Payment to Director

[sanjay misra]

Dear Sir

Whether any advance can be paid to Directors against remuneration and can be adjusted against remuneration due in subsequent month. At the end of the year all payments has been adjusted against remuneration.

As per income tax authority there should not be any debit balance on any day in directors account in a financial year.

Thanks

Sanjay

AI Summary

Paying Advances to Directors May Breach Section 295 and Trigger Deemed Dividend Concerns Under Section 2(22)(e) A query was raised regarding the legality of paying advances to directors against their remuneration, with adjustments to be made in subsequent months. The concern was whether such advances would result in any debit balance in the director's account during the financial year, which is not permissible according to income tax authorities. One response indicated that companies should not pay advances to directors. Another response highlighted that such payments might be considered a loan, potentially resulting in defaults under Section 295 and issues related to deemed dividends under Section 2(22)(e) of the Income Tax Act.