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Interest free loan from friends

Ankit (None) (75 Points)

23 August 2016

Hi, a person 'X' took Rs. 30,000 from one of his friends and Rs. 30,000 from another of his friends in F.Y 14-15 as interest free loan. But another friend of 'X' asked him for a interest free loan from him because he was in need of money, so he gave him Rs. 46,000 in F.Y 14-15 itself. 'X' left his job in 14-15. His friends asked for their money back in F.Y 15-16. 'X' asked for his money back from the friend he lent Rs. 46,000, but he was only able to return Rs.30000. So, 'X' took Rs. 30000 from his parents. In this way he paid his friends back. His other friend returned him the rest of amount (Rs. 16,000) in F.Y 16-17. My question is whether 'X' was liable to pay any tax due these transactions? Thank you.

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4 Replies

CA Saurabh Singh (Practising Chartered ) (974 Points)
Replied 23 August 2016

Hello Ankit,

Gift is taxable under head "Income from other sources", when cash is recived from Non-Relatives and the value of transactions exceeds Rs. 50,000.

In your case the limit si not exceeding hence it is exempt

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Ankit (None) (75 Points)
Replied 23 August 2016

Originally posted by : CA Saurabh Singh
	Hello Ankit, Gift is taxable under head "Income from other sources", when cash is recived from Non-Relatives and the value of transactions exceeds Rs. 50,000. In your case the limit si not exceeding hence it is exempt

Thanks for your reply. I still have some doubts. Please see the simple version of my question below:

"X" took interest free loan in F.Y 14-15 from-

1. "a" - Rs. 30,000

2. "b" - Rs. 30,000

"X" gave interest free loan in F.Y 14-15 to-

1. "c" - Rs. 46,000

"X" returned his loans in F.Y 15-16, souce of money are:

1. "c" returned Rs. 30,000

2. Help from parents i.e Rs. 30,000

'c" returned Rs. 16,000 in F.Y 16-17.

Will these loans will be treated as "gift from non relatives"? If yes, is the total amount Rs. 30000+30000=Rs.60,000 or Rs. 60000-46000=Rs. 14,000?

CA Saurabh Singh (Practising Chartered ) (974 Points)
Replied 23 August 2016

The amount is considred individually from individulas.

Not collectively

Ankit (None) (75 Points)
Replied 23 August 2016

Also, the Rs. 46,000 that X lent to "c" was from the money he took from "a" and "b". He took interest free loan and gave interest free loan from the same amount.