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Loan from directos relatives in pvt. ltd. company

VISHAL GUPTA (MBA-Finance) (145 Points)

05 November 2012

I want to know that If a Pvt. Ltd. Company require fund & the family member of the Director ready to give them. is it correct as per income tax rule of a company, pls suggest me.

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5 Replies

CA Manish (Job) (5264 Points)
Replied 05 November 2012

Deemed dividend - Section 2(22) (e)

Loans & advances (other than in ordinary course of business) by closely held company deemed as dividend

Payment by a company not being a company in which public are substantially interested.
Of any sum by way of loan or advances.

To beneficial shareholder of not less than 10% of voting power.
To any concern in which such a shareholder is a member or a partner and in which he has a substantial interest
To any person on behalf of or for the individual benefit of such a shareholder.

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Saket Sinha (Student) (129 Points)
Replied 05 November 2012

Yes , memebers of the family can give loans to the private limited company and interest paid on such loans by the comapny shall subject to sec40 of Income Tax Act 1961.

Saket Sinha (Student) (129 Points)
Replied 05 November 2012

Yes , memebers of the family can give loans to the private limited company and interest paid on such loans by the comapny shall subject to sec40 of Income Tax Act 1961.

CA Mangesh Chitale (B. Com. A.C.A. DISA (ICAI) DIRM (ICAI)) (245 Points)
Replied 05 November 2012

Yes, Directors can give loan to company. Section 2(22)(e) is not applicable here. loan will be called as 'Quasi equity'. Read 40A(2)b before claiming deduction of interest on loan.