Interest rate on related party transaction

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Shokin Tiwari (Querist)
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09 June 2015 Can give interest below 10% on related party transaction?
Any interest rate is fixed on related party loan ?

Guest

Guest (Expert)

09 June 2015 Dear Mr Shokin Tiwari,

As per section 186(7) of Companies Act 2013, loan to RP cannot be given at interest below the yield of Government securities. As of yesterday, the following were yield of government securities with various tenors - as taken from NSE:

1-3 year: 9.153%
3-8 year: 8.611%
8+ years: 8.550%

Depending on the tenor of the loan to Related party, the company shall charge interest.. So for example, if the loan period is 5 years, it has to charge, a minimum of 8.611%.

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