Remuneration to Director of a Pvt Ltd Co.

This query is : Resolved

Ashok Monga (Querist)
Follow

06 November 2008 I note that there are no restrictions on payment of remuneration to a Director of a Private Limited company.

1. Can the remuneration be structured in to basic pay, HRA, Dearness Allowance etc. so that he can avail of HRA exemption by submitting Rent Receipt to the company for the rent actually paid by him for the residential accommodation?

2. Also if he could also be provided facility for medical reimbursement upto Rs.15000/- per annum and reimbursement for Petrol, maintenance of car, insurance renewal of premium on car? It is understood that the company will pay Fringe Benefit Tax on the reimbursement

If so if you could you suggest text of the Board Resoluation to be passed in this regard?

Thanks and regards

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
Follow

06 November 2008 1.Yes.
2.Yes.

Ashok Monga

Ashok Monga (Querist)
Follow

06 November 2008 Grateful if you could provide specimen of the Board Resoluation to be passed in this regard.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
Follow

07 November 2008 Rsolved that Mr.....(name)director who is incharge of....(functions entrusted)be paid remuneration for his services effective.....(date)as under:

(List of remuneration components)

Ashok Monga

Ashok Monga (Querist)
Follow

07 November 2008 Thanks and regards.

Ashok Monga

Ashok Monga (Querist)
Follow

15 November 2008 Many thanks for all the clarifications which were very precise and prompt.

Could you clarify whether the company (Pvt Ltd) needs to convene a Extra Ordinary Meeting for the purpose of passing a board resolution for payment of remuneration to one of the two Directors?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

21 July 2025 Your questions deal with the remuneration structure for a director of a Private Limited Company, and related procedural and tax compliance aspects. Here's a detailed response:

✅ Answers:
1. Can director's remuneration be structured into components like Basic Pay, HRA, DA etc., and claim HRA exemption?
Yes, it can — provided the director is a whole-time/working director and there is an employer-employee relationship.

Basic Pay, HRA, DA: These components can be part of the salary structure.

HRA Exemption under Section 10(13A): If the director actually pays rent and submits valid rent receipts, he can claim HRA exemption like any salaried employee.

The company should deduct TDS under Section 192 (Salary) and not 194J (Professional Fees), reinforcing the employer-employee relationship.

2. Can the director also get:
Medical Reimbursement up to ₹15,000 (as per old limits)?

Reimbursement for Petrol, Car maintenance, Insurance premium?

Yes, these are permissible perquisites, provided:

The reimbursement policy is clearly documented.

In case of pre-2019 tax years, medical reimbursement up to ₹15,000 was tax-exempt under Section 17(2), subject to conditions. But this exemption has been withdrawn w.e.f. AY 2019–20 under the new standard deduction scheme.

Car and petrol reimbursements are considered perquisites and taxable unless used exclusively for official purposes with proper logs.

FBT Note:
Fringe Benefit Tax (FBT) was abolished from 1 April 2009 (i.e. from AY 2010–11).

So, your question's reference to the company bearing FBT is no longer relevant today. Perquisites are now taxed in the hands of the employee/director, not under FBT.

3. Is an Extra Ordinary General Meeting (EGM) needed to approve Director's Remuneration?
No, not typically.

For Private Limited Companies, remuneration to directors can be approved by Board Resolution at a Board Meeting (not an EGM), unless the Articles of Association or Shareholders' Agreement states otherwise.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now