Loan Default

Tax Glossary Definition

Loan Default

Occurs when a borrower does not adhere to the agreed repayment schedule or fails to service a loan as per contractual terms. Such defaults may cause the loan to be classified as a non-performing asset (NPA) and can affect the tax treatment of related interest or penalty expenses.

Example: In case of a business loan default, the unpaid interest cannot be claimed as a deductible expense until it is actually settled.

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