Interest on loans and advances

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

25 March 2016 Dear Experts,

For loans and advance what rate of interest needs to apply ?

is there any specific rate of interest is available in income tax ?

because i am charging 9% p.a. is it ok please advise.

CA SUNIL K GARG

CA SUNIL K GARG (Expert)
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25 March 2016 No specific rate of interest available for charging the interest on Loan & Advances in the Income Tax Act, 1961.
However if in rate of interest is charged in excess of prevailing market rate, then the income tax officer may disallow excess interest u/s 40A(2)(b). Moreover interest @ 12% pa is allowed as per income tax Act, 1961 u/s 40B on partner's capital.

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