Giving personal loan to brother for him to prepay his car loan

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 03 March 2013

Mr.Mahesh,

The amount which you are going to give to your brother is only a personal loan which will not attract any taxes.

The interest which is going to accrue from such loan should be shown as Income in your books if it is not Interest free loan.

Mahesh Kumar (self) (35 Points)
Replied 03 March 2013

Thanks for your kind reply sir. Yes I would like to give him a interest free loan. Infact I want to gift him (don't want him to return it). In such case does he have to show the money i give him (for prepayment of his car loan) in his income?

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 03 March 2013

Gifts received From Relatives As per the Income tax act, the Gifts received from any of your relatives are fully exempt from tax. Whether you are received the gifts as Cash, Cheque or any goods. You are not liable to pay the tax for these gifts.

Here the “relatives” term defines by the Income Tax act as follows :

Spouse of the individual
Brother or sister of the individual
Brother or sister of the spouse of the individual
Brother or sister of either of the parents of the individual
Any lineal ascendant or descendant of the individual
Any lineal ascendant or descendant of the spouse of the individual,
Spouse of the person referred to in clauses (ii) to (vi).

For example if you are receiving gift of Rs.100000 from your uncle ( your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.

Hence it is not taxable in your case

Mahesh Kumar (self) (35 Points)
Replied 03 March 2013

Thanks again. If i am gifting Rs. 3 Lacks to my uncle (my mother's younger brother) then my uncle does not have to show this Rs. 3 lacks (that i loaned him) in his income or pay any tax on this Rs. 3 lacks any way whatsoever. Is that correct? Also is there a cap (maximum amount that i can gift my uncle) on the amount that I can gift? what if the amount i want to gift my uncle is Rs. 8 lacks.

Thanks again for your kind time Sir.

Mahesh Kumar (self) (35 Points)
Replied 03 March 2013

Chiradeep Ji, I also need some LTCG tax consulting and looking for some CA who has good experience of LTCG. My situation is very peculiar and does not involve straight forward sale of property. It involves buy-back without possession or registration and a home loan is also involved. So only someone who has deep understanding of LTCG is needed. If you are interested pls let me know your contact so that we can meet up.

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 04 March 2013

Dear Mahesh,

This is my e-mail id : Crh.kvs @ gmail.com.

We surely will help you and we are located at Bangalore. Please contact me at above e-mail.

Mahesh Kumar (self) (35 Points)
Replied 04 March 2013

I will send you my case details but since I am in Delhi meeting is not possible. Also i suppose the answer to the question "When nephew gives his uncle a gift of Rs. 8 lakhs then does the uncle have to add the the gift to his annual income" is NO. Also I suppose me being the nephew (loan giver) does not have to pay any tax.

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 04 March 2013

Please give me the details of Sale of Property to my mail-id.

With regard to Gift ,

Nephew giving gift to uncle = Taxable in hands of Uncle.

Uncle giving gift to nephew = Exempt

Mahesh Kumar (self) (35 Points)
Replied 04 March 2013

I had an idea. How if i gift the said amount to my mother first and then my mother gifts it further to her brother (my uncle). Then would that work? I am working on the case details for LTCG would send it to you soon.

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 04 March 2013

Can I have your E-mail id Please

CA.SKR (CA; CS-Final (One Group); DISA (ICAI); Insolvency Professional) (442 Points)
Replied 04 March 2013

Dear Mahesh,

I am based at Delhi. My E-mail ID is : skr_ca @ rediffmail.com. You can contact me at above e-mail ID regarding your queries on LTCG and other Income Tax issues.

Thanks

BHARAT KUMAR BANKA (Self) (50 Points)
Replied 16 July 2020

Dear Sir, I have to give a gift of Rs 18Lac to the husband of my younger sister for 1/2 years. After that, I will like him to give me a return gift of same amount. Is it possible?

Other wise, can I give him an interest free loan of Rs 18 lac and get back after 1/2 years? Which will be feasible?

Kindly email me. bkbanka @ gmail.com

Bharat