Section 40a(2)

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.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
29 August 2026
Chartered Accountant

Velionit Consulting PVT LTd

Mumbai

CA

View Details
Company
25 August 2026
Senior Accountant

MG Associates

New Delhi

CA Inter

View Details
Company
09 September 2026
SENIOR AUDITOR & ACCOUNTS MANAGER

Anupam Parashar & Co.

Ghaziabad

CA Final

View Details
Company
ARTICLESHIP 01 September 2026
Articles

Saini Pati Shah & Co LLP, Chartered Accountants

Mumbai

CA Foundation

View Details
Company
19 August 2026
Chartered Accountant - Financial Consolidation & Reporting

Synergy Keystone

Mumbai

CA

View Details
Company
ARTICLESHIP 26 August 2026
CA Article Assistant/CA Drop Out/Accounts Executive

PARV & Co.

New Delhi

CA Inter

View Details
Company
27 August 2026
ACCOUNTANT

CHARUPREETI & CO

Noida

Graduate (Any)

View Details
Company
18 August 2026
CA Semi Qualifies

Goyanka and Associates

New Delhi

CA Inter

View Details