Interest on unsecured loan from relative

A/c entries 14881 views 5 replies

Guest

One of my close relative would like to invest his excess money in my business on terms of 24% interest. It is legally correct to obtain this loan and pay interest every month to him ?

Replies (5)

CA CS Jainam Shah

Practicing Chartered Accountant

2492 Points Joined May 2009

It is 100% legal to take loan from relatives. But interest rate 24% is too high. It might be possible that in Income tax the excessive interest part is going to be disallowed.

E-mail: ca.jainam @ gmail.com

Nikhil Kaushik

Fellow CA

86871 Points Joined June 2009

it is possible that the AO may view 24% as excessive and therefore make disallowance under Section 40A(2)(a).

B.SEKAR

manager-accts.

61 Points Joined September 2011

Dear Manish>>>>>>>>>> Availing loan is good for business. But 24% interest is make IT dept to put their eyes on you. The interest rate should not be more than bank interest rate. If your company is pvt ltd, resolution is to be passed. You can make interest to your relative every month after deducting TDS for the same. That amount is to be remitted in the bank. ok>>>>>>>>>>>>>>>>>>>sekar

Guest

Dear All,

Thanks for your suggestions and guidance.

Actually recent past when we had short of CASH in our books, we took money from them and used, now they dont need their money back. 1.75% or 2% PM is no problem for us, in this case we will pay interest as BANK rate to their account and rest interest in CASH. Is it ok ?

How to charge TDS from them ? Total amount was 700000/-

Please advice.

Regards,

Manish