Loan to director of pvt ltd company
This query is : Resolved
19 October 2013
A director of pvt ltd company which is not a subsidary of public company taken loan from company is any consequences for loan amount under income tax ?
20 October 2013
If the director holds 10% or more shares in the company from which he has taken loan then the provisions of deemed dividend under Section 2(22)(e) will be attracted and the entire loan amount may be included in the income of director. But no issues for the company from income tax point view provided they have shown the interest income from the loan otherwise AO may add certian percentage towards interest on loan.
20 October 2013
Further from 12.09.2013 98 section of Companies Act 2013 have come into force and Section 185 deals with loan to director (Corresponding section in Companies Act 1956 - Section 295 & 296).
2. Section 295 of Companies Act 1956 relating to loans to directors did not apply to private companies. Even in case of public companies such transactions could be entered into at the most with the approval of the Central Government.
Now corresponding Section 185 of Companies Act 2013 which has become effective from 12.9.2013 does not provide for such exemption to private companies. It seems the new Act puts total ban on such transactions, excepting loans to MD/WTD as part of conditions of service extended to all employees or pursuant to scheme approved by members by special resolution.
Fine imposed under Section 185(2) of Companies Act 2013---
On Company - Minimum Rs 5 Lacs and may extend to Rs 25 Lacs.
On Director to whom such loan is advanced Imprisonment upto 6 months or fine not less than rs 5 Lacs or which may extend to Rs 25 Lacs.
So please beawre of this new scenario.
2. Section 295 of Companies Act 1956 relating to loans to directors did not apply to private companies. Even in case of public companies such transactions could be entered into at the most with the approval of the Central Government.
Now corresponding Section 185 of Companies Act 2013 which has become effective from 12.9.2013 does not provide for such exemption to private companies. It seems the new Act puts total ban on such transactions, excepting loans to MD/WTD as part of conditions of service extended to all employees or pursuant to scheme approved by members by special resolution.
Fine imposed under Section 185(2) of Companies Act 2013---
On Company - Minimum Rs 5 Lacs and may extend to Rs 25 Lacs.
On Director to whom such loan is advanced Imprisonment upto 6 months or fine not less than rs 5 Lacs or which may extend to Rs 25 Lacs.
So please beawre of this new scenario.
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