA Part D (for LRS purposes that fall within Rule
37BB exceptions; otherwise full 15CA + 15CB)
(f) Source-of-funds proof at remitting bank: ITRs, salary slips,
capital-gain certificates, gift deeds, inheritance docs
§3 — CORPORATE ODI ROUTE (Indian Pvt Ltd founder)
If [CORPORATE_ROUTE] is ODI via Indian Pvt Ltd:
Regulatory base:
• RBI Master Direction on Overseas Investment (as updated, current
version from Aug-2022 with FEMA OI Rules + Regulations)
• Limit: Indian company can invest up to 400% of its net worth
abroad under Automatic Route in foreign subsidiary
• Beyond Automatic Route: Approval Route via RBI
• Foreign entity (German GmbH) becomes a Wholly Owned Subsidiary
(WOS) or Joint Venture (JV) of the Indian parent
Process:
(a) Indian Pvt Ltd board resolution authorising ODI
(b) Valuation certificate from Chartered Accountant (for non-cash
contributions)
(c) Form FC (Foreign Investment Reporting) filed via AD Bank
(d) ODI proceeds remitted to German bank for GmbH share capital
deposit (Stammeinlage) or working capital
(e) UIN (Unique Identification Number) issued by RBI for the
foreign entity
(f) Annual Performance Report (APR) due each year by 31-Dec
(g) Audited financials of foreign entity filed annually
When ODI better than LRS:
• [TOTAL_FUNDS_DEPLOYING_EUR] exceeds individual LRS limits
• Founder wants to retain Indian Pvt Ltd as parent for tax /
family-business / future-exit reasons
• IP / contracts staying with Indian parent, licensed to German sub
• Operating company exists in India already
When LRS better than ODI:
• Single individual founder, no existing Indian operating company
• Funds well under USD 250K
• Cleaner Ausländerbehörde narrative (personal capital deployed)
§4 — 15CA / 15CB COMPLIANCE
Form 15CA: Declaration by remitter under Income Tax Act §195
Parts:
Part A — Remittances < INR 5 lakh aggregate / FY (simplified)
Part B — With AO certificate / order under §195(2), §195(3),
§197 — rare
Part C — Remittances > INR 5 lakh / FY with 15CB CA certificate
Part D — Remittances not chargeable to tax in India (Rule 37BB
exception list)
Form 15CB: CA certificate under §195 — required for Part C
For [TOTAL_FUNDS_DEPLOYING_EUR] flows:
• Personal LRS for emigration / investment: typically Part D
(Rule 37BB(3)(ii) exempt list)
• ODI capital contribution: Part C + 15CB usually required
• Verify with CA — case-specific application of Rule 37BB
§5 — DOCUMENTARY CHAIN — GERMAN SIDE
The Ausländerbehörde / IHK file should establish:
(a) ORIGIN: how [CLIENT_NAME] earned / acquired the funds in India
• Salary slips + Form 16 (TDS certificate) for salaried employee
• Sale agreement + capital-gain return for property sale
• Pvt Ltd share-sale agreement + valuation certificate
• Gift deed + donor's source-of-funds (parent's ITRs)
• Bank loan sanction letter + collateral details
(b) HOLDING: that funds were held in client's name in India
• Bank statements 12 months minimum
• Fixed deposit certificates
• Mutual fund / demat statements
(c) TRANSFER: how funds moved from India to Germany
• SWIFT / wire transfer advice from remitting bank
• Form A2 copy
• Form 15CA / 15CB copies
• Receiving German bank credit advice
• If using Wise / Western Union / similar: full transaction
history with reference numbers
(d) DEPLOYMENT: how funds are now deployed in Germany
• German Geschäftskonto opening confirmation
• GmbH Stammeinlage receipt from notary (for company-formation
capital)
• Premises lease deposit receipts
• Initial business setup expenses
§6 — STAMMEINLAGE PAYMENT MECHANICS (GmbH route)
If founding a GmbH (cross-reference de-investor-gmbh-ug-formation):
• Minimum Stammkapital EUR 25,000
• At least EUR 12,500 paid in before Handelsregister filing
• Paid into the Geschäftskonto of the GmbH (in Gründung — "i.G.")
