Re payment of Loan

This query is : Resolved

V.S.Rajagopalan

V.S.Rajagopalan (Querist)
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20 December 2009 Can a Loan amt. due to its share holder be paid before payment of IT from the profits of a Pvt ltd co.Can interest be paid on the Loan amt.Ifso under what sec.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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20 December 2009 Income tax is decided after preparing profit and loss account.

And payment of Interest is a charge against profits. It is a business expenditure which is allowable under Income-tax u/s 36(iii).

Hence you can pay interest before payment of income-tax.

However; you have to pay income-tax also. For which you can take another loan.