Balwant Jain, an expert on tax and investment matters, says that you can take a home loan from your father to buy or build a house. The condition is that such a home loan will not be eligible for a deduction of Rs 1.5 lakh on repayment of the principal amount under Section 80C of the Income Tax Act. For this, you will have to take a loan from any government, private bank, or other financial institution.
Tax exemption up to Rs 2 lakh will be available on home loan interest-
However, under Section 24 of Income Tax, tax exemption of two lakhs on interest can be claimed. For this, the borrower will have to provide the interest certificate issued by his father to the department on demand. It is to be noted that this amount of interest will be considered as income of your father and he will have to show it in his return.
Payment from wallet up to a maximum of Rs 50,000-
Through a mobile wallet, the maximum loan can be taken from friends or relatives up to Rs 50 thousand in any one financial year. The Income Tax Department takes this amount as a gift and tax exemption is available only up to 50 thousand. Any amount above this will be considered as additional income and you may have to pay tax as per your slab.
No tax on loans taken from friends
If you have taken a loan from your friends or acquaintances (not family members) at the time of crisis, then this amount will also be out of the purview of income tax. However, if he has given you this amount as a gift, then tax exemption can be claimed only on 50 thousand in any one financial year. The amount above this will be considered as your additional income and tax liability will be made on it according to the slab. If the amount is taken as a loan and it is repaid, then the tax liability will not arise on the borrower. It has to be noted that if interest is given to a friend on this amount, then he will have to pay tax on the amount received as interest.
Transaction in cash should not exceed Rs 20,000.
The amount of loan taken from a friend or relative should not be more than 20 thousand in cash. If this happens, the Income Tax Department can impose a penalty equal to that amount. Similar rules will apply to the repayment of loans as well. That is, the person taking the loan will not give more than 20 thousand in cash while repaying it. Under Section 269T of Income Tax, such loan should be given by check or electronic means only and it should be followed in return.
A loan from NRI relative for three years only-
If an Indian citizen takes a loan from his Non-Resident Indian (NRI) relative, the maximum tenure will be three years. The loan amount should also not exceed $ 2.50 lakh and the interest should not be more than two percent of the bank's similar loan interest. For example, if the bank is giving a loan at 8% interest, then the relative can take a maximum of 10%. Similarly, if an Indian gives a loan to his NRI relative, then he can give a maximum of $ 2.5 lakh without interest for one year.
Making a loan agreement is right for both parties-
If you have to give a large amount as loan to friends or relatives, then it would be better to make a loan agreement. Interest is transacted on this, which should also be included in the agreement. So that, on the demand of the Income Tax Department, all valid documents can be made available and reasonable benefits of tax exemption can be availed.