• Bank issues Einzahlungsbestätigung confirming receipt
• Notary cites this in Handelsregister application
• Funds may then be deployed for business purposes immediately
For UG (Unternehmergesellschaft):
• Share capital can be as low as EUR 1
• 25% of annual profits compulsorily reserved until EUR 25K reached
• Practically, EUR 1,000-5,000 typical seed Stammkapital
§7 — BANK ACCOUNT OPENING SEQUENCE
The chicken-and-egg problem (Geschäftskonto needs Handelsregister; some
banks accept pre-Handelsregister "i.G." status):
Banks that accept GmbH i.G. account openings (working in 2026, verify):
• Deutsche Bank — traditional, in-branch
• Commerzbank — traditional
• Postbank — traditional
• N26 Business — digital, faster
• Holvi (defunct in DE? // 2026-05 — verify)
• Penta — digital, business-friendly
• Qonto — digital, France-based but operating in DE
• Fyrst (Postbank-affiliated) — digital
• Sparkasse local branches — Bundesland-specific
Pre-arrival personal banking (for capital staging):
• N26 — Indian residents can open with passport (verify current
KYC requirements)
• Wise (formerly TransferWise) — multicurrency account with EUR
receiving details
• Revolut — multicurrency
• Deutsche Bank — needs in-person Schufa typically; harder pre-arrival
NOTE on "Blocked Account" (Sperrkonto):
• Sperrkonto at Sutor Bank, Deutsche Bank, Fintiba, Expatrio is
typically required for STUDENT visas (§16), not for §21 founder
• Founders use a regular Geschäftskonto (business account), not a
Sperrkonto
• Confusion is common — clarify with client
§8 — TAX RESIDENCY TRANSITION
[CLIENT_NAME] becomes potentially German tax resident upon establishing
residence and centre of life in Germany. Key thresholds:
India:
• Resident: 182+ days in FY OR 60+ days in FY + 365+ days in
previous 4 FYs (with carve-outs for Indian citizens leaving for
employment / business)
• Once non-resident: Indian-sourced income still taxed in India,
world income outside scope
• RNOR (Resident Not Ordinarily Resident) status applies for first
2-3 years typically post-return — favourable for returnee scenarios
Germany:
• Unbeschränkt steuerpflichtig (unlimited liability) once Wohnsitz
(registered residence — Anmeldung at Bürgeramt) AND/OR centre
of vital interests
• World income taxable in Germany
• Foreign-tax credit via India-Germany DTAA (Doppelbesteuerungs-
abkommen, signed 1995)
India-Germany DTAA highlights:
• Capital gains on Indian property: taxable in India
• Salary income: typically taxable where services rendered
• Dividends: 10% withholding both directions
• Business profits: PE-based attribution
• Tie-breaker for dual-residency: centre of vital interests,
habitual abode, nationality, mutual agreement
§9 — ITR FILING POST-MIGRATION
If [INCOME_TAX_STATUS] shows recent ITR history:
• File ITR for FY of departure showing residential status change
• Disclose foreign assets if Indian Resident (ITR-2 Schedule FA)
• Once Non-Resident: ITR only on Indian-sourced income (rent, capital
gains on Indian assets, dividends, interest)
• In Germany: file Einkommensteuererklärung annually; declare Indian
income with foreign-tax credit
§10 — DISCLOSURE OBLIGATIONS
Indian side:
• Aadhaar update with overseas address (optional but recommended)
• PAN remains valid
• Bank accounts in India: convert resident savings to NRO; can open
NRE / FCNR
• Annual reporting of foreign-assets if Indian Resident under ITR
Schedule FA
German side:
• Anmeldung at Bürgeramt within 1-2 weeks of arrival
• Auslandskonto-Meldepflicht: declare Indian accounts > EUR 12,500 to
Finanzamt // 2026-05 — verify threshold
• Annual Einkommensteuererklärung
• For Freiberufler: USt-Voranmeldung quarterly initially
§11 — RED FLAGS
Flag any of:
(a) Lump-sum deposit in Indian bank just before LRS without history
— banks will hold; Ausländerbehörde will question
(b) Multi-party transfers (friend's account → client's account →
LRS) without clean gift-deed paper
(c) Cash-based source claims not reflected in ITRs
(d) Discrepancy between declared ITR income and capital deployed
(e.g., USD 250K LRS by individual whose ITRs show INR 8 lakh
total income last 3 years — implausible)
(e) Use of LRS for purposes inconsistent with stated heads
(f) Failure to file 15CA / 15CB when required
(g) Routing through FATF non-compliant jurisdictions
(h) Crypto-linked sources without proper Indian-side tax treatment
(Indian Income Tax Act §115BBH applies 30% on Virtual Digital
Assets)
(i) Hawala / informal-value-transfer methods (criminal liability
under both Indian PMLA and German GwG)
§12 — DELIVERABLE: SOURCE-OF-FUNDS NOTE FOR AUSLÄNDERBEHÖRDE
Draft a 1-2 page Herkunftsnachweis (source-of-funds memorandum) for
the Ausländerbehörde file, structured:
¶1 — Identity + total deployment + source heading (one line)
¶2 — Origin: how earned in India, with supporting docs cited
¶3 — Holding: bank/instrument with balances at relevant dates
¶4 — Transfer: LRS / ODI mechanism, dates, amounts, references
¶5 — Deployment: where funds are now in Germany
¶6 — Indian-side regulatory compliance summary (ITR, 15CA/15CB,
LRS purpose head, RBI ODI UIN if applicable)
¶7 — Statement that funds are clean, traceable, and lawfully held
¶8 — Annexure list
End with: "DRAFT source-of-funds memorandum + flow map — for Rechtsanwalt für Migrationsrecht + Indian CA + Steuerberater review. Indian FEMA / LRS / ODI compliance sits outside German lawyer scope; coordinate with Indian counsel. Verify current LRS limits, TCS rates, ODI thresholds, and 15CA/15CB rules against the latest RBI Master Direction and Indian Finance Act before remittance. Not legal or tax advice."Unlock the vault to see the full prompt