Interest to relative o a director

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CA Megha Vijay (Querist)
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24 December 2010 Can a company take loan from relative of a director or HUF of director? If yes, can a company give interest on loan to that relative or HUF? Please suggest can it be legally or on accounting basis a valid tranasction and also according to company law?

CA.RAJIV SHUKLA FCA

CA.RAJIV SHUKLA FCA (Expert)
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24 December 2010 Dear Megha,

As per need Company can take a loan from from relative of a director or HUF of director.It is allowable and Valid with Companies Act.

Interest can be provided which feasible and reasonable as per or less than Market rate. Over rate can be questioned.

Tds also liable on Intt.@10%

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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24 December 2010 Yes a company can take such loan. No problems. From Income Tax point of view keep in mind that you dont pay a higher rate of interest as the same can be disallowed during assessment by Income Tax Officer.

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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24 December 2010 interest rate should not be affected by being relatives :)

CA Megha Vijay

CA Megha Vijay (Querist)
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24 December 2010 ok... thank u for your early response....
thank u again for guiding me.

one more question. In case we pay interest at nominal rate than we have to mention or disclose it in the notes to final accounts?

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