When considering investments, understanding the tax implications is crucial, especially with high-yield options like 12 Club. Offering up to 12% returns annually, this P2P lending platform attracts attention but are these earnings taxable? Before diving in, it’s essential to grasp how Indian tax laws apply to your interest income from 12 Club.
In this article, we’ll explore the taxation aspects of 12 Club, ensuring you’re fully informed before making your next investment move.
What is 12 Club?
12 Club is an NBFC but it is a P2P Lending Platform; in other words, it is an online marketplace which brings together borrowers and lenders. 12 Club, as well as all other P2P platforms, differs from the conventional banking systems where the banks perform the role of intermediaries between the lenders and borrowers.
It says it can earn users up to 12 percent of the annual interest, which is significantly higher than the usual fixed deposit or any savings account.
Open an account with Angel One– Click here
Taxation on Interest Income
As a result of the investments made in 12 Club, interest income is accrued and is therefore tax chargeable. Here’s how it works:
Interest Income as “Income from Other Sources”:
The interest earned from lending on 12 Club comes under the head of “Income from Other Sources” while filing your Income Tax Return (ITR).
This income is included with the rest of your total income and taxed by your respective tax slab rate.
For knowing recent Tax slab rate open this website- https://cleartax.in/s/income-tax-slabs
Tax Deducted at Source (TDS): Tax Deducted at Source (TDS):
As contrasted to fixed deposit where the banks usually cut TDS on the interest paid if the amount exceeds a certain limit, the 12 Club P2P platform does not withhold tax on the interest to be paid.
This therefore means that it is up to the investor to declare this income while filing their ITR and meet the tax implications thereof.
Advance Tax:
In other words, if your total tax liability for the current financial year becomes more than ₹ 10,000 then you have to pay advance tax on your interest income from 12 Club. If not done this might attract interest penalties.
Special Considerations
Tax Implications of Defaults:
Lending through P2P carries certain risk of repayment default and it is possible in this case not all the expected interest income can be realised. However, tax is just possible on the actual interest income and not the expected or anticipated income in the market. If you don’t receive either interest or the principal if a borrower defaults, then this amount cannot be considered taxable.
Losses and Set-Off:
Even when there is a loss due to defaults the current tax laws will not allow the losses to be offset against other income. This is a factor that investors should put into consideration when investing in P2P lending firms such as 12 Club.
Open an account with Upstox– Click here
- Can I withdraw money from 12 club ?
Yes, you can withdraw your invested amount either partially or in full before maturity. The amount will be credited to your bank account as per the terms and conditions of the 12% Club. Note that the maximum investment tenure cannot exceed 36 months, in line with RBI P2P regulations.
2. Is the app of the 12% Club safe?
The 12% Club by BharatPe is funded by an NBFC which stands for Non-Banking Financial Company and it works quite differently to a bank but is not entirely regulated by the RBI.
Conclusion
In conclusion, yes, the income earned from 12 Club is taxable under Indian law. The interest you earn through our peer-to-peer lending platform is classified as “Income from Other Sources” and is taxed accordingly. While 12 Club promises high profits, it’s crucial to consider the tax consequences and potential risks of peer-to-peer lending. Before investing, always contact with a tax adviser to ensure you understand all of your tax requirements.
If you found this post useful, please comment “useful”. And I request you to Please share this post on Facebook/WhatsApp with those who need this.
