I gave my friend around 20 Lacs 2 years back into his personal account. He said that he now wants to pay interest as he has to show some expenses.
Under which category should I place the amount received "others" or "in the nature of pass through income" under income from other sources?
Also, he wants to pay at 5 percent annual interest. Is it acceptable ?
Its Interest income.
1. Amount given as loan to a friend will be an acceptable transaction and interest income from the same will be taxable under the head Income from other sources.
2. The above transaction is personal in nature and there is no restriction on the percentage on interest charged.
3. With respect to interest earned on above loan, the same will be shown under "Interest Income" under Income from other sources.
Please correct me if the above solution has an alternative view.
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