Mr. A wanted to buy his first house property worth Rs. 25 Lakhs, but did not have sufficient salary income. He did following thing : He took Rs. 21 Lakhs loan from Friends (via cheque) as friendly loan (interest free). Then he kept all money in Bank as Fixed Deposits.
Bank is ready to give loan of
1. Rs. 5 Lakhs based on salary income capacity &
2. Rs. 20 Lakhs against Fixed Deposits.
Justification :
1. After full repayment of bank loan, Mr. A will liquidate all FDs repay all friendly via cheque AND
2. Take all deduction which otherwise he would not able to take.
Doubts:
1. Can he avail Deduction of principal repayment made to bank u/s 80C (part of EMI)
2. Can he avail deduction of interest on Loan paid u/s 24(b)
3. Is this a clubbing of income case u/s 60 on IT Act.
4. If friends would have gifted (& not loan) through Gift Deed. Will answer of above three question change ?
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