If I transfer money to a friend's bank account (which I do not expect to receive back), how will it be accounted for with respect to income tax for me and my friend? Can I account for it as a loan given to my friend? In that case, will I have show quarterly/annual interest income received from my friend? Will that interest income be taxable for me under 'Income from other sources'?
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Accounting for money gifted to a friend
Replies (4)
loan to friend has to carry some interest which should be accounted in your books and should be offered for taxation purpose,
It is not necessary that it shall carry an interest, it could be an interestfree loan as well.
But since it is not going to comeback then I think it should be treated as gift and taxed into your friends hand, as there is no taxability for you, being the donor.
Thanks! If we treat the money as a gift given (as against a loan for which I might have to show interest received), then what will the tax implications for my friend?
IF GIFT IS MORE THAN 50000 THAN IT WILL BE FULLY TAXABLE FOR YOUR FRIEND
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