Loan from director
This query is : Resolved
29 June 2011
Pls Advice :
In case of Pvt Ltd ccompany-
whather a Pvt Ltd company can take loan from director in cash?
In case of Pvt Ltd ccompany-
whather a Pvt Ltd company can take loan from director in cash?
29 June 2011
Under Companies Act, 1956
Directors and their relatives and shareholders can give loans to Pvt Company, provided there should be proper agreement or deed and such loan should not be against the shareholders interest in the company. By mere Cash I think yes, but in normal course of business the same will be routed through Bank or Authorised Dealer if FEMA is applicable to the situation.
Under Income Tax Act, 1961
According to Income Tax Act, cash loans beyond 20,000/- are not allowed. You may further refer Sections 69D, 269SS & 269T for the explanation.
Further explaination in addition to above :
Sec 69D : Amount borrowed / repaid on hundi except by a/c payee cheque
Sec 269SS : Any person ACCEPTS any loan or deposit otherwise by a/c payee cheque / demand draft of20000/- or more.
Penalty u/s 271D for default of sec 269SS : equal to loan/deposit taken/accepted.
Sec 269T : Any Company including Banking Company & its branches, Co-operative Banks & its Branches, Co-operative Society, Firm or other person REPAY any loan or deposit (together wid interest) otherwise by a/c payee cheque / demand draft of20000/- or more.
Penalty u/s 271D for default of sec 269T : equal to loan/deposit repaid.
Exceptions : The above restrictions shall not apply if loan/deposit taken/accepted from or repaid to :
Govt.
Banking Company, Post office saving bank or Co-operative Bank,
Govt Companies or Corporation u/s 617 of companies act, 1956,
Other person notified in official gazatte.
Conclusion :
1. The loan in CASH can be taken by the company from its directors, relative of directors or from shareholders, after proper documentation & under the terms & conditions which are not prejudicial to the company, If :-
loan amount below 20000/-
or
any loan amount (whether below or equal to or more than 20000/-) if the loan is taken by Govt., Banking Company, Post office saving bank or Co-operative Bank, Govt Companies or Corporation u/s 617 of companies act, 1956,Other person notified in official gazatte.
2. In any other case, the Loan must be taken in ACCOUNT PAYEE CHEQUE OR BANK DRAFT.
Directors and their relatives and shareholders can give loans to Pvt Company, provided there should be proper agreement or deed and such loan should not be against the shareholders interest in the company. By mere Cash I think yes, but in normal course of business the same will be routed through Bank or Authorised Dealer if FEMA is applicable to the situation.
Under Income Tax Act, 1961
According to Income Tax Act, cash loans beyond 20,000/- are not allowed. You may further refer Sections 69D, 269SS & 269T for the explanation.
Further explaination in addition to above :
Sec 69D : Amount borrowed / repaid on hundi except by a/c payee cheque
Sec 269SS : Any person ACCEPTS any loan or deposit otherwise by a/c payee cheque / demand draft of20000/- or more.
Penalty u/s 271D for default of sec 269SS : equal to loan/deposit taken/accepted.
Sec 269T : Any Company including Banking Company & its branches, Co-operative Banks & its Branches, Co-operative Society, Firm or other person REPAY any loan or deposit (together wid interest) otherwise by a/c payee cheque / demand draft of20000/- or more.
Penalty u/s 271D for default of sec 269T : equal to loan/deposit repaid.
Exceptions : The above restrictions shall not apply if loan/deposit taken/accepted from or repaid to :
Govt.
Banking Company, Post office saving bank or Co-operative Bank,
Govt Companies or Corporation u/s 617 of companies act, 1956,
Other person notified in official gazatte.
Conclusion :
1. The loan in CASH can be taken by the company from its directors, relative of directors or from shareholders, after proper documentation & under the terms & conditions which are not prejudicial to the company, If :-
loan amount below 20000/-
or
any loan amount (whether below or equal to or more than 20000/-) if the loan is taken by Govt., Banking Company, Post office saving bank or Co-operative Bank, Govt Companies or Corporation u/s 617 of companies act, 1956,Other person notified in official gazatte.
2. In any other case, the Loan must be taken in ACCOUNT PAYEE CHEQUE OR BANK DRAFT.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- GST Audit whether Govt Companies are exempt?
- PTRC Show Cause Notice on Email
- Accounting treatment of AMC alongwith the purchase of Laptop
- Unable to File TDS Q2 Return – New TRACES Portal Error
- Issuing of delivery challan by seller of goods
- Not ordinarily resident having partnership income in India and salary in USA is any form to filed be
- Taxation of crypto futures in India Fy 2026- 2027
- EPF ECR NEW RULES Sep 17th 2026
- Transfer of Physical Stock Between Two Proprietorship Concerns
- GST Treatment of Purchases with GST Paid where Outward Supplies of Manufactured CattleFeed Exempt
- Condonation Request sec 119(2) b -Enhancement Limit of Leave Exemption prior to AY 2023
- Expert Help Required for TDS Refund 100000 Through TRACES – AY 2022–23
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
