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Tax on money borrowed from father

06 June 2015

Hello Experts,

I have borrowed Rs. 25 Lacs from my father which he got from his retirement funds. I Have deposited this amount in my Home Loan OD account to save the intrest.

what income tax rules has to say about it and how the taxation would happen.

Thanks in advance

Tanveer

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16 Replies

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 06 June 2015

You should refer gift provisions of IT Act

CMA Poornima Madhava (CMA) (13097 Points)
Replied 07 June 2015

Since your father has already paid tax on retirement funds, the same cannot be taxed again in your hands. @ bhargav: gift provisions are not applicable for loans

Aditya Sharma (finance advisory) (377 Points)
Replied 07 June 2015

do not show it as Borrowed Money/ Loan....MAKE A GIFT DEED AND SHOW THIS AMOUNT AS A GIFT FROM YOUR FATHER...ANY SUM OF MONEY RECEIVED AS A GIFT FROM RELATIVE SHALL BE EXEMPT

Gnanashekar.R (Chartered Accoutant) (64 Points)
Replied 07 June 2015

May be clubbing provision will attract

Tarunjay (GM) (42 Points)
Replied 07 June 2015

No tax involved. Show it as gift and it's exempt

dhruvika (Account Executive) (32 Points)
Replied 07 June 2015

No application of clubbing provision,as he is not a minor.how you know tax is already paid by father on his retirement fund..

PRAKASH SHARMA (MANAGER) (21 Points)
Replied 07 June 2015

Pls treat this money as a gift

priyesh (student) (86 Points)
Replied 07 June 2015

1.) since it is a genuine loan no tax provision attracted for acceptance of loans. (2.) interest saved might attract clubbing provision but since leader is father, clubbing will not be attracted. (3.)however you to see the compliance of sec 269ss

kartik bansal (student) (31 Points)
Replied 07 June 2015

Treat it as GIFT... Gift from relatives is exempt from income tax. Defination of relative includes linear ascendent or descendent .

Ganesh B (Accountant) (101 Points)
Replied 07 June 2015

If it was not a retired funds as mentioned in original query,

how will be the consequences?

And if the funds are already tax paid income how it will be treat

with out mention as a gift fund.

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 07 June 2015

@ Purnima Ji.

I was suggested to take such amount as gift from his father & then he can pay it for their outstanding loans.

I guess I was failed to communicate my point. As retirement income are already tax paid so no worry & also you can take it as loan then same has to be piad for outstading loans. At the end it will nothing but book adjustments.

thanx.

Sourabh Jain (Credit Manager) (62 Points)
Replied 07 June 2015

Make gift deed as in blood relationship it is exempt

Nataraj D (CA) (31 Points)
Replied 08 June 2015

Treat this as a gift and the same shall be exempt from tax

Ashok J (CA Final) (880 Points)
Replied 08 June 2015

Hi All

BORROWAL cannot be treated as GIFT..only the amount gifted through a registered gift deed is gift...since the amount is deposited in home loan account, you can treat it as repayment of int and principal as per HL repayment sch...