Interest on Unsecured loan from HUF

Tax queries 275 views 2 replies
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CEO
21 Points Joined July 2024

Hello everyone,

I have taken 30 lacs loan from my HUF for FnO trading. I purchased Liquidbees using that amount, and pledging it with my broker for Margin, and using that margin for building positions in Options.

1) Can I pay interest to HUF for this loan amount ?

1a) if yes at what rate ?

2) Can i deduct this interest amount from my profit as expenses ?

Thanks in Advance

Rajeev

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On 24 July 2024 at 04:34 Report
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Master in Accounts & high court Advocate
9447 Points Joined December 2011

To record the closing of a mutual fund investment in accounting books, follow these steps: *Debit:* - Bank Account (or Cash) - Redemption Amount - (To record the receipt of redemption proceeds) *Credit:* - Mutual Fund Investment Account - Cost of Investment - (To close the mutual fund investment account) - Gain/Loss on Sale of Mutual Fund - (Profit or Loss) - (To record the gain or loss on sale) *Example:* Suppose you invested ₹100,000 in a mutual fund, and you redeem it for ₹120,000. *Debit:* - Bank Account - ₹120,000 - (To record the receipt of redemption proceeds) *Credit:* - Mutual Fund Investment Account - ₹100,000 - (To close the mutual fund investment account) - Gain on Sale of Mutual Fund - ₹20,000 - (To record the gain on sale) If there's a loss, debit the Gain/Loss on Sale account and credit the Bank Account. *Note:* - Ensure accurate accounting and compliance with relevant accounting standards. - Consult a qualified accountant or financial advisor for specific guidance. Remember to update your accounting records accordingly to reflect the closure of the mutual fund investment.

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On 24 July 2024 at 14:47
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Master in Accounts & high court Advocate
9447 Points Joined December 2011

In India, interest on HUF (Hindu Undivided Family) margin for F&O (Futures and Options) trading can be treated as an expense for taxation purposes, but certain conditions apply: 1. _Business purpose_: The interest expense should be incurred for business purposes, i.e., F&O trading. 2. _Documentation_: Maintain proper documentation, such as interest statements, ledger accounts, and margin account statements. 3. _Accounting records_: Ensure accurate accounting records, reflecting the interest expense in the HUF's profit and loss account. 4. _Tax audit_: If the HUF's turnover exceeds ₹1 crore, a tax audit may be required. For taxation purposes, the interest expense can be claimed under: 1. _Section 36(1)(iii)_: Interest paid in respect of capital borrowed for business purposes. 2. _Section 37(1)_: Any other expenditure (not being in the nature of capital expenditure) laid out or expended for the purposes of the business or profession. However, it's essential to consult a chartered accountant or tax advisor to ensure compliance with specific tax laws and regulations. They can help you navigate the tax implications and ensure accurate treatment of interest expenses in your HUF's accounts.

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On 24 July 2024 at 14:48


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