If one of my friend is taking a personal loan to clear my credit card debts, as I am not eligible to take a PL due to current debts – What would be the best way of transaction for payment and re-payment, considering income tax? Till I repay him, he’ll continue paying EMIs. We are residing in different cities. Obviously, no one wants to pay tax on no-income.
a) We decided that – He will clear my credit card debt directly using his online banking. Once I get a PL, I’ll clear his PL directly. Possible? Logical?
b) He transfers whole amount to my account and I make CC payment. Then I transfer amount in his account, and he repays PL.
Is there any better way? What could be tax implications in both cases? What should we consider, keep in mind, and take care of?