Amounts received by directors apart from salary

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A private limited company receives its share of profits from a firm, on which the firm has already paid income tax. The company wishes to distribute this profit share to its directors. The discussion clarifies that while the income is tax-free for the company, it becomes taxable in the hands of the directors upon receipt. Experts confirm there is no exemption available for directors in this scenario.

mohamed ali & co

mohamed ali & co (Querist)

30 September 2023 A private limited company is a partner in a firm. The firm pays taxes on its profit and pays the company its share of profit. The company wants to pay its directors this share of profit on which the firm has already paid income tax. Is it taxable in the hands of the directors. Can it be given without attracting tax in the hands of the directors. Can the experts throw some light on this issue please.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

30 September 2023 It's only tax free income for the company.
When it's paid to the directors it's taxable income in the hands of the directors.

mohamed ali & co

mohamed ali & co (Querist)

02 October 2023 If the company pays its directors that portion of profits which has already suffered incime tax, is there any way for the directors to claim exemption?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

03 October 2023 No way, tax has to be paid by the directors.

mohamed ali & co

mohamed ali & co (Querist)

06 October 2023 Thank you very much sir. You have always been very helpful in all taxation matters

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 October 2023 You are welcome..
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