Money from Friend

Dear Singh

What is the nature viz is it a gift or a handloan w/wo interest

I had received it through Western Union. Though my friend had given me as gift. But, he's ready to do any paper work to help me save tax on it.

Dear Singh,

If it is a gift, then it is taxable since it is from an unrelated person

In a first-of-its-kind judgement, the Income-Tax Appellate Tribunal (ITAT) recently ruled that a recipient of an interest-free loan from a non-relative is not liable to pay tax. The judgement will come as a major relief for people who borrow money from friends and colleagues and latter grapple with notices from tax authorities.

Section 56 (2)(v) of the Income Tax Act provides for taxing any sum of money in excess of Rs 25,000 received without consideration by an individual or a Hindu Undivided Family (HUF) from any source other than a relative. Occasions where the recipient is exempted from tax are during a marriage, or in cases where the amount is received under a will, or by way of inheritance or in contemplation of death of the payer.

Applying this section, an income-tax assessing officer treated interest-free loans amounting to Rs 54.7 lakh received by one Chandrakant Shah from non-relatives as a sum without consideration and taxed it.

The assessee approached the Commissioner of I-T (Appeals), but was not granted relief. He then appealed before the Mumbai ITAT, where his legal counsel said that the lower authorities had “misinterpreted” the new section, which came into effect on September 1, 2004. Furthermore, Mr Shah’s counsel said the sum of interest-free loans taken by him even before that date (September 1, 2004) did not fall within the ambit of the amended section.

Please answer my queries point wise:

1. If I get Loan agreement signed from my friend to return amount in 5 years w/o interest. Shall I be liable to pay Tax?

2. What should be the matter of such Loan Agreement? and of What value Stamp Paper?

3. If I get loan agreement will it be shown anywhere in ITR2 Form?

Please answer previous queries......

Dear Singh,

Sent you a PM please check