Loan to friend - legal procedure
Satish Makam
(Querist) 05 May 2012
This query is : Resolved
I am giving loan to one of my friends Rs. 2,00,000 in cash.
Now what documents(like stamp paper/promissory note) i need to get prepared. Is it legally enforceable for repayment in case if he does not pay.
Please describe in detail.
thank u in advance.
ashutosh mishra
(Expert) 05 May 2012
You should not pay it in cash is the first very precaution you need to take.Pay it through Bank a/c.
Before paying take a letter of request for this loan addressed to you by your friend,then only issue an a/c payee cheque against receipt issued by your friend admitting the debt and promise to pay along with interest if any.
In lieu of this debt take back an a/c payee cheque of a date your friend promises to return inclusive of interest,if any.
SAINATH DEVALLA
(Expert) 05 May 2012
Satish,
From what sources are you giving that loan,whether to a friend or a foe the legal procedures are the same.I agree with the points of Mishra.Make it official payment,inorder to avoid any future complications.
adv. rajeev ( rajoo )
(Expert) 05 May 2012
Hand loan chit with two wittensses is sufficient. Pay the amount thru., cheque and keep the documents to show that you are having that much amount with you.
Do not write interest in the hand loan chit, if you mentioned it, it amounts illegal money lending.
ajay sethi
(Expert) 05 May 2012
you pay in cash rs 2 lakhs and your friend wont repay you . you will lose a friend for life as well as money .
instead help him getting loan from bank .
if at all you want to give money pay by cheque only . obatin acknowledegemnt from friend of having received funds . let him give in writing when he will repay the laon .
R.K Nanda
(Expert) 05 May 2012
I agree with experts.
Satish Makam
(Querist) 05 May 2012
Dear sirs, thank u for early reply.
what exactly i want is, can we have "loan agreement" on stamp paper specifying interest rate & repayment terms etc. or is it enough if i take promissory note.
V R SHROFF
(Expert) 05 May 2012
Agreed with Mr mishra.
Also note: As per Income Tax Laws, any Hand / friendly Loan above Rs. 20,000/- BY CASH IS PUNISHABLE.
Tax Experts may clarify more.
It is an offence to pay cash above Rs. 20k , unless you can justify the emergency like medical/ accidental
Satish Makam
(Querist) 05 May 2012
sirs, dont give irrelevant answers
Satish Makam
(Querist) 05 May 2012
20000 is disallowed for business people. but there is no punishment
Satish Makam
(Querist) 05 May 2012
Dear sirs, thank u for early reply.
what exactly i want is, can we have "loan agreement" on stamp paper specifying interest rate & repayment terms etc. or is it enough if i take promissory note.
V R SHROFF
(Expert) 05 May 2012
Mr. Satish, if he refused his sign on PN, how will you prove??
You cannot take two witnesses on Pro note, otherwise it no more remains Pro note, under definition of PN.
You cannot prove payment of 2L Cash.
Read sec 269ss 269 t i t act. Prohibiting Payment of Cash Loan over Rs. 20,000/-
u feel these are irrelevant answers Mr. Satish??
What difference it make to Pay by A/c Payee Cheque with MOU on Rs. 100/- Signed in pr of Notary with his Photographs, Photo ID Copy & PAN Card, and promise to repay within xx months, and a copy PDC etc??
Satish Makam
(Querist) 05 May 2012
First thing i am not a tax payer as i have no taxable income. I think sec 269ss 269t are not attracted in my case. second thing i dont have any bank account. i usually give loan Rs. 20000-30000 to know people for 2% interest Per month. till now no one defaulted repayment. This time i am giving 200000. so i thought, as it is large amount, there should be some documentary evidence. and in worst case, if my friend does not repay, i can sue him for recovery of my loan.
