Loan by shareholder

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Ritesh khurana (Querist)
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23 October 2012 Dear Experts

a shareholder of pvt co borrow unsecured loan from his friend @ 6% pa(less than FM ROI) and lend the same amount to his company in which he is shareholder at 6% pa

what are the tax and tds implication.

Can AO enhance shareholders income with same as market rate of interest.

and what will be provision if such share holder is director of company.

Thanks in advance

Ritesh khurana

V K Bajaj

V K Bajaj (Expert)
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24 October 2012 It makes no difference as either shareholder or Director advances amount as loan to a Company.

Company while paying interest will deduct TDS (if interest 5000 or more during the year) @ 10%.

Though A.O.can enhance the rate of interest but will never be done so. If it is done then Profits of Company will come down and Govt will loose I Tax by 30.9%.

contact@vkbajaj.co.in

Soumitra Basu

Soumitra Basu (Expert)
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24 October 2012 THE ASSESSING OFFICER HAS NO RIGHT TO SIT ON THE CHAIR OF A BUSINESS MAN AND DEICDE HOW HE SHOULD EARN. HE HAS TO COMPUTE THE TAX ON THAT TOTAL INCOME ON WHAT THE ASSESSEE ACTUALLY EARNED OR DEEMED TO BE EARNED.

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