Commission to a Director

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CA RAMESH KUMAR AHUJA (Querist)
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26 July 2008 A provision of Commission to a Non-executive director is made in the annual accounts of a listed company for FY 08-09. In this connection, pl reply the following queries:

1. Commission is ascertained at the time of finalisation of th B.Sheet; Will the same be the taxable income in the hands of the director for AY 08-09 or 09-10?

2. Under which head of income, such commission wlll be grouped?

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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26 July 2008 commission received by non executive directors is charged under income from other sources tds os to be deducted @ 10%+ecess.it is income of for the year 2008-09

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Querist)
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26 July 2008 Thanks,
However, the matter needs to be considered further in the light of the following:
Section 56(2) covers i) dividends ii) hire charges of machinery iii) income from letting of building, if inseperable iv)income referred to in sec 2(24)(xi); keyman insurance v).... vi)certain gifts exceeding Rs 50000 in aggregate

Moreover, it is in the context of Companies Act that term Non Executive Director is treated seperately. Otherwise, the same should be treated at par with Executive Director and commission paid be covered under the head of 'SALARY INCOME'
Non Executive directors also take part in the major decision making functions and involve themselves in the management of the affairs of any company. It is only on account of their being the Independant Directors that they are called as Non Executive Directors.
Hope you will reconsider the matter and give ur opinion thereto.