TDS ON INTEREST PAYABLE TO MOTHER

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  1. rl334709

    rl334709 New Member

    A mother (resident), transfers an amount from her bank a/c, into her younger son's bank account through cheque during f.y.2012-13 and f.y.2013-14, by 5 different transactions on various dates.

    These transactions are to be considered as loan from mother to son.

    THE SON HAS EARNED INTEREST ON SUCH LOAN AMOUNT BY MAKING F.D.s IN HIS OWN NAME.

    The mother is a housewife and having no income other than interest from bank savings. BOTH MOTHER AND SON ARE RESIDENTS. Both are INDIVIDUALS. They are not any company or firm or any other institutional entity.

    Now,
    in f.y. 2014-2015, the son wants to pay the loan amount back , with interest payable to her mother on such loan.

    My questions are :

    1. AT WHICH RATE THE INTEREST SHOULD BE PAID TO MOTHER ?
    IS THERE ANY RANGE /LIMITS FIXED REGARDING RATES , FOR SUCH CASES ?

    2. THE SON HAS TAKEN LOAN FROM MOTHER. BUT, THE LOAN AMOUNT IS USED FOR
    GENERATION OF INTEREST INCOME BY THE SON.
    IS IT COMPULSORY TO PAY INTEREST TO MOTHER ?

    CAN THE SON SHOW SUCH LOAN AS "LOAN WITHOUT INTEREST" , EVEN IF WHEN HE HAS
    EARNED INTEREST ?


    3. WILL THE SON HAVE TO DEDUCT TDS FROM THE INTEREST PAYABLE TO MOTHER ?
    . AND TO DEPOSITE THAT TDS AMOUNT TO GOVERNMENT ?

    4. WILL THE SON HAVE TO ISSUE TDS CERTIFICATE ( FORM 16/ 16A OR OTHER CERTI. ) , TO HIS
    MOTHER , FOR THE AMOUNT DEDUCTED FROM INTEREST PAYABLE ?

    5. HOW THE MOTHER CAN GET REFUND OF THE AMOUNT OF TDS DEDUCTED , IF HER TOTAL
    INCOME FALLS BELOW THE INCOME TAX EXEMPTION LIMITS?

    6. THE SON HAS NOT PAID ANY INTEREST DURING F.Y.2012-13 AND F.Y. 2013-14.
    HENCE, HE HAS NOT DEDUCTED TDS YET EVER.
    THEN, NOW WHEN HE WANTS TO PAY INTEREST IN F.Y. 2014-15,
    WILL HE HAVE TO PAY ANY PENALTY FOR NOT DEDUCTING TDS IN PAST YEARS ?
     
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    1. You can repay the amount with or without any interest. The rate of interest has not been defined anywhere. It is your personal discretion with respect to the interest to be paid.
    2. As you have earned income on this amount, therefore clubbing provisions will apply.
    3. TDS will not be deducted in this case.
    4. No need to deduct TDS, therefore refund not applicable
    5. As son is not required to get audit conducted, therefore TDS Provisions dont apply.
     
    rl334709 likes this.
  3. rl334709

    rl334709 New Member

    SIR,

    Thanks for your helpful guidance.
    My doubt regarding TDS provisions got solved.

    Besides, I still have a little confusion.
    I DESCRIBE IT BELOW.


    SIR,
    as per your answer, there can be two options for son.

    1st option : Pay the loan amount back to his mother, without interest, by showing the loan as '' LOAN WITHOUT INTEREST '' in the books of accounts.

    if son takes this 1st option, then it will be proved that mother has transferred the income on her own money to his son, without transferring the ownership of her money asset. Hence, clubbing provision will apply and thus, the interest earned by the son, on such loan amount, will be clubbed in the total income of the mother.


    2 nd option : Pay the loan amount back to his mother, with the interest.

    If son takes this 2nd option, then clubbing will not apply because there is interest receivable by mother on loan ,in this option.
    OF COURSE, the interest will be paid to mother, but it will not be said and considered as clubbing.

    Interest payable to mother will be considered as his expense.
    And interest earned by him on loan amount will be his income.



    SIR, I have understood your opinion in the above mentioned manner, from your previous answer .
    Is it correctly understood by me ?
     
  4. gaurav_kumar

    gaurav_kumar Well-Known Member

    Yes, you have understood the provisions in the correct sense...
     
  5. rl334709

    rl334709 New Member

    A lot thanks again...sir
    ....for your guidance.
     
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