Repayment of loan against fixed deposits by cash

yes you are correct as per rule 6DD

"My client have taken bank loan against Fixed Deposits. Can he repay the loan amount directly to the Bank Loan Account in excess of Rs. 20,000 (without depositing the cash to his  Savings Bank account) My understanding is that (1) the provision of Section 269T does not apply to repayment of any loan taken from any banking company. (2) no other prohibitions (such as Section 40A(3) or Section 269SS is applicable. Please advise. Earliest responses will be highly appreciated."

 

Ans : As per rule 6 DD Sec.269 TT and Sec.269SS does not applicable.

Whether he will be required to report this repayment of loan in income tax return ? 

The money was withdrawn for a purpose from the loan taken against the fixed deposit. But the purpose of money withdrawal did not materialize. 

If he credits the money to the savings bank account, he is afraid he may have to prove that the money so deposited was from the loan amount (or else he may be taxed for the savings bank credit as unexplained income).