Mudassar Nath (Manager) (41 Points)
26 July 2023My client had obtained Loan from his father to manage his proprietory business. His father borowed this money from his bank against Fixed deposit. Howeve, my client is paying interest to his father's bank in lieu of financial support.
In this scenario can my client claim interest on such loan as business expense? Is there any other tax benefit that can be availed by my client or his father?
Please suggest/advise.
jagdish chhugani
(engineer)
(736 Points)
Replied 28 July 2023
WHY SON PAYING TO FATHERS BANK, HE SHOULD GIVE INTEREST TO HIS FATHER, INTERSET IS EXPENCES TO HIS BUSSINESS.
FATHER TAKEN LOAN FROM HIS BANK AGAINST FIX DEPOSITS AND HE WILL SETTLE HIS INTEREST WITH HIS BANK , MONEY RECEIVED FROM SON.
ON THE CONTARARY SON WOULD HAVE TAKEN LOAN FROM SAME BANK AGAINST FATHERS FIX DEPOSIT GARANTEE.
OTHER SIMPLE METHOD FATHER GIVE DIRECT LOAN TO SON AND SON GIVE 1% OR 2% MORE OR SAME INTEREST WHAT FATHER GETTING IN BANK TO FATHER,, HE CAN SHOW AS BUSSINESS EXPENCES. GIVEN LOAN TO SON IS NOT TAXABLE,
jagdish chhugani
(engineer)
(736 Points)
Replied 28 July 2023
NO BENIFIT TO FATHER INTEREST ON FD IS OTHER SOURSE OF INCOME, INTEREST PAID TO BANK AGAINST LOAN NO OPTION IN ITR1 AND ITR2 THIS OPTION IS IN ITR3 IN PROFIT AND LOSS SHEET IF FATHER HAVING BUSSINESS.
IF FATHER UNDER 250000 NOT FILLING INCOME TAX RETURN NO PROBLEM.
1. NOW IF SON PAYING TO FATHERS BANK AGAINT FATHERS LOAN , HE CAN NOT SHOW EXPENCES WHERE HE NOT TAKEN ANY LOAN FROM BANK., THEN SHOULD GIVE TO FATHER AND SHOW EXPENCES.
2. AND IF FATHER FILLING ITR HE WILL HAVE TWO INCOMES FROM FD INTEREST AND INTEREST FROM SON, IF BANK JUST SHOWING NET INTREST ( FD INTEREST LESS INTEREST OF LOAN TAKEN) THEN NEGETIVE INTEREST, NO OTION IN ITR1 AND 2 SO NET INCOME FOR FATHER IS INTEREST FROM SON AND ANY OTHER INCOMES.
"Live class on Python for Financial Analysis: Unlocking Efficiency in Accounting and Finance"
CAclubindia
