Loan to director from pvt ltd co

Dhananjay (Director) (34 Points)

17 November 2010

Hi,

I am director in a Pvt Ltd co. This is a stand alone company and not a subsidiary of any PLC.

What are the applicable rules for getting loan from this company?

Is there any cap on amount that can be taken as loan?

Any limit the tenure?

Does the director have to pay any interest on this loan & if yes thn is there any guideline on what the interest rate should be?

Thanks

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6 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114763 Points)
Replied 17 November 2010

Hi,

In case of Loan to director previous approval of Central Govt. is required u/s 295. But this section is applicable to a public company only.

So in your case section 295 is not applicable and company can give loan to you just by passing a board resolution at the prevailing rate of interest.

Thanks

virender kumar (ASSISTANT MANAGER-ACCOUNTS & FINANCE) (45 Points)
Replied 17 November 2010

CHECK CONDITIONS SECTION 2(22)(e) OF INCOME TAX ACT... PERHAPS THE SAME WILL BE CONSIDERED AS DEEMED DIVIDEND AND TAXED IF YOU HAVE SUBSTANTIAL INTEREST IN THE COMAPNY

REGARDS

Mayur Arora (CA Final) (295 Points)
Replied 17 November 2010

Agreed with Ankur Sir & Virenderji

CA.Subhankar (Accounts & Finance) (65 Points)
Replied 17 November 2010

Yes,I think Sec.2(22)(e) is quite a dangerous Section to consider here.

The Directors will not be prohibited by the Companies Act, but the I.T.O will add the whole amount in the personal file of the Directors if they meet the Deemed Dividend criterias.

Be very careful while using/suggesting this Section to others,especially your Directors - it may cost you your job.

Yeshwanth (Chartered Accountant) (145 Points)
Replied 17 November 2010

Consider sec 2 (22) (e), TDS on the loan taken is to be deducted u/s 194 @ 10% also.....

Dhananjay (Director) (34 Points)
Replied 27 November 2010

Thank you all!

From what I understand, it is not avisible to take loan from company, not for company but for me as director, it will create lot of problem in my IT returns.

Thanks again