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Can a Director or Director's be employee of the company

Govind (Manager HR and Admin) (46 Points)

19 May 2010

Dear All,

My Managing Director recently called me and told that all people in the company, including him and other director to be taken on payroll of the company and he should be also given PF professional tax and other benefits exactly in same manner given to a regular employee.

We are a Pvt. Ltd. Company.

Now my question is can a Director or Directors be treated as an employee of the company?

Can we allow them to have Provident Fund and other benefit? Kindly provide reference of the Act or judgement

Regards

Govind

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13 Replies

ANIL A MALAVADE (Student ) (133 Points)
Replied 19 May 2010

Yes dear as per the company's Act a director can be appointed as whole time director/ Employee of the company, he will get a remunaration but cannot be considered as SAlary, and cant cliam deduction on salary in thename of the PF\ ESi, becouse as per Income tax Act there is no employer and employee relation

Deepak Maharishi (CS) (514 Points)
Replied 19 May 2010

Dear Govind,

In terms of the Companies Act, a director is an agent, tustee and employee. A director is an employee if he holds a salaried employement and thus enjoyes all the benefits which are given to a regular employee.

A Managing Director is a director who holds such position. Thus, all the executive directors ( including managing director) are employees of the company too and at par with other employees.

regds
Deepak

daya shankar singh (CA ,CS) (629 Points)
Replied 20 May 2010

The Directors can be the employee of company and received salary and other perks but the amount paid in any form to director is covered under the remuneration to director except the payment made to him for his services rendered by him in his professional capacity . Such payment are not allowed by the income tax

Dharmendra kumar (CA) (201 Points)
Replied 20 May 2010

Yes, if a director is MD/WTD, he is also an employee of the co.

Sudev Namboothiri (CA FINAL) (432 Points)
Replied 20 May 2010

Agree with above replies...

haridhayalan (TALLY CERTIFIED PARTNER) (1268 Points)
Replied 07 October 2010

dear experts,

please clarify. is it possible a person can be a director of the company and employee of other company?

regards,

hari

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 07 October 2010

I guess ...

it is very much possible provided he is not a Whole Time Director in that company. I had seen one case where individual was a director in three companies (not WTD) and plus employed Financial Consultant in other different company.

Ajay Mishra (Company Secretary) (74332 Points)
Replied 07 October 2010

Dear Friend

If a person is appointed as executive director then he/she will be treated as employee, whether he/she take remuneration from the company or not.

In case of MD/WTD, they will be treated ad executive director and treated as employee of the company.

Regards

1 Like

Sharad (D) (21 Points)
Replied 04 July 2012

Under which section can I find a statement that explictlyt (or even otherwise) states that a director can also be an employee of the company. I need to submit in the court a proof that it is not illegal for a director to be an employee of a company (private limited).

Rahul Patel (Accountant) (26 Points)
Replied 10 August 2012

I just wanted to know one more thing, if the director is not taking any remuneration for a particular period of time and then starts taking remuneration, can he claim the remuneration for the earlier period too?

CS Advocate Abhishek Goyal (M Com FCS LLB M-AIMA ) (13531 Points)
Replied 11 August 2012

A MD/WTD is in any case a director in whole time employement of the company capable of drawing salary from the company. MD/WTD are executive directors, while other directors who only attend board meetings and get paid sitting fees for the same, are non executive directors and are not in employment of the company. This distinction needs to be borne in mind.

Sudhansu (Assist Manager Finance) (21 Points)
Replied 06 November 2014

Dear all ,

Please clarify with the applicability of reverse charge mechanism where service tax needs to be paid to govt on the remuneration / fees paid to director . In such case whether to deduct TDS on such payments if so to show under 26Q or 24Q of return filing .

Awaiting a clear answer .

Manisha Jain (2 Points)
Replied 23 September 2023

IS IT MANDATORY TO DEDUCT PF IF DIRECTORS ARE BEING PAID SALARY (TDS U/S 192A). CAN THEY BE EXEMPTED FROM PF. AND IS THERE ANY REQUIREMENT TO MENTION IT IN PF RETURN UNDER EXCLUDED EMPLOYEES