Do I need to pay interest for the money I get back from Friend which I loaned ?

POSTED BY libranavi1 ON February 12, 2014 9:23 pm COMMENTS (5)

Usually my friend use to borrow some money from me, saying that he is investing somewhere and he returns me money whenever I want, with some interest. I am not sure where he is investing. Do I need to pay interest for the money returned? Usually amount transferred per year is less than 50K  and interest is usually around 2K

5 replies on this article “Do I need to pay interest for the money I get back from Friend which I loaned ?”

  1. ashalanshu says:

    Dear Libra, yes the Y is your taxable income and you need to pay tax on it. X was your money which you recived back now, hence no tax on it.

    Thanks

    Ashal

  2. libranavi1 says:

    Thanks Ashal!
    Sorry for not being clear about my case.
    My friend is returning money. Instead of X Rs. (Borrowed from me), he returns X+Y Rs. so my question is do I need to pay to tax for additional Y Rs, which I am receiving from him? This is understanding between me and him.

    Thanks
    Avi

  3. ashalanshu says:

    Dear Libra, return of your own money can not be termed as gift. So question of tax on it does not arise.

    Thanks

    Ashal

  4. libranavi1 says:

    Thanks Ashal! I had already informed my employer about this. I had one more query about the same.
    Since it is return of the money which I had given to him earlier, shouldn’t I be able to avail no tax considering this is a gift and this amount is less than 50K.

    How do we mention any money transferred between friends is gift?

  5. ashalanshu says:

    Dear Libra, is it interest or income tax you are asking for? Yes in case you are earning any interest say 2000 Rs. you need to declare it as your income from other sources and pay tax on it.

    Thanks

    Ashal

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