Queries about company strike off and loan waiver

A pvt company had losses and stopped its operation since 2023. The paid up capital of company is 14L, having assets of 7L and director loan of 22L. There is no other liability from outsiders or bank. The company will initiate the process of strike off in Fy 26-27 after two years of business non-operation (Fy 24-25, 25-26). The company had sold some of its assets but most assets remain unsold. The company is having nil balance sheet (no income from operation) in Fy 24-25, 25-26. The directors will give loan waiver letter and unpaid director loan will be made zero in 25-26 filling. The company will close its bank account having 60k balance in march 2026. This amount shall be utilised in paying consultants for closing. These are some queries that I have in this regard. 1) Whether above approach of company strike off with loan waiver is fine? 2) Whether loan waived off by director, become income in the hand of company and taxable under IT? 3) Can the company close its bank account now? 4) Which account the balance money should be transferred after closing bank account? 5) What things to consider while creating the last nil balance sheet? Looking forward to your reply. Thank you.

Thank you so much for reply. I need clarification in following points and have some queries. A) "Depends on the loan utilization amount" 1) What does rule says about loan waived off being taxable in case of asset purchase v/s trading liability? 2) It has 32L brought forward loss in ITR. Can 22L waived off loan amount be set-off against this BFL? B) "Bank account required at the time of ITR filling" 3) Does it mean bank a/c be closed after filing ITR of 25-26 but before initiating striking off in 26-27? 4) Is it necessary to show bank balance as Nil in 25-26 filling? If yes then how to do without closing bank a/c? 5) Whether the bank balance after closing be transferred to any director bank a/c or withdrawn as cash? 6) Can there be any issues raised by department after filing for strike off?

1) Whether the strike-off approach with loan waiver is fine?
Yes, the approach is generally acceptable provided the company extinguishes all liabilities in compliance with Section 248(2) of the Companies Act and maintains proper documentation for the waiver.

2) Whether the director loan waiver becomes taxable income?
Taxability depends on the nature of loan utilisation. Waiver of loans used for capital purposes is generally treated as a capital receipt, whereas waiver relating to trading/revenue liabilities may be taxable under Section 41(1).

3) Can the company close its bank account now?
Yes, the bank account may be closed after settling expenses and statutory obligations. From a practical standpoint, closure after filing the relevant ITR is preferable.

4) Which account should the remaining bank balance be transferred to?
The balance should be utilised for legitimate expenses or settled through properly documented reimbursements/repayments. Unsubstantiated transfers should be avoided.

5) What to consider while preparing the final nil balance sheet?
Ensure accurate reflection of nil assets and liabilities, correct accounting treatment of the waiver, no pending statutory dues, and consistency with regulatory filings.

1) Whether the strike-off approach with loan waiver is fine?
Yes, the approach is generally acceptable provided the company complies with Section 248(2) of the Companies Act and validly extinguishes all liabilities with proper supporting documentation.

2) Whether the director loan waiver becomes taxable income?
Taxability depends on loan utilisation. Waiver of loans used for capital purposes is generally treated as a capital receipt, whereas waiver relating to trading/revenue liabilities may be taxable under Section 41(1).

3) Can the company close its bank account now?
Yes, the bank account may be closed after settling legitimate expenses and statutory matters. Practically, closure after filing the relevant ITR is advisable.

4) Which account should the remaining bank balance be transferred to?
The balance should be utilised for genuine expenses or settled through properly documented reimbursements/repayments. Arbitrary transfers should be avoided.

5) What to consider while preparing the final nil balance sheet?
Ensure nil assets and liabilities, correct accounting treatment of the waiver, no pending statutory dues, and consistency with compliance filings.

6) Can issues arise from authorities post strike-off?
Yes, issues may arise if compliance, accounting treatment, or waiver classification is improper. Proper documentation and accurate reporting mitigate such risks.

Queries about company strike off and loan waiver

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