GRANTING OF LOAN BY OCI TO HIS FATHER AND MOTHER

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Querist : Anonymous

Querist : Anonymous (Querist)

06 July 2011 KIND ATTN. SIR
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AN OVERSEAS CITIZEN OF INDIA HAVING A PROPERTY IN INDIA CONSTRUCTS BUILDING ALONGWITH HIS FATHER AND MOTHER AS CO-OWNERS OF LAND. FUNDS ARE PROVIDED BY THE OCI AND CO-SHARE RELATING TO FATHER AND MOTHER'S CONSTRUCTION COSTS ARE TREATED AS LOAN TO FATHER AND MOTHER. LATER ON FATHER AND MOTHER WILL REPAY THE LOAN TO THEIR SON BASED ON THE RENTAL INCOME FROM THE BUILDING.KINDLY CLARIFY THE IMPACT UNDER INCOME TAX ACT AND WHEHTER THERE IS ANY PROBLEM IN THIS ARRANGEMENT MAY BE CLARIFIED.
WITH REGARDS
CA.P.SHANGAR

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 July 2011 In this case the share in Rental Income will be taxable in the hands of OCI and he has to file his Income Tax Return if due to such income his Total Income goes beyond the taxable limit.
Father and mother can repay the loan by transferring the amount from their respective bank accounts to NRO a/c of the OCI towards the repayment of loan.

In spite of giving loan to Father and mother he can gift the amount to his parents if there is no tax on gifts in the country of his employment.

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2011 THANK YOU SIR , FOR THE TIMELY REPLY. IN THIS REGARD WE WANT TO CLARIFY WHETHER A NOMINAL INTEREST CHARGED BY THE OCI FOR THE UNSECURED LOAN GRANTED TO HIS FATHER AND MOTHER , CAN BE CLAIMED UNDER AS INTEREST ON BORROWED CAPITAL AS DEDUCTION U/S.24.
WITH REGARDS
CA.P.SHANGAR

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