Loan from Directors received in cash

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thukarama Rai p (Querist)
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19 August 2010 Are the directors of private limited company prohibited from advancing loan to the company by way of cash...and consequences if any

Ram Avtar Singh

Ram Avtar Singh (Expert)
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19 August 2010 According to Income Tax Act, cash loans beyond Rs.20,000/- are not allowed. You may further refer Sections 69D, 269SS & 269T for the explanation

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 of Rs. 20000/- 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 of Rs. 20000/- 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.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 August 2010 No prohibition to Director. If so accepted, Company will be penalized under section 271D of the Income tax Act,1961. Penalty is equal amount of deposit.

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