Personal money lending to relative
ajay gupta
(Querist) 22 November 2010
This query is : Resolved
I am in service with a private company in india and files my income-taxes regularily.One of my close relative wants Rs. 5 lakhs loan (with or without interest) from my salary account for investing in one of the real estate company's FD which might result him a better ROI.He wants me to transfer the loan money via cheque or netbanking transfer from my salary a/c to his company bank a/c through which he would make investment.He promise me to return the money within 15 days but in theform of cash only.
Since he is a very cose relative and hard to refuse from my part, please advise whether it is legal to do so in this way and there shall not be any tax implication on my side in future OR kindly suggest some suitable method for doing this. He is not a blood relative (wife maternal uncle. Money pay back in cash is guaranteed from him.
prakash vathore
(Expert) 22 November 2010
it doest make any difference it is just like other transaction.
A V Vishal
(Expert) 22 November 2010
Not advisable to get into unsolicited trouble.
adv. rajeev ( rajoo )
(Expert) 22 November 2010
It doesn't make any difference but you have to get a hand loan chit without mentioning interest if you are charging interest. But I do agree with A.V.Vishal
s.subramanian
(Expert) 22 November 2010
Mr.Vishal's advice is right.
ajay gupta
(Querist) 22 November 2010
Thanks to all of you gentleman for your valuable comments. I understand that this is not advisable but sir the question is how to do this safely considering even all this, so that i am not in any legal or tax trouble afterwards. I dont want to bring any bitter feelings in this relationship, given that if it is at all possible.
R.Ramachandran
(Expert) 22 November 2010
Dear Mr. Gupta,
Giving loan to a relative or friend is not at all wrong. Nor is it a crime.
The real issue seems to be that your relative is not in real need of the money. All that he needs is that he wants 'white money'. When you transfer the money through banking channels it is a 'white money' as far as he is concerned. But when you receive the 'cash' from him in return, unless he owns that he has paid the 'cash' to you in repayment of the loan given by you, you will definitely have a hard time in explaining the source of the income i.e. the money returned to you by your relative in 'cash'.
This is the real crux. Your relative will jolly well show in his accounts the money received from you through banking channels as 'loan' received from you.
The trouble for him will also start only when in times of scrutiny by the Income Tax Authorities, you fail to confirm that any loan is outstanding from him (since you received the 'cash' back from him).
Otherwise the problem is yours.
YOU INSIST THAT HE SHOULD RETURN THE MONEY ONLY BY MEANS OF 'CHEQUE' or get a proper 'Promissory Note from him for the amount which you would be giving him as a Loan'. Say that you will return the promissory note only when he repays by means of Cheque. See the result. Explain to him that otherwise you will be having problem in income-tax in accounting the amount returned by him in 'cash'. If he does not agree - then you can understand his games plan. HOWEVER, FOR THE SAKE OF KEEPING THE RELATIONSHIP IN TACT, YOU AGREE TO GIVE THE LOAN ON THE ABOVE TERMS.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 23 November 2010
Full security is only in GRAVE, it is your relative and will return in short time , why worry.
Avinash Dube
(Expert) 23 November 2010
Mr. Gupta the loan to a relative is not an offense .Matter is that u have the sufficient capital in white. and u can prove it that is your own capital.
One point always take in mind that transaction of cash above 20000 is not allowed by law. so advice your relative to return money by banking transaction . if it is not possible return money in one time he may return money in part but by banking only
ajay gupta
(Querist) 23 November 2010
Many many thanks to all of you expert there. Your advice has certainly helped me in taking decision. This forum is excellent, keep it up.
