Venkata Suresh (27 Points)
26 September 2024I'm given some amount to my friend through banking channel and I'm getting interest every month from him since May 2024.My friend is not deducting TDS in interest amount.I will show that whole interest income in my upcoming IT returns.
Is it compulsory to deduct TDS?Is it legal or not ?If it is illegal,is there any alternative solution?
Dhirajlal Rambhia
(SEO Sai Gr. Hosp.)
(177713 Points)
Replied 26 September 2024
What is your friend is doing? purpose of loan taken?
Venkata Suresh
(27 Points)
Replied 26 September 2024
He is a business man.For construction of his house,he taken some amount from me.
Dhirajlal Rambhia
(SEO Sai Gr. Hosp.)
(177713 Points)
Replied 26 September 2024
If he has used the amount for his personal use, he is not liable to deduct TDS on interest.
Khushbu Bansal
(student)
(48 Points)
Replied 26 September 2024
In your case, as long as the interest income is reported in your ITR, the transaction remains legal and transparent.
Venkata Suresh
(27 Points)
Replied 27 September 2024
Thank you for your reply.
As I'm already said,my friend taken that amount to construct his house and he wants to earn rental income on that property.After getting rents,Is it possible to claim principal and interest amount part deductions in his ITR as like home loan taken from financial institutions?At present he is in old tax regime.
Khushbu Bansal
(student)
(48 Points)
Replied 28 September 2024
Since your friend has taken a loan from a private source (not a financial institution) for constructing his house, the tax treatment may differ from a typical home loan taken from a recognized financial institution.
Interest Deduction:Under Section 24(b) of the Income Tax Act, interest on a home loan is deductible up to ₹2 lakhs per year if the loan is taken for acquiring or constructing a house. There is no explicit restriction that the loan must be from a financial institution.Proving that the loan was genuinely taken for the purpose of house construction and that interest is being paid, he may be eligible to claim the interest deduction.
Principal Repayment Deduction:Under Section 80C, deductions for the repayment of the principal on home loans are allowed only when the loan is taken from specific institutions, such as banks, financial institutions, or government bodies. Loans from private individuals or friends do not qualify for this deduction.
Given that your friend is currently under the old tax regime, he may claim the interest deduction on rental property (Section 24(b)), but not the principal deduction unless the loan was from a recognized institution
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