17 February 2011
Unsecured loans are mainly taken for the purpose of meeting the requirement of funds in the business. * Payment of interest on such loans definitely results into tax benefits to the borrower, but the interest out go is a bigger expenditure than the small tax savings. * Some times unsecured loans are available interest free, on which due to relationship, interest is not payable at all. * If funds are not required nobody will take Unsecured Loans. * Salaried persons are, generally, not getting any benefit for interest paid on such loans. * So borrowings are always need based. * In case of fictitious borrowings, tax saving aspect may fail when its genuineness can not be proved by the assessee.
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