Borrowing

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SALONI LOGANI (Querist)
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22 December 2014 I want to take some money from a friend to invest in my business (government contractor). I will pay him back the money with interest. I want to know the best practice I can do so that both the parties get benefit in taxation and all. My second query is if u suggest to take as unsecured loan should I deduct tax on the interest amount??

Amol S Joglekar

Amol S Joglekar (Expert)
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22 December 2014 01. You can accept it in cheque. Pay the interest.

02. Deduct TDS only if the TDS provision is applicable to you.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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22 December 2014 Remember, if you taking loan in CASH payment should be made in CASH only i.e. out of Book Entry.

If you taking loan by bank entry ensure that it be routed though by account payee cheque only and repaid in account cheque only.

Otherwise if you violate any of the above suggestion like received in cash and paid by cheque or vise-versa
You will be liable for penalty for violating section 269SS or 269S

Further, it is also advisable to take a loan from relative (gifting to relatives is not covered under income tax) of person who does not have income or income in minimum slab rate. so that tax liability in hands of receiver is also minimum.

Hopes you get the cruse

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Rupesh Jain

Rupesh Jain (Expert)
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23 December 2014 you have to take by banking channel like cheque, DD, RTGS, NEFT ETC. if you are proprietorship business and in last year your receipts exceeds rs. 1 crored then you have to deduct the tds if your intt exceeds rs. 5000/- in a year to one person tds will be @ 10%

if you are firm /pvt ltd company then you have to deduct the tds if intt above rs. 5000/-@10%

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