Share Capital vs. Unsecured Loans

TO BRING LOAN OR CAPITAL, DIFFERENCE WILL BE AS FOLLOWS:-

1) EXPENSE - IF LOAN CARRIES INTEREST THEN IT WILL BE DEDUCTED UNDER INCOME TAX ACTSUBJECT TO 40A(2), BUT DIVIDEND ON SHARES WILL NOT BE DEDUCTED AS EXPENSE (FURTHER ADDITIONAL AMOUNT AS CDT @ 15% HAS TO BE PAID ON DIVIDEND)..

2) PROMOTER'S - INTEREST ON LOAN WILL BE TAXABLE IN THE HANDS OF DIRECTORS WHEREAS DIVIDEND WILL BE EXEMPT..

3) REPAYMENT - LOAN CAN BE REPAID IN CASE OF URGENT NEED OF FUNDS BY DIRECTOR'S..

4) FUTURE PLAN'S - IF IN FUTURE PROMOTER'S WANTS TO SELL A PART OF THEIR SHARE SHARES CAN BE SOLD AT ABOVE THEIR BOOK VALUE BUT LOAN WILL BE TAKEN AT BOOK VALUE.