Cash Paid Given to Brother For Business

As u have given the amount to your brother, that comes within the defination of relatives.

however, such receipts will be shown as Income from Other Sources and this is fully exempt u/s 56(2) and debit his cash a/c and credit the capital a/c accordingly.

You can debit your Capital Account by such amount. no effect in ITR.

Hi Azim,

Happy NEw Year, Thanks for your reply. Is there any way he can make document of the cash has recieved and used already to purchase the material so that he can produce proof of cash barrowed from me in case there are any queries from the INcome Tax Department.

Also how do you suggest me to lend him money in future to avoid any queries from income tax for him. I am salary holder and do you see any complication in lending cash to my borhter.

Thanks

Govinda

Dear Govind, you are using word borrowed and not gift. It appears that you have given a cash loan and not gifted money to your brother which you expect to be refunded later.

Please note that receipt of loan in cash in excess of Rs 20,000/- is in violation of section 269SS of Income Tax Act. If your brother shows this cash loan in books, he is liable to be penalised u/s 271D of the Act by way of penalty of Rs 9 Lakhs.

In future don't lend him a single penny in cash as it will again be violation and liable to be penalised by sum of identical amount.

The money given to brother so far can be shown as cash gift by you to your brother as the same will neither attaract any tax or penalty. However, by acknowledging gift, you will lose any right to recover this sum back.