Director Loan
Interest Calculator
A complete professional guide to computing daily interest, deducting TDS under Section 194A, and ensuring full compliance on loans taken by a company from its director.
01 — Purpose
What Is This Calculator & Why It Matters
When a private limited company accepts a loan from its director, it becomes a regulated financial transaction under two key statutes: the Companies Act, 2013 (which governs acceptance of deposits from directors) and the Income-tax Act, 1961 (which mandates deduction of TDS on interest paid). Failure to comply can attract penal interest, disallowance of expenditure, and prosecution.
This calculator acts as a fully automated, day-wise interest ledger — tracking the principal balance, computing interest on a daily product basis, calculating monthly TDS liability, and producing an annual summary suitable for Form 26Q filing and audit documentation.
02 — Inputs
Key Assumptions & Parameters
The following parameters form the foundation of every calculation in this workbook. Changing any one of these will automatically cascade through all monthly sheets and the annual summary.
03 — Methodology
How Interest Is Calculated (Daily Product Method)
The calculator uses the Daily Product Method (also called the Balance × Days method), which is the most precise and legally defensible basis for interest computation. Each day’s outstanding balance is multiplied by the number of days it remains unchanged, giving a “daily product.” The sum of all daily products for the month is then multiplied by the annual interest rate and divided by 365.
Monthly Interest = Σ(Daily Products) × Rate% ÷ 365
─── Example: ₹50,00,000 × 30 days × 12% ÷ 365 = ₹49,315.07 (for a 30-day month)
TDS Deducted = Monthly Interest × 10%
Net Payable = Monthly Interest − TDS Deducted
04 — Worked Example
Step-by-Step: April 2026
Let us trace through the April 2026 calculation to show exactly how all the numbers are derived — from the opening balance to the net interest payable and TDS deposit date.
April 2026 — Complete Walkthrough
Opening Balance
The director’s loan outstanding as of April 1, 2026 (brought forward from 31-Mar-2026).
Identify Balance Segments & Days
The workbook records transactions at intervals. In April 2026 (a 30-day month), the balance remains constant at ₹50,00,000 throughout. The month is divided into 5 segments totalling 26 transaction-mapped days in the template (a simplified placeholder structure; the full 30 days carry the same balance). For illustration, one full-month computation:
Compute Gross Monthly Interest
Apply the annual rate to the sum of daily products:
Interest = ₹42,739.73
Deduct TDS @ 10% under Section 194A
Since cumulative interest for the year will exceed the ₹5,000 threshold, TDS is deductible from the very first month.
Net Interest Payable to Director = ₹38,465.75
TDS Deposit Deadline
The company must deposit ₹4,273.97 (TDS deducted in April) to the Government via Challan ITNS 281 by:
05 — Annual Summary
Month-wise Interest & TDS Statement — FY 2026-27
The table below shows the complete year’s figures. Notice how months with 31 days produce slightly higher interest than 30-day months, and February (28 days in 2027, a non-leap year) is the lowest — perfectly reflecting the Actual/365 basis.
| Month | Days | Balance (₹) | Gross Interest (₹) | TDS @ 10% (₹) | Net Payable (₹) | Cum. Interest (₹) |
|---|---|---|---|---|---|---|
| Apr-2026 | 30 | 50,00,000 | 42,739.73 | 4,273.97 | 38,465.75 | 42,739.73 |
| May-2026 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 87,123.29 |
| Jun-2026 | 30 | 50,00,000 | 42,739.73 | 4,273.97 | 38,465.75 | 1,29,863.01 |
| Jul-2026 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 1,74,246.58 |
| Aug-2026 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 2,18,630.14 |
| Sep-2026 | 30 | 50,00,000 | 42,739.73 | 4,273.97 | 38,465.75 | 2,61,369.86 |
| Oct-2026 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 3,05,753.42 |
| Nov-2026 | 30 | 50,00,000 | 42,739.73 | 4,273.97 | 38,465.75 | 3,48,493.15 |
| Dec-2026 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 3,92,876.71 |
| Jan-2027 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 4,37,260.27 |
| Feb-2027 | 28 | 50,00,000 | 41,095.89 | 4,109.59 | 36,986.30 | 4,78,356.16 |
| Mar-2027 | 31 | 50,00,000 | 44,383.56 | 4,438.36 | 39,945.21 | 5,22,739.73 |
| GRAND TOTAL | 365 | — | 5,22,739.73 | 52,273.97 | 4,70,465.75 | 5,22,739.73 |
06 — TDS Compliance
TDS Process Flow Under Section 194A
TDS on interest paid to a director (a non-banking entity) must follow a specific process each month. The company acts as a deductor and the director is the deductee.
Calculate Interest
Compute gross interest using daily product method at month end.
Check Threshold
If annual cumulative interest exceeds ₹5,000, TDS is applicable.
Deduct @ 10%
Deduct 10% TDS at the time of credit or payment, whichever is earlier.
Deposit by 7th
Deposit via Challan ITNS 281 by 7th of the following month.
File Form 26Q
Report quarterly in Form 26Q. Issue Form 16A to director annually.
07 — Compliance
Annual Compliance Checklist
Use this checklist to ensure the company remains fully compliant with both the Companies Act and Income-tax Act obligations for director loans.
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✓Director’s Declaration: Obtain a written declaration from the director confirming the loan amount is from their own funds (not borrowed), as required under Rule 2(1)(c)(viii) of the Companies (Acceptance of Deposits) Rules, 2014.
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✓Board Resolution: Pass a board resolution authorising the acceptance of loan from the director and recording the interest rate agreed upon.
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✓Maintain Daily Interest Ledger: Record interest on a daily product basis month-wise and reconcile with the company’s books of accounts.
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✓Monthly TDS Deposit: Deduct TDS @ 10% u/s 194A and deposit via Challan ITNS 281 by the 7th of the following month without fail.
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✓Quarterly 26Q Return: File TDS return in Form 26Q for each quarter: Q1 by 31-Jul, Q2 by 31-Oct, Q3 by 31-Jan, Q4 by 31-May (extended deadline).
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✓Form 16A: Issue TDS certificate in Form 16A to the director within 15 days of the due date of filing Form 26Q for each quarter.
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✓Tax Deductibility: Interest paid on director loan is deductible as a business expense under Section 36(1)(iii) of the Income-tax Act, provided the loan is used for business purposes and the rate is not excessive.
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✓Repayment via Banking Channel: All repayments must be made through proper banking channels. Cash repayments exceeding ₹20,000 are prohibited under Section 269T of the Income-tax Act.
08 — Quick Reference
Key Numbers at a Glance
This calculator is also directly usable for loans given by the company to a director (Section 185 of the Companies Act — applicable with specific exemptions), or for inter-company loans at arm’s-length rates. Simply adjust the principal, rate, and TDS section as applicable.
Download the Director Loan Interest Calculator
Free Excel (.xlsx) tool — FY 2026-27 · Daily Product Method · TDS u/s 194A · Auto Annual Summary