Interest on borrowed capital from individual

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This query is : Resolved

Mitesh (Querist)

18 August 2013 Respected Sir,
If my wife borrow money from me to buy a shop or office and then she rent it, will interest paid to me will deductible from her rental income? What is the paperwork for me to lend money to her?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

18 August 2013 You issue a cheque and the entry should pass through the bank account. At the year end charge interest and claim the interest paid by your wife against rental income it is allowable. There should be some repayment of interest every year so that it looks like actual payment of interest on loan

Mitesh

Mitesh (Querist)

24 August 2013 Is interest paid on loan taken from relatives is eligible for deduction in Income tax or loan taken from any financial institution or bank only is accepted for incometax deduction? What are the procedures and paper work to follow to borrow money from relatives?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

25 August 2013 Interest from relatives also eligible for deduction. lender need to give the certificate of interest with their PAN numbers and purpose of loans

Mitesh

Mitesh (Querist)

25 August 2013 Is there any agreement format which needs to be stamped with details or any other paperwork?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

25 August 2013 loan agreement is need to be executed with the mention reason of loan. particularly lender need to show the interest income in their income tax returns

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