Right procedure to loan to relative

ITR 584 views 3 replies

Rakesh

Others

147 Points Joined November 2014

Respected experts ,

one year ago i have loaned to my maternal unlcle 2 lakhs cash without charging interest ( Rs 50-50 thousends in 4 months ) . I am a tax payer . i run a coaching . Since in my family my brother , mother and father has their own income from business and salary thats why whatever i earned i loaned to my uncle for 6 months in cash ( in cash because i dont have cheque book and sice i get money in stallements by students thats why i never have bulk amount of money in my bank account ) . one day ,One of friend told me that the way i loaned my uncle is wrong but he dint clear me why ...
My question is ..
1) since i have already given loan in cash , is this wrong ?

2) Now if my uncle wants to return money , what procedure should i approach so that to avoid wrong transaction ?

3) will i have to prepare a stamp to make that transection right ?

please show me some way

Replies (3)

Guest

1) accepting or repayment of cash loans in excess Rs 20000/- is not allowed u/s 269SS and 269T. Since you have advanced the amount to him, it might cause problem for him. (you may also have to explain the source). How have you shown the amount in your IT returns?

2) You should receive the amount back from him by cheque only. In future always advance or receive loans by cheque. There is no need to use stamp paper, from income tax point of view atleast.

Raphael

Chartered Accountant

214 Points Joined January 2009

My suggestion in the regard is that if your uncle is a close realtive, then show this amount as gift to him. Subsequently when he returns the money, show this also as gift by him to you. As you have already made the payment to him this is the only way out. At least while recieveing the money back, ask your uncle to give it in cheque.

Rakesh

Others

147 Points Joined November 2014

respected madhvi :: i run a coaching center . My annual income from coaching isabout 2.5 to 3 lakhs . The money i had given to my uncle was from my FY 2013-2014 income . In FY 2013-14 , my income was 2.8 lakhs .

Cant i show that money as i have given to him in 20000 - 20000 slots in 10 months . He will give me receipt on paper in which i will put one revenue stamp ticket . show me best possible way mam ...