REGARING UNSECURE LOAN
This query is : Resolved
24 March 2024
A PROPERRITOR FIRM RECIVED A LOAN FROM B
AMOUNT 50000 (BY CHEQUE) SINCE 2020 AND FIRM NOT PAID TO INTEREST TILL DATE
WHAT WILL BE THE IMPACT TILL 2023-24
ANY ISSUE ????
AMOUNT 50000 (BY CHEQUE) SINCE 2020 AND FIRM NOT PAID TO INTEREST TILL DATE
WHAT WILL BE THE IMPACT TILL 2023-24
ANY ISSUE ????
24 March 2024
Is this interest loan...?? or interest free loan...?? Who is the giver...??
25 March 2024
B
HE IS A PERSON ONLY...
HE IS A PERSON ONLY...
13 August 2025
1. Is the loan interest-bearing or interest-free?
This is the most important point. Since you said:
“Firm not paid interest till date”
We have two possibilities:
🔹 **A. If the loan was intended to be interest-free:
There is no issue, provided:
It's properly recorded in the books
It is a genuine loan, backed by loan confirmation
It is not in the nature of income or gift
✅ Impact:
No interest needs to be accrued or paid
No TDS applicable
Just show it as unsecured loan from B under liabilities
🔹 B. If the loan was supposed to carry interest, but interest is unpaid:
Here, accounting and tax implications arise.
📘 Accounting Treatment:
Accrued interest (even if unpaid) should be booked annually in books:
Dr. Interest Expense A/c
Cr. Interest Payable A/c
If this wasn’t done, your expenses (and liabilities) are understated.
💰 Income Tax Impact:
As per mercantile system of accounting, interest expense must be booked, even if not paid.
However, under Section 43B, such interest is not allowable as deduction unless actually paid by due date of filing ITR.
✅ So:
If interest was not booked and not paid, no deduction claimed → No disallowance
But if interest was booked as expense, but not paid, it will be disallowed under Section 43B until paid
📑 TDS Implication:
If interest is due but not paid, TDS under Section 194A should be deducted at the time of credit (not just payment)
Non-deduction of TDS could lead to:
Disallowance of interest expense (Section 40(a)(ia))
Interest + penalty for non-deduction
🟡 Additional Compliance Considerations:
If the loan remains unpaid for long and no interest is ever paid:
Ensure it is not in the nature of gift or money laundering
Have loan confirmation or loan agreement from Mr. B
PAN of lender should be available for any future verification by ITD
This is the most important point. Since you said:
“Firm not paid interest till date”
We have two possibilities:
🔹 **A. If the loan was intended to be interest-free:
There is no issue, provided:
It's properly recorded in the books
It is a genuine loan, backed by loan confirmation
It is not in the nature of income or gift
✅ Impact:
No interest needs to be accrued or paid
No TDS applicable
Just show it as unsecured loan from B under liabilities
🔹 B. If the loan was supposed to carry interest, but interest is unpaid:
Here, accounting and tax implications arise.
📘 Accounting Treatment:
Accrued interest (even if unpaid) should be booked annually in books:
Dr. Interest Expense A/c
Cr. Interest Payable A/c
If this wasn’t done, your expenses (and liabilities) are understated.
💰 Income Tax Impact:
As per mercantile system of accounting, interest expense must be booked, even if not paid.
However, under Section 43B, such interest is not allowable as deduction unless actually paid by due date of filing ITR.
✅ So:
If interest was not booked and not paid, no deduction claimed → No disallowance
But if interest was booked as expense, but not paid, it will be disallowed under Section 43B until paid
📑 TDS Implication:
If interest is due but not paid, TDS under Section 194A should be deducted at the time of credit (not just payment)
Non-deduction of TDS could lead to:
Disallowance of interest expense (Section 40(a)(ia))
Interest + penalty for non-deduction
🟡 Additional Compliance Considerations:
If the loan remains unpaid for long and no interest is ever paid:
Ensure it is not in the nature of gift or money laundering
Have loan confirmation or loan agreement from Mr. B
PAN of lender should be available for any future verification by ITD
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