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Loan to capital treatment

Sumanta ku Nayak (3 Points)

08 November 2021

Dear Sir/mam

If in case a proprietor/shareholder/partner of the business taken loan and invest such amount as capital.

The interest which is chargeable on such how the tratment of such in income tax.

Can it allowed as deduction from dividend in other sources or allowed as business expenditure?

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3 Replies

Janak Shah (ca) (603 Points)
Replied 08 November 2021

Allowed as business expense in case of proprietary concern. for partner and shareholder you can adjust the amount by way of increase in remuneration. In either case it can't be allowed as dividend

Sumanta ku Nayak (3 Points)
Replied 09 November 2021

Interest expense allowed against dividend income or income in respect of units of a mutual fund subject to max. 20% of such income as per sec 57 of income tax act.

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 23 November 2021

A loan may or may not be a current asset depending on a few conditions. A current asset is any asset that will provide an economic value for or within one year. If a party takes out a loan, they receive cash, which is a current asset, but the loan amount is also added as a liability on the balance sheet.