Bringing Money Into Your Startup: Director’s Loans, Share Capital & the DPT-3 Trap

Almost every founder funds the company from their own pocket in the early months — office deposit here, a vendor payment there. It feels informal, but under company law and tax law it is anything but. Get the mechanics of director loan to company rules wrong and you can trigger heavy penalties and a missed annual filing that quietly builds risk. Founders who completed their company registration in Hyderabad and are now injecting funds — across HITEC City, Gachibowli, Kondapur and Kokapet — should read this before the next transfer. (This is general guidance; confirm your specific facts.)

Two ways money legitimately comes in

When you put money into your own Private Limited Company, it is one of two things:

• Share capital — you receive shares in return. It is permanent, does not have to be repaid, and (where issued above face value) needs a valuation to support the premium.
• Director’s loan — a loan from you to the company, repayable later, with no dilution of shareholding.

Most founders use a mix: a base of share capital at incorporation, then director’s loans for ongoing working capital because loans are flexible and can be repaid tax-free later.

The Section 269SS cash trap

Here is the rule founders break without realising: under Section 269SS, a company cannot accept a loan or deposit of ₹20,000 or more in cash — it must come through a banking channel (bank transfer, cheque, etc.). Breach this and the penalty under Section 271D can be 100% of the amount taken in cash. So never hand cash to the company for a loan; always route it through the bank with a clear narration.

Director’s loan under the Companies Act

A company can accept a loan from a director, and it is not treated as a “deposit” under the Companies (Acceptance of Deposits) Rules — but only if the director gives a written declaration that the money is from their own funds and not borrowed. Keep this declaration on file, along with a board resolution and proper loan documentation. This is exactly the paperwork that makes a later tax-free repayment clean and defensible.

Injecting your own funds into your company? Check it with a CA in Hyderabad first — call 99595 36391 or WhatsApp ComplianceKart.

The DPT-3 return most founders miss

Even though a director’s loan is an exempted deposit, the company must still report it. Form DPT-3 is an annual return of deposits and exempted deposits (which includes director’s loans and other amounts) filed with the MCA, generally by 30 June each year for the previous financial year. Missing DPT-3 is one of the most common silent defaults for young companies — there is no notice reminding you; the penalty simply accrues.

Share capital and the valuation question

If you bring money in as share capital above face value (a premium), the company generally needs a valuation report to support the price. The good news for 2026: the so-called “angel tax” under Section 56(2)(viib) has been abolished, removing a major past headache on share premiums — but valuation discipline and FEMA reporting (where any investor is foreign) still matter. If you are also taking foreign investment, additional filings such as FC-GPR apply.

Don’t let the company lend to you casually

The reverse flow is a trap: a loan from the company to a director or a shareholder with substantial interest can be taxed as a deemed dividend under Section 2(22)(e), and is restricted under Sections 185/186 of the Companies Act. Keep founder money and company money on clearly documented, one-way tracks.

Why founders search for a CA firm near me on this

The documentation — declaration, board resolution, loan agreement, DPT-3, valuation where needed — is simple when set up correctly and painful to reconstruct later. Whether your startup sits in Madhapur, Nanakramguda or Kukatpally, a CA firm near you can put the right paperwork in place the first time you fund the company, so every rupee in and out is clean.

Frequently Asked Questions

Can I put my own money into my Private Limited Company?

Yes — as share capital (you get shares) or as a director’s loan (repayable later). It must come through a banking channel, and a director’s loan needs a written declaration that the funds are your own and not borrowed.

Can the company take my money in cash?

No. Under Section 269SS, a company cannot accept a loan or deposit of ₹20,000 or more in cash. The penalty under Section 271D can be 100% of the cash amount. Always use a bank transfer or cheque.

What is Form DPT-3 and do I need to file it?

DPT-3 is an annual MCA return of deposits and exempted deposits, including director’s loans, generally due by 30 June each year for the previous financial year. Most companies with director’s loans need to file it, and it is commonly missed.

Is repaying my director’s loan taxable?

Repayment of the principal of a properly documented director’s loan is a return of your capital and is not income, provided the loan was brought in and reported correctly.

Is angel tax still a problem on share premium?

Angel tax under Section 56(2)(viib) has been abolished, easing share-premium concerns. However, valuation discipline and, where any investor is foreign, FEMA filings such as FC-GPR still apply.

Fund your startup the clean way — with a Hyderabad CA firm

ComplianceKart sets up director’s loan documentation, share-capital paperwork, valuations and DPT-3 filings for startups across Hyderabad — HITEC City, Gachibowli, Kondapur and Kokapet. Call 99595 36391, WhatsApp us, or contact us — your Virtual CA · CS · Advocate.