Dear Sir/Madam,
1. is there any restriction on loan taking from directors based on company networth?
2. can these loans be interest free ?
3. do we have to set any tenure for repayment ?
4. what are the documentations to maintain for loan?
- Yes, there are restrictions on loan taking from directors based on the company's net worth.
- Yes, loans from directors can be interest-free. However, it is important to note that as per the Income Tax Act, 1961, interest-free loans from directors are considered as deemed income and may attract tax liability.
- There is no specific requirement to set a tenure for repayment of loans from directors, but it is recommended to have a clear repayment schedule agreed upon by both parties to avoid any confusion in the future.
- The documentation that should be maintained for loan from director includes:
- A board resolution authorizing the loan
- A loan agreement specifying the terms and conditions of the loan
- A copy of the director's PAN and address proof
- Any collateral security or guarantees provided
- Any correspondence or communication related to the loan
- Any repayment schedule or interest certificate, if applicable
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