ITR
Loans from friends questioned in scrutiny
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Facts
For a loan, the officer checks the lender's identity, their capacity to lend and whether the loan is genuine. If these are not shown, the credit can be added to your income.
Provisions and law
- Sec 68, Income-tax Act 1961 (now Sec 102, Income-tax Act 2025)Credits not satisfactorily explained can be treated as income.
- Sec 142(1), Income-tax Act 1961 (now Sec 268(1), Income-tax Act 2025)Officer can require documents and information.
Analysis
Give the lender's PAN, a confirmation letter, their bank statement showing the payment, and their ITR to show capacity. Show repayment if made, through the bank. Cash loans are hard to prove and can also break the cash limits. A complete set of papers usually settles this.
Conclusion
- Ask the lender for a signed confirmation with PAN.
- Get the lender's bank statement and ITR.
- Show the loan and any repayment through bank.
- Submit with the reply.
A Savvy can do this for you
Scrutiny assessment, Sec 143(2) (now 270(8))
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