Salary expense of employees

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A business owner is seeking ways to account for employee salaries without classifying it as a direct 'Salary expense' to avoid statutory obligations like Provident Fund (PF), Employee State Insurance Corporation (ESIC), and Professional Tax (PT). The individual pays two employees a total of Rs. 30,000 per month and wishes to reclassify this cost under a different head. The primary concern is to keep the total number of employees below a certain threshold to bypass these additional compliances, especially since the majority of their workforce operates on a contract basis.

DIVYESH JAIN

DIVYESH JAIN (Querist)

10 April 2020 Dear Sir,

I am giving Salary every month of Rs. 30,000/- which I don't want to show it as a Salary expense in my Books of Accounts (Individual). Is there any other head in which I can show this expense which does not require TDS to be deducted. My nature of income is Contract income on which TDS is deducted U/s. 194C.

Please help.

Regards,
Divyesh Jain

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

10 April 2020 Upto 5 lacs salary no need of any TDS.

DIVYESH JAIN

DIVYESH JAIN (Querist)

11 April 2020 That is ok. I want to decrease my 2 employees whom I am paying Rs. 30,000/- in total as if I show these additional employees as a Salary expense I will fall under other statutory obligations like PT, PF & ESIC.

Please suggest the type of expense I can show apart from Salary.

CA Suresh Jain

CA Suresh Jain (Expert)

11 April 2020 Please take opinion personally from your known tax consultant

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

11 April 2020 PT, PF & ESIC. Not applicable in case of 2 employees.

CA Suresh Jain

CA Suresh Jain (Expert)

13 April 2020 @ CA R SEETHARAMAN sir, You are right, but from the additional info given by Mr. Diyesh Jain, it is clear that he want to reduce the total employment by 2 to reduce number of employees below 10.

DIVYESH JAIN

DIVYESH JAIN (Querist)

15 April 2020 @ CA Suresh Jain sir, yes that is only the case since I don't want to increase the number of employees and the 2 employees which I am talking about are my personal employees. Rest 8 are on contract basis.

CA Suresh Jain

CA Suresh Jain (Expert)

15 April 2020 It is why I suggested you to contact an accounts/taxation expert

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