Interest on loan from lic

Sir,

It is your personal loan or Business loan, If you having business loan then you deducted allow as per law, or if you having the personal loan then also allow as per law.

Further, In this regard, If you having business income as a interest recd. such income calculated in your business income or If you having the personal interest income then you calculated in personal.

Hope you clear the position if you having any doubt. Plz forward the same.

Dear Harendra,

The loan amount was again invested in LIC.

Sir,

It is good you investment again but it is a personal loan or business loan. You can either benifit availed as per law.

If the loan was taken to invest in a LIC policy it is definately taken for personal purpose and will be classified as drawings. It will not be allowed as deduction from business income.

Then it is treated a Busness Investment under Accounts Head Investment and  Deposits i.e. Current Assets and better tell you CA. Because I amdeal in Direct Tax only Individual Income.

Hope put-up the question Ms. Pandit, CA. PLZ.

I am assuming that the client runs a proprietory (not a company/ firm) business and hence the LIC investment was classified as investment. When the loan is taken, it is shown as secured loan as a liability in BS.

Since, the loan is taken solely for the purpose of buying another LIFE insurance policy on the life of the proprietor, the interest on that loan should be classified as drawings (personal expenses). Even if it is debited to P& L a/c, it should be added back to income and reported in form 3CD as personal expenses.

If the LIC loan was used for business purposes eg buying fixed assets, materials etc, then the interest thereon  would have been business expenditure Even then you would have to disallow prior period expenses from 2011 to 2013.