cpc

tax on non returnable loan


A man gives  Rs 20 lacs to his father in law to buy a property 10 years ago. Now FIL has simply transferred to property to his daughter ie to the wife of the person who had given the loan.

1. Would there be a tax implication for the FIL, as he has transferred the property to his daughter not to ther person who has given the loan.

 
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Director

no tax implication in the hands of FIL. if the recovery of loan is not enforceable, it will be treated as waiver of loan or at the most gift. in both circumstances, non taxable.

 
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Practicing Lawyer

Any sum received by a person (Both in cash and Kind) from his/her father is not taxable under the Income-tax Act. A person is entiltled to transfer any self acquired property to his/her children. including daughter and no tax is attaracted on such transfer.  Non-repayment of Loan also does not amount to any kind of income creating tax implication.

 
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This transaction is not between son and father. It is between a man and his FATHER IN LAW. Similarty property transfer is between the daughter and her  father and not to the person who gave the loan. So this transfer  can not be set off against the loan. ( Infact this seem to be a Benami Transcation )

If it is claimed that it was a gift then any gift above Rs 50,000/- has to be registered. Also per year limit of receiving gift from a relative ( Not blood relation )  is Rs 50,000/- .

I think it is an income in the hands of FATHE IN LAW and also he needs to pay penalty and interest.

Please advise!

 
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Director

Mr Raman, unfortunately none of your contentions draw support from law.

 

Loan waiver is not taxable in hands of father in law. secondly exemption of gifts is not limited to blood relatives BUT relatives as defined in IT Act. Parents of spouse are covered under the definition.

Now whether recovery proceedings for loan can be initiated or not is a different question. IT Act cannot help in this.

 
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Thanks Mr Vineet for your considered views.

 
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