banner_ad

Section 40a(2)

Tax queries 307 views 4 replies

Hello,

I have a query regarding Section 40A(2) with regards to payment of an expense incurred by the assessee in relation to loan taken by its former director.

To elaborate; if an assessee takes up a loan from its director during the year on which it pays interest to the director, will it still be covered under Section 40A(2) if the director retires from the Company during the year(Assuming the director retires on 30th April of the financial year)? Do quote the links if any

P.S. - As per my knowledge of the section, only persons having substantial interest in the assessee's business at any point during the year are covered under section 40A(2) for any payment made to them for expenses even if they cease to hold a substantial interest in the assessee's business.

Thanks in advance

 

 

Replies (4)

Every Director is a Related party. The substantial interest concept  comes in case of a shareholder.

Thanks,

@ Dipjyoti,

I agree with you, but in this case the director has retired from the company. In that case will he still be considered a related party?

A retiring Director shall not be a Related party. But if he was so for a part of the FY, then you compute the interest on loan paid to the Director on a proportionate basis and disclose in Form 3CD and notes to accounts to financial statements.

Thanks,

Very well! Thank you so much Dipjyoti for your help.


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
Featured 02 May 2026
Senior Executive

hitesh chandwani & co

Pune

B.Com

View Details
Company
Featured 29 April 2026
Manager- Finance and Compliance

Naveen Fintech Pvt Ltd

Kolkata

CA Inter

View Details
Company
Featured 14 April 2026
GST CONSULTANT

Abhishek G Agrawal & Co.

Korba

CA Final

View Details
Company
Featured 13 April 2026
GST CONSULTANCY

Abhishek G Agrawal & Co.

Korba

CA Final

View Details
Company
Featured 28 March 2026
Accountant

Ashok Amol & Associates

New Delhi

B.Com

View Details
Company
Featured 28 March 2026
CA Final

Ashok Amol & Associates

New Delhi

CA Final

View Details
Company
Featured ARTICLESHIP 19 March 2026
Article Assistant

Gupta Sachdeva & Co. Chartered Accountants

New Delhi

CA Final

View Details
Company
Featured 14 March 2026
Associate CA

N N V Satish&co

Hyderabad

CA

View Details