Interest free loan to friend

I think if the lent amount is used by the friend to carry on his business in India, the interest would be taxable in hands of the NRI vide Sec 9, otherwise no tax liablity for the NRI. Moreover, borrowing does not lead to any tax liability in hands of the friend. But since itz int free, it would be a gift in hands of the frnd taxable as ifos. Still no tax liability for the nri.

How will it be treated as gift in the hands of receiver if it is returned?

I think this canot be treated as gift

No one is required to pay any tax..

Moreover, charging interest is not compulsory, provided you are able to prove it as loan

It can be proved as a loan,  as the transaction is through bank

If no interest is charged how wl u prove to the AO that it is a loan and not an income. The point that it is returned back would be application of income.....i.e first the income is received by the assessee and the return would be application of the income received. So, in short first the AO would take it as ur income and then you can go for appeal trying to prove that it ws never an income. Such transactions so easily fall within the ambit of AO exercising his vast powers. the thing that the transaction is thru bank....so what even cash gifts have to be accompanied by a gift deed...so that's no plea