Income tax
Mathan Ramasamy
(Querist) 21 January 2015
This query is : Resolved
Hi,
One of my friends is doing Trading business as individual. In order to increase his cashflow, I am planning to lend money (TBD. could be Rs. 10L) and he agrees to give me 15% flat interest rate irrespective fo his profit or loss. Basically it is a risk free investment from my side.
However, I believe I will have to pay income tax for the gained interest. But the amount was already taxed as part of his trading business. How do we avoid this double taxation? I am a NRI. My friend is in India.
Thanks,
Mathan
Anirudh
(Expert) 21 January 2015
What is being taxed in the hands of your friend is his business income.
What is being taxed in your hands is the interest income in your hands.
Therefore it is not correct to say that the income is taxed twice.
Guest
(Expert) 21 January 2015
Dear Author,Better you Consult the CA Club of the same Forum whose Details are just below in this same Thread for a Professional and Practical Reply from CAs.
Rajendra K Goyal
(Expert) 21 January 2015
Apart from the fact you should lend or not and if lend how, the would be interest income of yours is taxable in your hands.
ajay sethi
(Expert) 21 January 2015
it is not double taxation . you are being taxed on interest you earn from lending to your friend
T. Kalaiselvan, Advocate
(Expert) 24 January 2015
The income in the hand of your trading friend will suffer TDS hence he need not pay additional tax on the income derived, however the interest income in your hand out of your investment has nothing to do with your friend's tax payment/deduction, therefore it is wrong perception that it is being taxed twice. Further in the normal circumstances itself it will not be possible to foresee a regular income in the trading business due to fluctuations and recessions in the market, so what is the guarantee that your friend will be able to pay interest despite suffering losses, better analyse all the facts and weigh the probabilities before investing huge amount in such investments.
