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Tds on director or managing director's remuneration (Income Tax)

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This query is : Resolved

Author : Anonymous

( Author )
04 April 2012

Sir

what is the proceedure or percentage of TDS on Director's or Managing Director's remuneration


swasti

( Expert )
04 April 2012

If it is categorised as salary, then the personal slab rates would be applicable otherwise TDS would be deducted @ 10% u/s 194J if remuneration exceeds Rs 30000/-.


CA CS Amit S. Kedia

( Expert )
04 April 2012

The Managing director is considered as employee of the company, TDS will be deducted u/s 192 as per the Slab. In case of other than directors other than MD it depends upon contract.
If it is contract for service tds u/s 194J and if it is contract of service tds u/s 192.


Mihir Doshi

( Expert )
04 April 2012

From FY 2012-2013, FM has inserted new section 194J(1)(ba), where by any remuneration or commission paid to director of the company would be liable to TDS @ 10% irrespective of any amount.


CA CS Amit S. Kedia

( Expert )
04 April 2012

Dear Mihir & Swati,

Section 194J(1)(ba) is not applicable where TDS is deductible under section 192.


Mihir Doshi

( Expert )
04 April 2012

Dear Amit,

Thanks, I would like to know how section 192 will be applicable while 194J(1)(ba) wont work. I doubt because FM has explicitely provided that section will applicable for any amount paid as remuneration or commission which also includes sitting fees to director.

Hope you would clarify more on this matter.

Thanks
Mihir Doshi


CA CS Amit S. Kedia

( Expert )
04 April 2012

TDS on remuneration to a director
Under the existing provisions of the Income-tax Act, a company, being an employer, is required to deduct tax at the time of
payment of salary to its employees including Managing director/whole time director. However, there is no specific provision for
deduction of tax on the remuneration paid to a director which is not in the nature of salary.
It is proposed to amend section 194J to provide that tax is required to be deducted on the remuneration paid to a director,
which is not in the nature of salary, at the rate of 10% of such remuneration.
This amendment will take effect from 1st July, 2012.
[Clause 71]of finace bill 2012.

Hope it will clarify the provision.


CA CS Amit S. Kedia

( Expert )
04 April 2012

Clause 71. In section 194J of the Income-tax Act, in sub-section (1), after clause (b), the following clause
shall be inserted with effect from the 1st day of July, 2012, namely:—
“(ba) any remuneration or fees or commission by whatever name called, other than those on
which tax is deductible under section 192, to a director of a company; or”.

This clearly clarifies the position.


Mihir Doshi

( Expert )
04 April 2012

Dear Amit,

Doubt is removed still there is room for suspicision. I am pondering how Remuneration and commission word as used in the new section will be interpreted. Because remuneration in lay man's language is part of salary. So if remuneration is paid then TDS would be deducted under 194J or 192????


CA CS Amit S. Kedia

( Expert )
04 April 2012

Mr. Mihir,

It depends upon the terms of the agreement. As per companies act, A director can hold directorship of max 15 companies.
Accordingly, many directors hold directorship in many companies and they execute the agreement of providing services.
It more depends upon the terms of the agreement.
The purpose of introducing new section is to make clarity for TDS on payment made to Non executive directors.

Generally, they are paid sitting fees, commission, professional fees ete because no salary can be paid to them.

Further, Executive directors are paid salary and they are not entitles to sitting fees and not covered by new section.


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