Individual lending loan to a proprietorship firm

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Dear Sir/ Madam,

I am an individual and am planning to provide say 5 lakhs at an interest rate of 24% per annum for 2 years to a proprietorship firm / proprietor, without any kind of mortgage.  I would be receiving interest on a month on month basis, until my principal is returned.

a) What is the procedure to be followed in terms of agreement / promissory note to safeguard my money.

b) What action can I be able to take against the proprietorship firm / proprietor, if the interest or principal is not paid to me.

c) Would I need to pay tax for the interest received.  If so, where can I get the details of how much tax need to be paid.

Replies (3)

Sir,

 As a banker i can tell u that there is difference between Individual and proprietory firm so what we do is take Demand Promossory Note as basic document and please remember try to get an acknoledgement of debt from the borrower within every three years as 3 years is the limitation period for the borrowing.some private financial institutions also obtains Cheque leaf as additional security

the remedy available for u is through court

Next you have to pay taxes if your income exeeds the basic exemption limit and interest income is normal income basic exemption is available for u

This is a general guideline please talk with an expert before giving loans to anybody

Thank u

 

Sir,

 i mean to say that there is no difference between a proprietor and proprietory firm .typing mistake

the PAN of proprietor is the PAN of the proprietory firm

one can give a loan to a proprietor ship concern. But anyone guide as to what happens in the event of one of the parties expiring without a will

 

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