Can a company accept deposit from its distributors?
This query is : Open
Kenil Satra
(Querist)
09 December 2019
Can a private limited company accept deposit from its distributors? If yes, then what interest should the company pay on such deposit and how much TDS shoud be deducted on the interest paid?
CA R SEETHARAMAN
(Expert)
09 December 2019
Yes, can be accepted. Charge 12% interest and deduct 10% TDS.
Devershi Gupta
(Expert)
10 December 2019
There are various information that I need to know to give a correct view on the said issue, Since your question is vague in nature please check the following table for suitable answer:
1.) Shareholder: Yes, can accept, but subject to the condition specified in deposit Rules
2.) Director/Relatives of Director Yes, can accept, but the director/relative will give a Declaration in writing that money is not given out of borrowed funds and company will disclose it in the Board’s report.
3.) Employee: Yes, can accept up to the employee’s annual salary ( there should be a contract of employment with the company) in the nature of non- interest bearing security deposit.
4.) Any other Individual: Can’t accept because it is prohibited by the definition of Private Company.
5.) Proprietorship Firm: Can’t accept because it can’t be director, Member or relative of Director.
6.) HUF: Can’t accept because it can’t be director, Member or relative of Director.
7.) Partnership Firm: Can’t accept because it can’t be director, Member or relative of Director.
8.) Any Company: Yes, can accept, but also comply with Sec 179(3) wherein the conditions are specified for the lender
9.) Banks: Yes, can accept
10.) Trust: Yes, can accept, but loan received should be non- interest bearing.
11.) Outside India: Yes, can accept, but subject to the provisions of the Foreign Exchange Management Act, 1999 and rules and regulations made there under.
12.) Govt. organization ( eg. SIDBI): Yes, can accept
13.) Any other Financial Institution which are not incorporated as Banks (eg. Religare, Fullerton, Barclays, Bajaj Finance): Yes, can accept
Just by simple look on your matter, I can say you can not take deposit from your distributors. But please check this list yourself. If your case falls under any given scenarios.
1.) Shareholder: Yes, can accept, but subject to the condition specified in deposit Rules
2.) Director/Relatives of Director Yes, can accept, but the director/relative will give a Declaration in writing that money is not given out of borrowed funds and company will disclose it in the Board’s report.
3.) Employee: Yes, can accept up to the employee’s annual salary ( there should be a contract of employment with the company) in the nature of non- interest bearing security deposit.
4.) Any other Individual: Can’t accept because it is prohibited by the definition of Private Company.
5.) Proprietorship Firm: Can’t accept because it can’t be director, Member or relative of Director.
6.) HUF: Can’t accept because it can’t be director, Member or relative of Director.
7.) Partnership Firm: Can’t accept because it can’t be director, Member or relative of Director.
8.) Any Company: Yes, can accept, but also comply with Sec 179(3) wherein the conditions are specified for the lender
9.) Banks: Yes, can accept
10.) Trust: Yes, can accept, but loan received should be non- interest bearing.
11.) Outside India: Yes, can accept, but subject to the provisions of the Foreign Exchange Management Act, 1999 and rules and regulations made there under.
12.) Govt. organization ( eg. SIDBI): Yes, can accept
13.) Any other Financial Institution which are not incorporated as Banks (eg. Religare, Fullerton, Barclays, Bajaj Finance): Yes, can accept
Just by simple look on your matter, I can say you can not take deposit from your distributors. But please check this list yourself. If your case falls under any given scenarios.
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