Loan from a friend for business

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Hardik (Querist)
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12 September 2013 Hello,

I am borrowing an amount of Rs. 1Lac from my friend as loan for my business(its a proprietorship firm).
I want to know:
1.By what it is beneficial for lender and borrower to pay the money(Cheque/Cash).

2.If I borrow in cheque, will I have to pay taxes on it.(I am going to use it as working capital).

Thanks in advance

Nikhil Kaushik

Nikhil Kaushik (Expert)
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12 September 2013 Hi Hardik.

It would be advisable to borrow via a/c payee cheque. You may also consider signing a loan agreement to evidence the receipt of money as loan.

Since the said amount shall be in form of loan, there won't be any tax on the receipt of the same.

However, if you pay any interest on the said loan, the same shall be added to your friend's income.

If you need any further information/ assistance, please let me know.

Regards

Nikhil

Message likes : 1 times

Hardik

Hardik (Querist)
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04 August 2016 Thanks sir!

I did what you mentioned and have repaid the loan :) Sorry for rating late.

Thanks again.

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