Private trust

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buvana (Querist)
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03 April 2009 Respected experts..
Ours is a private trust(non deposit taking) engaged in microfinance activity at chennai.At present we are lending to individuals under lower income group to improve their business, house and personal purpose.We planned to buy gold and sell it to the clients through loan schemes.Is there any legal formalities to be followed to execute this loan?Is there any limit to fix the interest rate for gold purhcase loans?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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03 April 2009 You have to check whether the trust deed permits to do gold business. If trust deed do not permit you have to first ammend the trust deed.

Then you have to get sales tax registration.

After checking these two, then you can do the above transaction.

Interest rate should not be abnormal. It may be approximately PLR + 6% Maximum.

The maxium amount has to be decided through trust deed or in general it should not exceed more than 10% of the net worth of the trust.

buvana

buvana (Querist)
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03 April 2009 sir..Thanks. As u said, we have to amend our trust deed and our maximum loan size is 50000 INR.we are lending for the past 1 year and got sales tax registeration already.Is it necessary to get sales tax registeration again?Like other products, gold is also one of the loan product and it is secured as the client will get the gold at the end of loan.

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CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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03 April 2009 Not required. But you should check whether as per the sales tax certificate you should check whether you can deal in gold. If not you should ammend the sales tax certificate under the category inclusion of new product. The old licence itself is valid.