Interest on personal loan

1. You cannot claim interest paid to bank as expenses because the fund is not used for earning income.

2. Yes Interest received will be taxable and in this case you can claim interest paid to bank as an expenses.

3. Yes .

Mr. CA manish is right & i aggred with him

Thanks for the clarifications CA Manish. Could you also please clarify under which head i c claim expenses as per your response to my questions no 2?

Thanks

Your income will be taxed under the head "Income from Other sources" . Charging sec 56 (1).

The expenses incurred to earn the income will be claimed u/s 57(iii).

Thanks a ton for clarifying Mr. Manish. Appreciate your quick response.

Dear 

You can not take benifit of interest paid of personal loan under income tax.

Originally posted by : abhay
	Dear  You can not take benifit of interest paid of personal loan under income tax.

Please refer to the sec of  Income Tax Act in support of your answer.

@ S Ramchandran

CA Manish answers are right considering that all the transactions of payment and receipt between you and your brother are through banking channel and not in cash, else it may be difficult to justify and also attract section 269SS and 269T.

Yes, All the transactions will be only through cheques or RTGS transfers and never through Cash. There will be a proper agreement as well(though he is my brother). The interest charged will be exactly same as what the bank will charge me, if I go for the loan. 

Good preparation to avoid or face any litigation with depttt.