Loan taken from friend of large amount

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A client received a substantial bank entry of 50 lakh rupees, stating it was a loan from a friend to be repaid in instalments. The query concerns its legality under Income Tax law, especially regarding the lack of TDS. The transaction is permissible, but the client must be able to prove it's a genuine loan. Repayment of sums exceeding Rs. 20,000 must be made via ECS or account payee cheque, not cash, as per Section 269T. TDS provisions will apply to any interest paid on the loan.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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31 August 2021 Dear Sir,

One of my client has got a receipt entry in Bank amounting to 50 lacs. He said me that he has received the amount as loan from a friend and the same will be repaid by him in parts.

My query is whether such transaction is allowed as per Income tax. There is no TDS deduction made on this transaction.

Regards,
Divyesh Jain

CA Kushwanth AVSR

CA Kushwanth AVSR (Expert)
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31 August 2021 Yes, such transaction is allowed in Income Tax. However, the assessee has to prove that such transaction is a loan and as the amount involved is Rs. 50,00,000. As per section 269T, he cannot repay such loan other than by way of ECS or Account payee cheque or any other electronic mode prescribed.
However, take note of TDS provisions at the time of payment of interest

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DIVYESH JAIN

DIVYESH JAIN (Querist)
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31 August 2021 Ok, Thanks for your reply

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