Impact of taxation on this transaction

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anshul (Querist)
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22 September 2011 suppose if Mr. A transfer Rs 20lacs from his bank account to his brother who is engaged in business of construction, so what will be the effect of this transaction?

whether this funds transfer can be shown as a gift, or this has to be shown as loan in balance sheet of his brother

whether the income earned by his brother on rs 20 lacs need to be clubbed???

CA. Nitin Agrawal

CA. Nitin Agrawal (Expert)
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22 September 2011 Dear Anshul

The transaction will be treated as Loan (unsecured).

The transferor may get the Interest on such loan max. @12% and no other income will be clubbed.

Further these transaction is not in the nature of gift hence question of gift does not arise as it is not supported by gift deed.