Loan taken on deposit - tax impact

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CMA Sivapriya

126 Points Posted on 25 August 2019

Ms.A, a senior citizen allows a company to get loan on one of her bank deposits. The company repays the loan amount along with Interest after deducting TDS, to Ms.A's savings account.

Queries:

1. Is TDS Deductible on this transaction by the company?

2. Is the repayment of loan by the company to Ms.A be treated as her income, since it is an adjustment against the loan account?

Replies (4)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121534 Points Posted on 25 August 2019

1. Yes.Company has regarded it as loan from the lady.

2. Any excess over and above loan amount or interest paid over it to bank will be treated as income of the lady.

Difference in interest received from company and interest paid to bank on loan against FDR is taxable in the hands of lady assessee.
TDS by Company (if proprietory) won't be there.
Otherwise company will deduct TDS as per TDS rules

CMA Sivapriya

126 Points Posted on 25 August 2019

1.Since Ms.A has given loan say for example Rs. 10 lakhs, whether the repayment by an Individual under tax audit (Rs. 10 lakhs,no excess amount is paid), in 3 installments spread over 2 Financial years, will be chargeable to tax in the hands of Ms.A? 2. Can the individual under tax audit can claim the loan repayment ( principal and interest) as business expense?

Suresh Thiyagarajan

Student

2612 Points Posted on 25 August 2019

1. If the individual is under tax audit he can claim the interest expenses as deductions while computing his profit chargeable to tax.
2. However, interest should have actually been paid as per sec 43B in order to claim the deductions.
3. With respect to principal portion, deductions will not be allowed under sec 80C as only housing loan repayment will be allowed as deductions.
4. Interest will be taxable in the hands of a person who had given a loan under the head Income from Other Sources.
Please correct me if the above solution has an alternative view.