Breaking of FD in Pvt Ltd Company
This query is : Resolved
DIVYESH JAIN
(Querist)
21 May 2026
Dear Sir,
One of my client runs a Pvt Ltd. company in which he has booked and FD of Rs. 5 lacs in the year 2022. Now he wants to break that FD and withdraw the amount either in the form of Salary or any other source of income.
My query is the company does not earn much profit hence if the company gives Rs. 5 lacs as salary or any other expense will there be any compliance issue to the company with the loss of Rs. 5 lacs carry forward to next year.
Please help me in this matter
One of my client runs a Pvt Ltd. company in which he has booked and FD of Rs. 5 lacs in the year 2022. Now he wants to break that FD and withdraw the amount either in the form of Salary or any other source of income.
My query is the company does not earn much profit hence if the company gives Rs. 5 lacs as salary or any other expense will there be any compliance issue to the company with the loss of Rs. 5 lacs carry forward to next year.
Please help me in this matter
21 May 2026
Compliance Issue: Liquidating the FD is legal, but booking the ₹5 Lakhs as a sudden salary or random expense solely to create an artificial loss will likely face disallowance under audit (Section 37/40A(2)) if there is no commercial business substance behind it.
Tax on Individual: If taken as salary, the company must deduct TDS, and the client must pay personal income tax on that ₹5 Lakhs.
Carry Forward: If the loss is genuine and accepted, it can be carried forward for 8 years, provided the company files its corporate ITR strictly before the due date.
Tax on Individual: If taken as salary, the company must deduct TDS, and the client must pay personal income tax on that ₹5 Lakhs.
Carry Forward: If the loss is genuine and accepted, it can be carried forward for 8 years, provided the company files its corporate ITR strictly before the due date.
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