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loan in cash to pvt. ltd.company

CA Bhuvan (CA ) (83 Points)

10 April 2010

The directors and their relatives and shareholder can give loan to a pvt. ltd. company. can they give loan in cash.

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CS Jithesh (ACS,) (COMPANY SECRETARY ) (485 Points)
Replied 10 April 2010

Directors and their relatives and shareholders can give loans to Pvt Company, provided there should be proper agreement or deed and such loan should not be against the shareholders interest in teh company.

By mere Cash I think yes, but in normal course of business the same will be routed through Bank or Authorised Dealer if FEMA is applicable to the situation

Kindly rectify the same if Iam wrong :)

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CA Bhuvan (CA ) (83 Points)
Replied 10 April 2010

what i know is that Cash loan can be given to a pvt. company only upto Rs. 20,000/-. But I am not so sure about that.

(Guest)

The Rule of Rs. 20000/- is of the Income Tax, which says that.

In a Single Day only Maximum of Rs. 20000/ - can be paid towards the Expenditure to any particular Seller/ Vendor, etc.

-------------------------------------------

If you need further clarification than contact me

CS Ankur Shah (Practicing Company Secretary)

“Guru Gautam” Bungalow, Inside Parshwa Tower,

Nr. Shyamal Cross Road, 132ft. Ring Road,

Satellite, Ahmedabad – 15

Contact: + 91-9427633901

E-mail: ankur @ csankur.com, ankurjewel @ gmail.com

Blog: csankur.blogspot.com

Website: www.csankur.com

SUDHIR & PRADEEP JI (CA FINAL+LLB + DISA) (2299 Points)
Replied 10 April 2010

but dr ankur shah

income tax also say that u cant take a loan from a person in cash in excess of rs 20000/-

& if u has taken it then u have to return it by account payee cheque. only

CA. Ashish Bihani (C.A.) (307 Points)
Replied 16 April 2010

According to Income Tax Act, cash loans beyond Rs.20,000/- are not allowed. You may further refer Sections 69D, 269SS & 269T for the explanation.

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CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 16 April 2010

Under Companies Act, 1956

As explained by CS Jithesh Ji : Directors and their relatives and shareholders can give loans to Pvt Company, provided there should be proper agreement or deed and such loan should not be against the shareholders interest in the company. By mere Cash I think yes, but in normal course of business the same will be routed through Bank or Authorised Dealer if FEMA is applicable to the situation.

Under Income Tax Act, 1961

As explained by Ashish Bihani Ji : According to Income Tax Act, cash loans beyond Rs.20,000/- are not allowed. You may further refer Sections 69D, 269SS & 269T for the explanation.

Further explaination in addition to above :

Sec 69D : Amount borrowed / repaid on hundi except by a/c payee cheque

Sec 269SS : Any person ACCEPTS any loan or deposit otherwise by a/c payee cheque / demand draft of Rs. 20000/- or more.

Penalty u/s 271D for default of sec 269SS : equal to loan/deposit taken/accepted.

Sec 269T : Any Company including Banking Company & its branches, Co-operative Banks & its Branches, Co-operative Society, Firm or other person REPAY any loan or deposit (together wid interest) otherwise by a/c payee cheque / demand draft of Rs. 20000/- or more.

Penalty u/s 271D for default of sec 269T : equal to loan/deposit repaid.

Exceptions : The above restrictions shall not apply if loan/deposit taken/accepted from or repaid to :

Govt.
Banking Company, Post office saving bank or Co-operative Bank,
Govt Companies or Corporation u/s 617 of companies act, 1956,
Other person notified in official gazatte.

Conclusion :

1. The loan in CASH can be taken by the company from its directors, relative of directors or from shareholders, after proper documentation & under the terms & conditions which are not prejudicial to the company, If :-

loan amount below 20000/-

an y loan amount (whether below or equal to or more than 20000/-) if the loan is taken by Govt., Banking Company, Post office saving bank or Co-operative Bank, Govt Companies or Corporation u/s 617 of companies act, 1956,Other person notified in official gazatte.

2. In any other case, the Loan must be taken in ACCOUNT PAYEE CHEQUE OR BANK DRAFT.

NOTE - EVEN SHARE APPLICATION MONEY SHOULD NOT BE PAID IN CASH.