When a company gives a loan to its directors (the big bosses), the company gets interested.

If the loan is given with no interest or at a rate lower than usual, the company might still have to pay tax as if it earned interest on that loan.

This is because the tax rules treat it like the company made some money from it.

The type of money used for the loan matters too!

If the company uses its own savings (internal funds), it might have to pay tax.

But if the money came from a bank or someone else (external funds), the tax rules are different.

Even if a company isn’t doing much business (dormant), giving loans to directors can change its status and bring the compay commence business!

So, always check the tax rules before giving out loans!

Read the full content in our #ktp blog on “Tax Implication on Loan or Advance to Directors by a Company” https://lnkd.in/grV4PNmX