How to Declare Loan in Income Tax Return?

Income tax return filing requires to declare all the assets and incomes made during that particular tax year. It is filed on an annual basis. The non compliance can attract penalties and extra taxes to be paid the by the person. Today we will discuss in particular how to declare the loans in a tax return. The loan can be by an individual, an institution or from employer or relative etc. What are the prerequisites of taking a loan?

The loan being a liability in nature must be declared in the form 116 under wealth statement. Loan is not an income. But if one fails to properly declare it in the return the tax authorities might opt to treat it as an income and thus assess tax on such income. Under Section39 it will be deemed as an income. The first pre requisite is that it must be received via a banking channel. For example if one takes loan and then deposit such amount via cash in the bank account it will be difficult to justify such amount as loan and not income. The other condition which must be met that the person giving shall have an NTN. 3rdly the intention of taking loan shall be that it will be returned. Because if any such amount is given without an intent to take it back it will be treated as a gift. Which has its own purview of declaration etc.

Where an employee is taking a loan from employer if that amount is greater than one million. If it is given on without interest basis, then that benchmark rate (at the year of taking loan) will be applicable and that interest will be treated as a part of salary and taxed thereon.

This article was published by Zoya Zafar at How to Declare Loan in Income Tax Return?