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Loan from one director to another director in same pvt. co.

Rohit (XYZ) (34 Points)

25 October 2012

Hello Experts!

I'm new here, but love the helpfulness of the experts here! I have 2 questions:

Suppose there is a Private Limited Company named ABC Pvt. Ltd. There are 2 directors (X and Y) in that company ABC. Can director X give unsecured/secured loan (using his own personal money) to director Y? If yes, what rate of interest should be used?

If above private company ABC enters in to a 'partnership agreement' with another private company DEF, such that the newly formed partnership pays ABC a fixed amount of money per month resulting from the business of the partnership. Now, since the partnership has already paid TDS before transferring the fixed amount of money to ABC, will company ABC have to pay TDS again (possible double taxation?) on that amount?

Waiting for expert replies!

Best Regards,

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2 Replies

CA Anuj Diwan (Partner) (51 Points)
Replied 26 October 2012

Dear Rohit

In first case the loan transaction is between 2 individuals & the company has nothing to do with it.

In the second case since DEF pays Fixed amount every month, if such amount is in the nature of profit then such amount is liable to Tax @ 30% (not TDS) but if such amount is in the nature of commission on which TDS is being paid by DEF then ABC does not need to pay any further TDS on such amount. But the company shall be liable to pay advance Tax as the rules.

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Rohit (XYZ) (34 Points)
Replied 26 October 2012

Originally posted by : CA Anuj Diwan
	Dear Rohit In first case the loan transaction is between 2 individuals & the company has nothing to do with it. In the second case since DEF pays Fixed amount every month, if such amount is in the nature of profit then such amount is liable to Tax @ 30% (not TDS) but if such amount is in the nature of commission on which TDS is being paid by DEF then ABC does not need to pay any further TDS on such amount. But the company shall be liable to pay advance Tax as the rules.

Thanks a lot for the quick reply Mr. Anuj! The partnership (between private cos. ABC and DEF) will pay to ABC a fixed amount (which will be derived from the net profit and NOT commission earned by the partnership). So, as you mentioned, only 30% Income Tax (and no TDS) will have to be paid by ABC Pvt. Ltd., right?