Interest on loan from director
This query is : Resolved
15 May 2012
Is it necessary to pay interest on loan taken by private limited company from its directors. If so, at what rate should the interest be provided.
15 May 2012
It is not mandatory to pay interest. However, it can pay interest at rates not more than the rates prevailing in the market for similar loans.
Message likes :
1 times
15 May 2012
Under which section it is mentioned that it is not necessary to pay interest. Can the AO add deemed interest on such loan in the income of director during the assessment.
15 May 2012
No. He cannot add deemed interest. After all it is the directors will whether to advance money to the company or not. An exception to this is if the director has borrowed money on interest and then granted interest free loan, then there can be chances of deemed interest to on the amount which is in excess of the directors own funds.
15 May 2012
But the AO might say that if you would have kept the money with you then you would have earned interest and that would be taxable. But instead of this who have given loan to company and that too interest free.
15 May 2012
The AO cannot make such weird judgement. The money is of the director. It is his will whether to keep it in hand or bank or advance it interest free or with interest. AO cannot have any objections on the same.
If this is so, the the AO should also add deemed interest on cash in hand balance on the assumption that had this amount been invested in fixed deposit, there could have been so much of interest. So, this does not happen. The AO cannot add deemed interest to the director.
If this is so, the the AO should also add deemed interest on cash in hand balance on the assumption that had this amount been invested in fixed deposit, there could have been so much of interest. So, this does not happen. The AO cannot add deemed interest to the director.
Message likes :
3 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- REGARDING GST ON COMMERICIAL PROPERTY
- Is this income indian or foreign income?
- 15ca /15cb whose income tax login? remitter or nri seller's login?
- Regarding Documentation & Compliances for Opening of Unit of Pvt Ltd.
- RCM applicability on Rent Paid by Registered Person to Unregistered Landlord for Residental Building
- TDS U/S. 194NF
- GST on export of services and Input Credit
- ITC temporary reversal and reclaim
- Applicable TDS rate for sale of property in Nov 2024
- Can we claim ITC of Feb-2024 in the month of November-2024 which was not claimed by oversight
- Event company query
- MIS MATCH OF INVOICE NUMBER
- VERIFICATION OF REFUND RELATED
- GST Regis.
- ITC c/f from FY2022-23 to FY2023-24 entered the same in table 8C of GSTR9 of FY 2022-23, in FY23-24
- Late filling fees Demand by gst office
- IGST Credit-Show cause notice issued-confusion
- Short and Excess provision of expenses
- Issue of gst e invoice
- Interchangeable words in accounts
Trending Online Classes
CAclubindia
