Loans to workers

come with facts of case

repeated

https://www.lawyersclubindia.com/experts/Loans-to-Workers-496641.asp#.VBQqXVeO5G0

Repeated academic query.


HR/CA/CS should preferably avoid to handle maters that pertain to Labor Law/Service matters and have legal implications.
Many employer want HR/CA/CS to meddle into such matters probably……………………. to save money……………………..however such matters be politely sent for counsel handling Labor Law/Service matters and legal cell………………………………….

The employee should understand that employer would want a shoulder to fire and a chest to take the bullet.

Hope it is sufficient. 

Company has already hired an advocate of Labour laws. As these provisions are getting contrary to Companies Act 2013 thats why Company Secretary is involved, And A Company Secretary is always an expert of all Corporate Laws such as Companies Act, Income tax act, FEMA, Factories Act, Payment of wages Act and many others.

The reason of putting this question on this forum is I want to find out that is their any other solution to this problem or is there any other angle of thinking towards this problem from which I am unable to see.

Hope it is sufficient. 

Facts of the Case are: 

Company X wants to give loans to its workers at a lower rate of interest say 5%. But according to section 186 of the Companies Act, 2013 Company cant do so. It can not allow such less rate of interest to any person.

Now if Company wants to give loans workers and if it fits in other law, so what is that law? and what will be rate of interest for it.

There is no hard and fast rule to give Loans to the workers, its totally depend upon the agreement/settlement/policies framed by the company or reached between the parties to give at the lower rate.

whether there is any union functioning in your company?if there is a union it depends upon the mutual agreement reached between the parties or if there is no union and  is a small unit then company may framed its own policies to give loans at the lower rate.

You have empanelled  an advocate of Labor Law……………………..and probably you are looking for second opinion.

It is suggested that you may contact LCI Experts Advocate A.V. Vishal, Advocate Zulfikar Ali that have advised on matters pertaining to Company Act, I.Tax and have command on the subject.......................................and they can suggest you in line with New Companies Act 2013.

You can find their contact details in LCI databank.

The following is with limited understanding on the matter.

Special resolution may be the solution.

Section 185 shall not apply in the following cases: -

If a loan is given to MANAGING or WHOLE TIME director as a part of the conditions of service extended by the company to all its employees or pursuant to a scheme approved by the members by a SPECIAL RESOLUTION

If the loan is given to any employee/director then there is no specific bar since the same is classified under Loans & advances to employees/directors.

If any payment made to an employee is in the nature of loan, Rule 3(7)(i) will govern the taxability of the same.

For loan to be taxable, the total amount of loan given to an employee in a tax year should be more than Rs 20,000. If the loan amount provided to an employee is less than Rs 20,000 in a year, the same shall be non-taxable.

Loans provided to employees are taxable as per Rule 3(7)(i) of the Income Tax rules.  However, the actual tax amount on loan provided will depend on the interest rate the employee pays. According to the income tax rules, if loans are provided at a rate which is less than the interest rate charged by the State Bank of India (SBI), then the employee who receives the loan is deemed to have received the loan at a concessional interest rate. The extent of “concession” is a benefit which is taxable.

 Mr. Ashish Dongre and Mr. Kumar Doab I wolud like to thank you for your valuable suggestions.

@ Prachi Kaushike,

You are welcome.

While you pursue the New Company Act, I.Tax Act you may find that there is a relation of Rate of Interest to one advocated by RBI, nearest ROI on Govt. securities and as charged by SBI on various products................................The experts that specialize in such matters can guide you in detail.