Interest on unsecured loan disallowed

[satbir singhwahi]

AO HAS U/S 40A(2) DISALLOWED INTEREST PAID TO RELATIVES @18% AND OTHERS @ 12%.I.E 6% HAS BEEN DISALLOWED.INTEREST PAID TO BANK 14.25% AND UNSECURED LOAN FROM RELATIVES WAS TAKEN TO TIDE OVER THE CRISIS AS BANK HAS REFUSED LIMITS AS MAJOR DEBTOR HAD GONE TO BIFR.WHETHER AO ACTION RIGHT???

AI Summary

Dispute Over Disallowance of Interest on Unsecured Loan Under Section 40A(2) Due to Excessive Rates to Relatives An individual raised a query about the disallowance of interest on an unsecured loan by the Assessing Officer (AO) under Section 40A(2) of the Income Tax Act. The AO disallowed 6% of the interest paid to relatives at 18%, deeming it excessive compared to 12% paid to others, while the interest paid to the bank was 14.25%. The loan from relatives was taken due to a financial crisis after a bank refused limits. In response, another participant suggested reviewing a relevant case and agreed that if the interest is genuine, justice could be sought at an appropriate forum.