My father got some amount after his retirement.He is thinking of two options.First one is to do fixed deposit in bank.Second one is to give that amount to his friend for interest more than bank FD.He has to show that interest amount in IT returns also.
Besides safety and security,is there any disadvantages of giving it to his friend in terms of tax deductions etc and one more thing is,Should his friend deduct TDS from the interest amount while transferring it to my father?
Please clarify.
Regarding your father's options, here are some points to consider: *Option 1: Fixed Deposit (FD) in a bank* - Advantages: - Safety and security of the principal amount - Fixed interest rate - Interest is taxable, but the bank will deduct TDS (Tax Deducted at Source) and issue a TDS certificate - Disadvantages: - Lower interest rates compared to other investment options - Interest is taxable, which may increase tax liability *Option 2: Giving the amount to a friend for interest* - Advantages: - Potentially higher interest rates compared to bank FDs - Friend may not deduct TDS, which could reduce tax liability - Disadvantages: - Risk of default or non-payment by the friend - Interest earned is still taxable, and your father may need to declare it in his IT returns - No protection or guarantee for the principal amount - May damage the friendship if there are disputes or non-payment Regarding tax deductions: - If your father chooses Option 2, he may need to declare the interest earned in his IT returns and pay tax on it. - If the friend deducts TDS, your father will receive a TDS certificate, which can be used to claim credit for the tax deducted. - If the friend doesn't deduct TDS, your father may need to pay advance tax or request his friend to provide a declaration that no TDS was deducted.
Is deduction of TDS not compulsory?
Vakilsearch.com
Chennai
CA Inter
View Details
CCI
Pro
CAclubindia
