LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Loan from relative

CA Dheeraj Bansal (Chartered Accountant) (652 Points)

26 June 2011

In case of properitorship, if the propreitor take loan from his relative. then what is the maximum interest he can pay on these loans

Reply
Follow
Share

14 Replies

Sunshine (Helping All) (10575 Points)
Replied 26 June 2011

I think the interest has to be at fair interest rates prevailing in the market or else the A.O has the right to disqualify the interest expense u/s 40 A (2)...

Regards!!

suneet (CA FINAL) (421 Points)
Replied 26 June 2011

there is no limit on payment of interest only if proprietor is under Tax Audit than as per section 269 you can not give interest more than 20000 in cash or bearer cheque

but by way of an by an account payee cheque or account payee bank draft .

ther is no limit on payment of interset through these modes

but of Course Section 40 A(3) comes into play

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 26 June 2011

15%

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 26 June 2011

wat is d logic behind 15 % mr future ca?

can u justify ur ans?

Vijay (Adamo Studio) (2112 Points)
Replied 26 June 2011

Never heard about such but ya the rate should be such prevailing in the market for the same type of loan otherwise when the income comes under assessment the powers are given for dis qualification u/s 40A(2)b...

Devendra (Chartered Accountant) (4775 Points)
Replied 26 June 2011

As per my knowledge, the rate should be such which is similar to the market rate. If it is more than such rate, then it shall be disallowed u/s 40A(2)b.

Regards,
Devendra K

Anvesh Desai (Chartered Accountant) (156 Points)
Replied 26 June 2011

Dear Dheeraj..

There is nothing specefically mentioned regarding the max limit of payment of interest (w.r.t mentioned case) in any law tht exists in India...hence there is no fixed limit specified in any law that ever exsists...

One should follow the requirements mentioned by other viwers...

CA Rajat Jain (CA) (1677 Points)
Replied 26 June 2011

no maximum limit prescribed

Sunshine (Helping All) (10575 Points)
Replied 26 June 2011

@ Future CA

U owe us an explaination over this "15%"...So please do the honours...

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 27 June 2011

Originally posted by : Sunshine...
	I think the interest has to be at fair interest rates prevailing in the market or else the A.O has the right to disqualify the interest expense u/s 40 A (2)... Regards!!

normally bank charges interest arround 15%

hence we can also give interest @ 15%

i have also seen many cases in my practical experience that AO is allowing interest @ 15%

CA SUMIT LAL (PROPRIETOR) (83 Points)
Replied 27 June 2011

Interest can be paid as per the prevailing ,market rates and that too can be taken as per the rates of SBI (to be on a safer side) as that is a prime lending govt. bank.

Interest paid without any logical reasoning will automatically attract the disqualification provisions.