Can any NRI Give loan to Pvt Ltd Company (its Urgent please)

Can any NRI (Who is not director of pvt ltd company) Gives loan to Pvt ltd Company. 

i wan to know the tax treatment  for NRI, if any Interest received by NRI on that loan.

and conditions or rules to be fulfill for given any loan to pvt ltd company by  NRI who is not director of company . 

Any amount received as a loan from any person other than a director or his relative or a member of a private limited company, would be treated as a "Deposit" attracting Section 58A of the Companies Act, 1956. Private Companies are prohibited from accepting deposits other than its members, directors or their relatives.

There seems to be difference in terms used in the act. ''Deposit'' as defined under section 58A need not be the same as used in section 3(1)(iii)(d), vice versa. Explanation given under section 58A for deposits start with  '' deposit for the purposes of this section means........'', therfore the term deposit as defined may be used only for purposes of section 58A. Whereas the term deposit includes all kinds of borrowings as defined u/s 58A, for purposes of section 3(1)(iii), deposit may need not include all other kinds of borrowings, i.e, loan, etc. As there a clear distinction betweem loan and deposit. (loan is repayable on demand, deposit is generally for a specified period, decided in few cases) 

therefore can it be argued that term deposit u/s 3(1)(iii) need not include loans and hence private company can take loans from NRI in above case??

(Source for above points: V S Datey, Corporate Laws)  

Jayshree ma'm please correct me if m wrong, i have no updates of case laws in this topic. 

Dear Sunny

As per Deposit Rules, Depositor includes who has given loan to the company. It also specifies that it includes any amount borrowed by the company.

I dont think section 3 does not include loan.

Regards- Sudhir

ya but again, such rules are framed for the purposes of section 58A .. Will the same be made applicable to section 3 also??? 

In exercise of the powers conferred by section 58A, read with section 642, of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules, namely .......................... this is how the rules start, so reiterate, there is no specific mention of private companies here too. Depost defined u/s 58A are for the purposes of that section alone and the rules made thereunder are for the purposes of section 58A. 

I may be wrong, please post your views along with case law, if any, on this topic. 

First the Pvt Ltd company issue a min shares to the NRI. and then the P ltd company can get unsecured loan from NRI member in foreign currency. Is it possible.

Originally posted by : vivek Palande
	Can any NRI (Who is not director of pvt ltd company) Gives loan to Pvt ltd Company.  i wan to know the tax treatment  for NRI, if any Interest received by NRI on that loan. and conditions or rules to be fulfill for given any loan to pvt ltd company by  NRI who is not director of company .

No, The NRI can't give loan to Indian Compoany either in foreign currency or in rupees.

There is requirement of TDS @ 20.6% if the loan is in foreign curency otherwise 30.90%.

Besides the same is also restricted under Companies Act,1956

Anuj

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Anuj- Can you pl clarify - "The same is also restricted under the Comapnies Act" and " the NRI Cant give loan to indian Co either in FC or in INR".

TDS requirement is OK.

Loans from NRI's are covered under Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 and Foreign Exchange Management (Borrowing or Lending in Rupees) Regulations, 2000, which clearly prohibits borrowing from NRI's by COMPANIES  without RBI approval.

Regarding Companies Act the same has been answered by Jayashree.

Anuj

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