TDS on Directors Remuneration

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shehzad (Querist)
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02 February 2010 Dear Sir,

Ours is a public ltd. co. Co. decided to give remuneration to 2 of the directors now for the F.Y. 2009-2010.
My question is:
1) Whether TDS is to be deducted on it? In which section? Is there any way to escape from tax liability?
2) Whether any board / members resolution is to be passed?
3) Any other tax compliance's to be done?

Plz it is urgent.
Thanks

CA PRIKSHIT GUPTA

CA PRIKSHIT GUPTA (Expert)
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02 February 2010 Director salary will be treated as salary and TDS will be deducted as per provisions of salary.

shehzad

shehzad (Querist)
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02 February 2010 Sir,
Thanks for reply

Whether interest is to be paid for late deduction & deposit of tds on salary, as tds should be deducted from starting.

Sir, in order to save interest liability, can v do that board passed resolution in jan so no late deduction of tds on salary.

is this feasible / any other way

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 You're dealing with TDS on director's remuneration for a public limited company, and there are a few questions you've raised about compliance and possible ways to handle tax deductions. Let's address each point in detail.

### 1. **TDS on Director’s Remuneration**

* **TDS Applicability**: Yes, TDS **must be deducted** on the director’s remuneration. Since the remuneration paid to directors is considered **salary**, TDS should be deducted under **Section 192** of the Income Tax Act, 1961. This is because directors, whether full-time or part-time, are treated as employees for tax purposes when they are paid a salary.

* **Rate of TDS**: TDS on salary is generally deducted at the **applicable tax rates** based on the income tax slab for individuals. The company needs to determine the director’s overall taxable income to ensure the correct TDS amount is deducted.

* **Escape from Tax Liability**: There's no way to “escape” from the TDS liability. However, if the company is paying a very small amount, you may not need to deduct TDS if it’s below the **basic exemption limit**. But for most cases, the company will have to deduct TDS on director's salary and remit it to the government.

### 2. **Board/Member Resolution**

* **Board Resolution**: Yes, a **board resolution** is required to approve the payment of remuneration to directors. The board needs to decide on the terms of the remuneration (amount, frequency, etc.) and pass a resolution to approve it.

* **Shareholder Resolution**: For public limited companies, if the remuneration exceeds certain limits, shareholder approval may also be needed as per **Section 197** of the Companies Act, 2013. Specifically, if the remuneration is in excess of the prescribed limits, a special resolution passed by shareholders would be required.

### 3. **Other Tax Compliances**

* **TDS Return Filing**: The company must file quarterly TDS returns (Form 24Q) showing the details of TDS deducted on salary, including that of directors. This needs to be done within the prescribed due dates.

* **TDS Certificate (Form 16)**: After TDS has been deducted, the company must issue Form 16 (TDS certificate) to the directors as proof of TDS deduction. This needs to be issued annually and should reflect the TDS deducted for the full financial year.

* **GST Compliance**: If the company is also paying service fees to directors (as consultants or otherwise), the GST implications on those services may need to be reviewed, especially under the **reverse charge mechanism (RCM)** for director services as discussed earlier.

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### Interest on Late Deduction/Deposit of TDS

* **Interest for Late Deduction**: If TDS is not deducted at the time of payment, interest is liable to be paid under **Section 201(1A)**. The interest will be:

* **1% per month** from the date on which TDS was due to be deducted until the date it was actually deducted.
* **1.5% per month** from the date the TDS was deducted until the date it was actually deposited with the government.

* **Late Deposit**: Similarly, if TDS is deducted but not deposited on time, the company will have to pay interest on the delayed deposit:

* **1.5% per month** from the date of deduction to the date of deposit.

* **Preventing Interest Liability**: If you're looking to avoid the late deduction penalty, passing a resolution in January will not help because **TDS needs to be deducted at the time of payment**. If the payments to directors were made earlier, you cannot escape the interest liability by retroactively passing a resolution. However, you can:

* Ensure that TDS is deducted **at the time of payment** or **within the same month**.
* If there was any delay, pay the interest as per the prescribed rates.

### Can You Avoid Late Deduction by Passing a Resolution in January?

No, unfortunately, passing a resolution after the fact won't help you avoid the interest liability on late deductions. The key is ensuring that TDS is **deducted at the time of payment**, or immediately when the liability arises. If the company has missed deducting TDS on time, the interest is inevitable, and the best way is to **pay the overdue TDS** along with the interest as soon as possible to minimize penalties.

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**In summary**:

1. **TDS** should be deducted under Section 192 on director remuneration, and the rate is based on the director’s income.
2. A **board resolution** is required, and if the remuneration exceeds limits, a **shareholder resolution** might also be needed.
3. **TDS returns** must be filed, and **Form 16** must be issued to directors.
4. **Interest** for late deduction and deposit of TDS will apply, and passing a board resolution in January won't help to escape the interest liability.

Let me know if you'd like further clarification on any of these points!

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