LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Cash loan

Harpreet (* * * * * *) (1670 Points)

20 March 2012

Can company give loan in cash to its employees or directors?

Reply
Follow
Share

2 Replies

Sonam Bidasaria (CA) (770 Points)
Replied 20 March 2012

If the Company is not a closely held company and it gives loan to directors, it will attract provision of Sec 2(22)(e) and such loan will be deemed dividend in the hands of directors and he has to pay tax.

There is no ban on giving loan in cash exceeding Rs. 20,000 but Sec 269SS provides that no person shall accept the loan in cash of more than Rs. 20,000 (In aggregate) in a financial years.

Hence, a penalty of a sum equal to the amount of loan u/s 271D will be imposed on employee and directors for non-compliance of provisions of Sec 269SS.