I wish to know what is the limit of amount a private limited company can take exemption for the interest paid on the unsecured loan taken (Please note that this loan was from the Director to the Company)
20 August 2023
Any interest paid by a taxpayer on capital borrowed for the purposes of the taxpayer’s business or profession is tax-deductible without any limit. However, if such interest is paid to certain related persons (non-resident associated enterprise), then, the interest expense will be restricted to 30% of earnings before interest, taxes, depreciation, and amortisation (EBITDA). Excess interest expenditure disallowed in that year can be carried forward for eight years and would be available for set-off. If the capital is borrowed for acquiring a capital asset, then interest liability pertaining to the period until the time the asset is used cannot be allowed as a tax-deductible expense and will have to be added to the cost of such asset.
There are some specific guidelines for interest deduction being prescribed in ICDS.
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