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Amount paid separately other than salary

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Querist : Anonymous

Querist : Anonymous (Querist)

06 July 2011 Dear Sir,
We have to pay an amount of Rs.13000/- per month to an employee in a seperate payment by cheque or cash.

The amount is actually in view of increase in the income but not clubbed with salary so that it does not become taxable.

Request your opinion as to how this allowance can be paid.
Regards
S. Anand

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 July 2011 Allowances are allowed on the basis of amount expended by the employee or as per the IT rules. Any amount received by the employee from his employer is taxable under the head salaries and the employer can be penalised for non deduction of TDS.
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However, I do not disregard the fact that, if any amount other than tax is paid to the AO, the issue of TDS may not be raised by him. (Humour)
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The possibilities of showing Cash Salary in other persons name is there.
However, Professional Tax and other consequential benefits of other employees are also supposed to be given to the dummy employee.

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