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

[Asish Kumar Nath]

Dear sanjay,

As per best knowledge company can't pay any advance to Directors.

[CA Rachit Agarwal]

Dear Sanjay,

Payment of Advance to director would tantamount to Loan to Director and may lead to default under Section 295.

Further from the Income Tax point of view default may be under 2(22)(e), deemed dividend.

AI Summary

Advance payment to directors may constitute a director loan and trigger company law default and deemed dividend tax treatment. Advances to directors against future remuneration are not recommended; such payments operate as a loan to the director, may constitute a company law default, and can be treated as a deemed dividend for income tax purposes, so director accounts should not carry a debit balance during the financial year and remuneration should be adjusted when due.