what will be income tax implications for 1) director and 2) company , if loan to director is written off by the company.
will the amount considered as deemed profit and will the director have to pay tax
and can the company show it as a bad loan and book loss ?
Whether the loan is written off or not, if he has 10 % or more of voting power in the company and if the company has reserves and surplus in its balance sheet, then the director will have to pay tax on it as deemed dividend. No implications in the case of the company, unless it is in the business of financing, in which case it can write off the loan as bad debts.
CA Suraj Garg & Associates
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Thane
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S.B.G. & CO. CHARTERED ACCOUNTANTS
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