Loan to brother

Answers:

1. yes, you can take interest on such loan from your brother.

2. there is no limit on interest rate. (wait for others to comment).

3. and yes you can show the interest paid on OD as business expense..

As far as my experience is concerned., you need to charge your brother interest at bank rate only.., reasong being:

A. If you charge LOWER rate., it will amount to higher expense of yours., i.e. you pay higher interest to bank and collect lesser.., that means you are claiming additional interest as "net expense" that would be disallowed by income tax.

B. If you charge HIGHER rate., it will amount to higher expense of your brother., in that case, he would end up in claiming additional expense.., which would again be disallowed by authorities..

So., being on safer side., i would suggest you to charge either bank rate or any average loan rate (around 11.56% currently) prevailing in market at that point of time.

Dear All

1st of all thank you very much.

Further, With Respect to Above,

Is There is any Requirment to Deduct TDS by my Brother (he is Individual and Runing Propritership Conern) on the Interest Rs. 4 lacs (without effect of TDS).

IF YOUR BUSINESS IS LAIBLE FOR TAX AUDIT U/S 44AB, YOU ARE LAIBLE FOR TDS DEDUCTION ON INTEREST TO YOUR BROTHER