Write off loan to company in the books of the director

Dear all,

Can a director write off the loan given by him to a private limited company? If so what will be the tax impact in his books (Director's).

This loan has been given as working capital loan.

Replies (4)
there will be no tax impact in the book of director however the corresponding impact in the book of pvt ltd company need to be given by the auditor.
Thus the written off of the non - trading liability by the pvt ltd company i.e. unsecured loan will not attaract deemed income u/s 41(1) of income tax act thus there will be no any addition under normal provision of income tax act.
However written of of unsecured loan will increase the book profit thus there will be tax payable u/s 115JB of income tax act if the tax payable under normal provision of income tax act is lower then tax payable under 115JB.

Mr. Divakar Agarwal

Thanks for your input. We have been looking for the impact mainly in the books of the individual (the director). Because he wants to write off that in his books which I believe is not possible.

Can you help substantiate this point mentioned above?

Director can write off the loan given to a company and the capital account will be debited by the amount of loan which were write off. However at the time of audit auditor need to take the balance confirmation from the director. Thus if the loan is written of by the director corresponding impact in the book of company need to be given.

A director has written off the loan he provided to the company. Now can the director set off this loss in his books on account of writing off the loan provided to the company? Is there any benefit in income tax for this loss?

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