Can an individual get interest free loan from NRI friend by cash for purchase of property?
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 15 August 2010
Hi Dear,
No person shall, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,—
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),
is twenty thousand rupees or more :
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,—
(a) Government ;
(b) any banking company, post office savings bank or co-operative bank ;
(c) any corporation established by a Central, State or Provincial Act ;
(d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;
(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette :
Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.
Hope this solves u'r query...
regards,
manoj
obeid
(learner)
(292 Points)
Replied 15 August 2010
Thanks
Is it compulsory that the account payee cheque or transfer from NRE account only?
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 15 August 2010
HI DEAR,
THERE IS NO SPECIFIC MENTION ABOUT TRANSFER FROM BANK A/C TO ANOTHER BANK A/C NEITHER THERE IS ANY CASE LAW IN SUPPORT OF THIS. BUT THE BASIC THING BEHIND THIS PROVISION IS THAT TRASACTION SHOULD BE ROUTED TOTALLY THROUGH BANKING CHANNEL.
SINCE, THERE IS NO SPECIFIC MENTION UNDER THE SECTION CONCERNED, IT WOULD BE BETTER TO RECEIVE THROUGH ACCOUNT PAYEE CHEQUE.
FURTHER, IF U READ THE SIMILAR SECTION WHERE THE CASH TRANSACTION DISALLOWED IS 44A(3) OF THE INCOME TAX ACT, WHERE PAYMENT IF MADE THROUGH BANKING CHANNEL INCLUDING INTER BANK TRANSFER IS AN ALLOWABLE TRANSACTION AND NO DISALLOWANCE WOULD GET ATTRACTED. U/S 44A(3), ANY PAYMENT MADE EXCEEDING RS.20,000 WOULD GET DISALLOWED IF PAID OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. SINCE INTERBANK TRANSFER ALLOWED UNDER SEC 44A(3), WE WOULD CONTEST OUR CASE AS THE FOUNDATION OF BOTH THE SECTION IS SAME I.E. TO CURB BLACK MONEY.
THUS, CONCLUSION IS, IF MADE BY INTER BANK ACCOUNT TRANSFER, U MUST PREPARED BEFORE AO ON THE ABOVEMENTIONED GROUNDS.
REGARDS,
MANOJ
CAclubindia
