I took 12lakhs loan from my friends. Using it for trading. What should i do when IT fiiling?

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Loan taken can always be shown as borrowed funds in the balance sheet. It is also better to show some interest expense to lessen your taxes.


make a bond in a stamp paper stating that you took 12 lakhs loan from your friend and mention if there is any interest if you are paying your friend.the income you earn by trading in derivatives will be considered as business income.so why filing IT,you just have to pay tax for the income excluding the interest (if any) which you pay for your friend…

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Roopa, correct me if I’m wrong…loan taken and returned within the same financial year from the first circle (defied as family, relatives and close friends) does not attract tax…however if carried over to the next FY then interest expense can be claimed.

what if funds are borrowed/taken from spouse , and spouse has already paid tax on that money

We pay tax only on the profits earned from trading but not on the capital invested, hence borrowing from friends, spouse or the fund which is already taxed should not make a difference.

Btw, @harish, - Good for you if you are successful trader, otherwise not a safe idea to borrow money and trade.

Sorry! I am not able to figure out how does loan taken or returned attract tax in any way. In my opinion, it doesn’t.

Sorry, clearly I mixed two things.
Would a soft loan taken from friends and family treated as income? I’m under the impression that if this loan is returned within the same FY then it wont be treated as income…else it would be.

In my opinion, loan taken from friends and family is not treated as income unless it is intended as gift/not repayable. And there is no condition as such to be paid in same F.Y. It can be carried forward in balance sheet for a reasonable period.

Thanks Roopa, I remember my CA mentioning something like this…hence wanted to confirm. Guess I got that wrong.

Should I deduct the TDS when paying the interest to the lender ?

Hi @RLM,

If you have gotten your books of accounts audited in the previous financial year and paid interest more than the threshold specified u/s 194A, in such a case you need to deduct TDS and file a TDS return.
However, if you are not liable for tax audit in the previous financial years, you are not liable to deduct TDS or file TDS return