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Interest Paid to HUF

Akash A (100 Points)

09 April 2023

Respected Experts,

If a member of HUF pays interest to HUF on loan taken from HUF then interest expenses can be shown under Income from other sources head if i have also shown interest income from FD?

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8 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166601 Points)
Replied 10 April 2023

For what purpose the loan was taken?

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Akash A (100 Points)
Replied 10 April 2023

Loan was taken for investment in FD

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166601 Points)
Replied 10 April 2023

In that case you will have to pay full amount of interest earned to HUF, as banking is not your business, and ITO would not allow such income distribution.

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Akash A (100 Points)
Replied 10 April 2023

In short it means I can't pay interest to HUF as banking is not my business. Correct?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166601 Points)
Replied 11 April 2023

The reason is you have taken loan for investment in FD, which HUF can directly make investment.

Otherwise, you can take loan and if required, can pay interest to HUF also.

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Akash A (100 Points)
Replied 11 April 2023

Thanks a lot for your valuable response.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166601 Points)
Replied 11 April 2023

You are welcome.

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SUSHANT BIDAYE (583 Points)
Replied 12 April 2023

I hold diifetent views. you can lain it as deduction under interest income, so long as it is reasonable and there is clear nexus between loan funds and investment in bank FD.