borrowing money from mother


Dear Readers,

   I am planning to borrow a sum of more than 20 lacs from my mother due to an emergency.

   She is a widow and has no means of income apart from the savings that she has.

   I have couple of questions:

1. Is simple online bank transfer is the best way to transfer money? or through gift deed?

2. What are the tax implications for my mother and for myself?

3. What kind of documents should be maintained while borrowing the money from indicating the same while filing income tax returns?

 

Thanks

 
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Advocate

For taxation purpose you should made gift deed and payment through bank cheque or transfer.

If you are borrowing money to be returned back than you need not made gift deed otherwise the amount taken by you will be considered as part of your total income for the financial year.

You in such case enter in to an loan agreement where you agree to return back the amount with nominal interest to your mother after the decided period of time. By doing so the amount you take as loan will not be your income and the interest you pay her too get tax benifits. The interest that your mother gets from you becomes her income that will get exempted if her total income for the financial years is less than taxable income allowed to her.

 
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