taxability of Director remuneration

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Goongan (Querist)
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25 May 2010 Why Director remuneration taxable under head Salary

Sec. 15 of Income tax Act, Income taxable under the head salaries only if there exists employer & employee relationship between the payer & payee.

Sec. 2(13) of Companies Act – meaning of Director – Director as such are not employer or servant of the company .

Sec. 56(2) of Income tax Act, specific Income chargeable under the head “Income from other sources “ include Director Fee .

As per above point Why Director remuneration taxable under head “Income From salaries”. Why not Income chargeable under the head “Income from other sources”

Jitender

Jitender (Expert)
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25 May 2010 director are the employees of the co. therefore, their payment is liable for tds u/s 192.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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25 May 2010 yes liable for tds u/s 192.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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26 May 2010 AGREE SEC 192 IS ATTRACTED.

Goongan

Goongan (Querist)
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26 May 2010 Ok I also agree with you ...........
but not satisfy in absence of specific provision, sec. ect …..
pls specify specific provision, sec. ect ….. fo your answer. ………

CA Kishore Tallam

CA Kishore Tallam (Expert)
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26 May 2010 We should make a clear distinction between remuneration paid to Managing/Whole Time directors and Non executive/Independent Directors.

As per companies act, MD and WTD are considered as employees only.

Hence, whatever remuneration is paid to them is included in Salary cost of the company and disclosed in notes on accounts and is taxable in their hands as "Salary Income".

Whereas if any remuneration is paid to directors other than MD/WTD, the same is shown as an expense in the financials and shall be taxable as Income from other sources in the hands of directors.

CA Kishore Tallam

CA Kishore Tallam (Expert)
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