Outstanding interest u/s 269ss/t

Should the jounal entry for outstanding interest on unsecured loans at the end of the year considered as loan or deposit accepted u/s 269SS. And if yes should it be classified under category of loan accepted otherwise than by account payee cheque/bank draft?

I would like to clarify that sometimes these loans are not repaid for years and the balance keeps increasing for many years due to interest.

Thank You in advance. 

Replies (2)

Interest accrued on the deposit and credited to the account periodically or otherwise partakes of the character of a deposit and as such becomes a deposit itself. (Relevant extract of the undermentioned circular)
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[This was clarified vide Circular No. 479 [F. No. 225/47/86-IT(A.II)], dated 16-1-1987, when the monetary ceilings prescribed u/s 269SS/269T was Rs. 10,000 and which were subsequently raised to Rs. 20,000 w.e.f. 01.04.1989.]
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Further, Para 49.8(viii) of Guidance Note on Tax Audit issued by ICAI (2014), states that, Loans and deposits taken or accepted by means of transfer entries in the books of account constitute acceptance of deposits or loans otherwise than by account payee cheques. Hence, such entries have to be reported under this clause, i.e. Clause 31(a) for Sec. 269SS.

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Also note that, opening credit balance of loan taken in earlier years is not specifically required to be disclosed. However, while giving figures of maximum amount outstanding at any time during the year or while giving information about acceptance and repayment of loan/deposit, the opening balances in the loan accounts will have to be taken into consideration [Para 49.8(v) of Guidance Note on Tax Audit issued by ICAI (2014)].

Thank You Deepak, this solves myquery perfectly.

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