Interest Free Loan From An Individual For A Charitable Trust Exempted U/s. 80G(5) of the I.T.Act

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This query is : Resolved

Quick Summary

A charitable trust, registered as a society and exempt under Section 80G(5) of the Income Tax Act, is considering accepting an interest-free loan of Rs. 5 Lakh from an individual. The principal will be repaid over time. The trust's bylaws permit such loans. The key questions are whether this should be recorded as a 'Loan' in the financials and if there are any restrictions under the Income Tax Act regarding accepting this interest-free loan.

Bapun Dasgupta

Bapun Dasgupta (Querist)

16 January 2023 This a charitable trust Registered as a Society and is exempted u/s. 80G(5) of the Income Tax Act, 1961 (the "Act"). An individual wants to give an amount of Rs. 5 Lakh to this trust free of interest. The principal amount has to be repaid to him over a period of time.

The bye laws of the Society permit the Society to accept amounts from outside parties with / without securities.

Queries :
1) Should the amount received by the Society be shown as "Loan" in it's Financials ?

2) Is there any restriction under the Income Tax Act for the Society to accept this loan of Rs. 5 Lakh ?

Shall be thankful if a reply is received quickly.

Best Regards.