Interest on unsecured loan

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Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2012 Can we due interest on unsecured loan to a company director in a Pvt. Ltd. Co.
and what rate ?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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10 April 2012 If the private company is a subsidiary of holding company then Section 295 of companies act should be complied with.

If it is not the case, then loan may be given to directors of the private company.
Interest may be collected on such amount of loan.

Further, Section 2(22)(e)of Income tax act, 1961 treats such loan as deemed dividend to the extent of accumulated profit.if such director holds more than 10% shares in the company and is the beneficial owner of the same.

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