Hi. My father gave someone a loan of 35 lakhs once upon a time years ago. He is returning the money to me now as my father expired. What are the tax implications for me upon bank transfer?
in your income tax returns mention it as loan repayment
2) Any repayment of loan amounting to Rs20,000 or more should be done through an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, under Section 269T,"
3) Any interest charged by lender from any borrower is chargeable to income tax, generally under the head 'income from other sources',"
- If the said amount being received by you is nothing but the return of the principal amount of the loan given by your deceased father , then it will not constitute income and hence not taxable.
- However, the interest amount received upon the principal amount will be taxable.
this money was repayable to your late father had he been alive
so if the money was repaid to your father when he was alive and subsequently he died, you would have become entitled to this money as your father's legal heir [i am taking it that you are the only surviving legal heir of your late father]
so any money which is received by an heir due to inheritance from his parent, such money is not taxable in the hands of the heir
as your father is no more, the borrower will naturally turn to his legal heir to return the money
so this money should be treated as inheritance money on which no tax is payable in my view
even otherwise if the borrower had not repaid the loan, you could have filed a money recovery suit against the borrower, being the legal heir of the lender. If you would have succeeded in such suit and pursuant to the decree that would have been passed in your favour, the judgment debtor/borrower would have paid you the decretal money, that would not attract any tax
It was a loan given to his friend without interest and there is no proof of him giving the loan. It was given years ago and we have changed a lot of houses and lost a lot of documents. Will it be a problem for me tax wise not having a proof of my father giving a loan years ago?
There is no proof of loan given
if any money had been advanced it should be reflected in income tax returns
3) contact your father CA and check old records regarding advancement of loan
If the person who seeks to repay the loan, can give an affidavit to the effect that he had taken a loan without interest from your late father who was his friend, then that may help.
Obviously accepting a bank transfer is not going to be without legal problems
I take it that since the loan transaction is a very old one for which there is no documentary proof and the loan may also possibly be given by cash, then the question would arise about the known sources of income of your father for lending an amount of 35 lacs and whether this money was declared in his IT returns as an asset.
So if you are accepting the repayment by bank transfer , your case may get selected for scrutiny by the assessing officer and you would have to explain everything
At the highest you will have to pay tax on the amount that is being repaid to you
It's much better and advisable to receive the money by proper banking channels than in cash since repayment of money in cash will bring both the borrower and the heir of the lender in legal trouble since under the IT act no borrower is permitted to repay any loan in cash and also receiving cash in excess of 2 lacs is prohibited
So please consult a proper CA
Nowadays, such a large amount can't be taken as cash. So either you or the sender have to pay the tax.
You can take it as a gift or take the amount in cash in small chunks. 1 to 5 lacs cash at the interval of a 1 month gap in between.
This is loan repayment made by the borrower to the legal heirs of the lender.
There is no income tax applicable for receiving the loan repaid.
If there is any interest paid along with the principal repayment, then that portion will attract income tax because it will be considered as an income from other sources.
You can give a receipt acknowledging the receipt of the repayment of loan and enclose the copy of the said acknowledgment along with your ITR, which will be sufficient to prove that it was a loan repayment without interest.
You can discuss with your auditor on all such further issues and proceed as suggested.
- Yes, you may have to submit the proof of the said amount
- However , after returning the said amount , that person may ask you a receipt of the same , where you can mention that you have receipt this amount as loan .
Dear client,
In India, receiving a repayment of a loan doesn't typically have direct tax implications, especially if the loan was given without interest. Receiving the principal amount back shouldn't attract tax implications under normal circumstances. It's not considered income; it's the return of the money that was lent. While it's beneficial to have documentation of the loan, such as a written agreement or acknowledgment, not having explicit proof doesn't necessarily mean the transaction didn't occur. Testimony from witnesses or the borrower's acknowledgment could serve as evidence. India doesn't have wealth tax as of my last update, so receiving a lump sum of money (like the loan repayment) wouldn't trigger a wealth tax liability. There might be considerations if the money is considered a gift, but as this is a repayment of a loan given years ago, it's less likely to be categorized as a gift. You can reach out to us for further assistance
There will be no tax implications if you wrote off the same
