Hi,
A close friend of mine requires a 50 lakh loan for his business. I have decided after much thought to help with his venture as he requires to the money to expand his product line .
On my part, I have decided to lend the money from my Overdraft account. Even though its a friend , the agreement is that interest will be paid. So my questions is
- What is the Income Tax Rules on maximum interest that can be levied contractually? I was thinking 15%
- My OD interest is 12% so I assume I only pay tax on the 3% margin ?
- I worked as a salaried proffesional, so I dont produce a balance sheet, will I need to maintain any other documentation
- For the Loan I would make an agreeement and pay the amount to him via RTGS. The Interest would be paid back every 3 months , which will go towards paying my OD interest. The 3% "profit" will be clubbed to my income head and taxed accordingly .
Let me know if this is correct or if need to maintain any other documentation
Please help me with your response
Regards
CAclubindia
