Sec 28 chargability
This query is : Open
17 November 2009
Sec 28 says that 'THe value of any benefit or perquisite, whether convertible into money or not arising from the business or exercise of a profession' is chargeable under the head profits and gains from business or profession
Keeping with concept. Will notional interest on interest free loans provided by the promoters, shareholders, other stakeholders categorised under unsecured loan be subject to tax in the hand of the company.
This question is intended to clarify whether my understanding of the act is correct or not and not specifically whether companies or other assesses do or do not charge if such interest if taxable as income in practice. Kindly bear that in mind when answering. Thank You
Keeping with concept. Will notional interest on interest free loans provided by the promoters, shareholders, other stakeholders categorised under unsecured loan be subject to tax in the hand of the company.
This question is intended to clarify whether my understanding of the act is correct or not and not specifically whether companies or other assesses do or do not charge if such interest if taxable as income in practice. Kindly bear that in mind when answering. Thank You
17 November 2009
Seems the second para is not properly framed. Promoters/shareholders/stakeholders are providing interest free loans to the company thereby eligibility of interest income, notional or otherwise, arises in their hands. On the other hand interest is an expense real/notional as far as the company is concerned. Then how can the company be assessed on the expense u/s 28.
There arises my doubt raised in the ist sentence given herein above.
There arises my doubt raised in the ist sentence given herein above.
18 November 2009
My question arises because in income from salary where the employer provides an interest free loan excess of 20000 the notional interest in accordance with the SBI lending rate is taxable in the hands of the assessee.
As to your 1st point where the company does not charge interest to the employee it does not show as income as income does not accrue
Whereas the salaried employee is charged tax on notional interest which he never paid. It must be noted that interest is an expense for a salaried person whether notional or not. It is a monetory benefit and is taxed.
Keeping this in mind if would like to know if notional interest for interest free loans provided by the promoters, shareholders, other stakeholders categorised under unsecured loan be subject to tax in the hand of the company.
Sec 28 says that 'THe value of any benefit or perquisite, whether convertible into money or not arising from the business or exercise of a profession' is chargeable under the head profits and gains from business or profession
KINDLY SUBSTITUTE 'EMPLOYER' WITH THE 'LOAN PROVIDER' OR 'STAKE HOLDER' AND 'EMPLOYEE' WITH 'COMPANY'
I have heard that the character and nature of income is the criterion for chargeability and not mere receipt of funds. Hence Keeping in mind that income includes notional income I would like to know if the notional interest is chargeable to tax.
This question is intended to clarify whether my understanding of the act is correct or not and not specifically whether companies or other assesses do or do not charge such interest if taxable as income in practice. Kindly bear that in mind when answering. Thank You
As to your 1st point where the company does not charge interest to the employee it does not show as income as income does not accrue
Whereas the salaried employee is charged tax on notional interest which he never paid. It must be noted that interest is an expense for a salaried person whether notional or not. It is a monetory benefit and is taxed.
Keeping this in mind if would like to know if notional interest for interest free loans provided by the promoters, shareholders, other stakeholders categorised under unsecured loan be subject to tax in the hand of the company.
Sec 28 says that 'THe value of any benefit or perquisite, whether convertible into money or not arising from the business or exercise of a profession' is chargeable under the head profits and gains from business or profession
KINDLY SUBSTITUTE 'EMPLOYER' WITH THE 'LOAN PROVIDER' OR 'STAKE HOLDER' AND 'EMPLOYEE' WITH 'COMPANY'
I have heard that the character and nature of income is the criterion for chargeability and not mere receipt of funds. Hence Keeping in mind that income includes notional income I would like to know if the notional interest is chargeable to tax.
This question is intended to clarify whether my understanding of the act is correct or not and not specifically whether companies or other assesses do or do not charge such interest if taxable as income in practice. Kindly bear that in mind when answering. Thank You
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