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Interest Paid to Relative @ 18%

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(Querist)
03 July 2009 Dear
freinds

My client paid Interest on unsecured loan @ 18% p.a the case under scrutiny and ITO is allowing 12% only can any one tell me is there any circuler, notication or caselaw about maximum rate of Interest we can pay to relative
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CA Nitin Wadhwani

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CA Nitin Wadhwani (Expert)
03 July 2009 There is no circular as such, but generally the rate of interest varies from Interest-Free to 18% depending upon credit market and commercial expediency.
If AO is disallowing, either you prove why such rate is expedient or appeal before CIT(A) against the order of AO.
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Ratan Sharma

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Ratan Sharma (Expert)
03 July 2009 Agree.
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Aditya Maheshwari

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Aditya Maheshwari (Expert)
05 July 2009 There is no circular stating the maximum rate interest can be paid. It depends on the credit market and commercial expediency and your should prove the same in CIT (A)
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