Does income clubbing law apply to me?

in my opinion, it wont be any violation of any section of IT Act. U are being paid Rs. 400K/month and ur wife (from her own skills/intellectual mind/as a dentist) getting 50K/month. that money she is getting is in the view of her profession and not as a settlement of any illegal way to not pay tax or low tax. Authorities will not ask why u r getting 400K and not 450K and neither your wife. If any authority asks the Hospital regarding such structure then they can say the pay scale is not high as compared to 5K to others (as u already mentioned their visit if fixed say 2-4 a month) but your wife visits 25 days a month. that is legally tenable in my view. u dont have to worry neither the hospital for the payment made to u and ur wife

"how much less tax"

You didn't see it...did you

If I am paid at rs 4.0 lakhs per month, in a year I will get 48 lakhs as professional income. Presumptive profit rules therefore would apply. I would therefore pay tax for 24 lakhs only

 

If I am paid 4.5 lakhs per month, i would get 54 lakhs per year.....falling above the 50 lakhs limit and "presumptive expenses" clauses cannot be applied.....therefore instead of around 5 lakhs as tax, I would pay around 15 lakhs as tax

 

Therefore @ 4 lakhs per month, I retain 43 lakhs with me in a year (48-5 lakhs).....PLUS this way no one can question my bank balances

And @ 4.5 lakhs per moth , I would retain only about 39 lakhs with me (53-15 lakhs)...FURTHER  if I resport to show too much expenses to bring down the taxable income, I cannot show too much money in my bank account

 

Things as of now are such that, if my wife cannot be employed or something, it would be better for me to ask my employer to stop paying me once the remuneration touches 50 lakhs/year!!!!

It wont be a problem to you Sir and neither to the Hospital authorities if you can substantiate the amount paid to your wife. You can ask for payment of Rs. 415000/ month in your name and Rs. 35000 in your wife name as her professional fees for dentist if they are saying 50000 is too much to be paid as u already said. for a doctor being paid 35000 per month is not high amount/unreasonable amount in any case rather she can be dentist or physician!
it would be better if you ask for 415000 in ur name and rest in ur wife's.
this will make u pay 5.54 lakhs tax from ur own account which cant be questioned in any way. Earning 4980000 a year and paying tax of 550000 is too much when one have the luxury to use newly inserted section 44ADA presumptive profession.

@ Abhishek

Thank you for the reply.

Yet I saw you use the phrase "if you can SUBSTANTIATE the amount".....how does anyone anyone decide whether a pay can be substantiated?

....Is it illegal to pay someone a high remuneration more than what seems substantiable?(provided that person is not related to you, which would have invited income clubbing clauses)

....Let me present the case hypothetically

1) I have a driver.(who is not related to me)....if I pay him say 30000 rs per month.....i think its reasonable (and substantiated) and nobody can question me

 

BUT

 

2)If i employ my driver for say 1.5 lakhs per month.....it seems odd..definitely.....but which authority gets to question me on this?

 

I am trying to get a clarification because my income is variable....My wife has to be paid atleast 50000 or 60000 (atleast) to keep me within the 50 lakh bracket.....So yes; she will have to paid an amount that might seem a "little unsubstantiable" (unsubtantiable for a dentist) for my purpose to be served

 

PUT in other words....I don't know whether any govt authority will aks this....BUT IF anyone asks the hospital 'Why are you paying so much to this dentist?", then the hospital will find it difficult to explain.....maybe the only thing they could say would be either:-

 

a)Its our wish. We liked her, so we are paying her

 

or

 

b)She is the wife of one of our cardiloigists.....and we want this cardioloigst to stay with us. ....and he would have stayed only if his wife could be employed somewhere near by with a reasoable pay.....So we are paying her...We know she is not doing 60000rs/month worth work, but we have to pay her, if she is to stay with us

 

Are such explanations legally tenable....thats the question !!!!

how will the govt officials can ask about a pay which seems high in their own view without giving opportunity to the party. the hospital has to substantiate means substantiate in words not in terms of money. Let your wife not consider full time as a dentist elsewhere and serving just for ur organization.
contrary to the above facts as mentioned by your goodself, where the hospital is paying 400K a month to the doctors then there govt officials wont ask for so much of clarification need for the pay of say Rs. 600000 a year. If in a rare case they ask so, then hospital officials can make their argument as they deem fit. the only thing if the query happens is that you have to satisfy the AO that it is not unreasonable in any case. Related person query occurs there where the related person is not having a qualification of his own and getting paid in the same organization in which his spouse is working. As she has a professional qualification of his own and intellect, the AO wont do any harm by disallowing the expenditure to the hospital.

Dentists of nearby centres are being employed in those centres for 10k to 15k per month.....eventhough the one who own the clinics may make in lakhs....but as an employee dentists get only 10k to 15k.....its in this setting that my wife is to be employed as a dentist for 60k

 

Not to mention that ours being a cardiac hospital, there will only be inpatient consultations for a dentist (even thugh its a cardiac centre, an admitted patient can have non-cardiac problems as well for which  an "outside" consultant gets called in albeit occassionally)....which will be far and few in number.

 

I presume you get it that inpatient consultations are not money fetching scenarios

Yeah, this amount seems unreasonable now as you have reiterated that nearby dentists are getting 10k/15k salary. Now 50k/60k seems unreasonable and not a fair valuation of money what should actually be paid. Well, now you have just one scenario left of getting excess money than 50Lakhs a year as Other Sources which should not relate to your normal business proceedings as a cardio. This only can help you to deviate the income legally and not paying those extra 10 lakhs as tax

@ Abhishek

Thank you..

But what happens if an unreasonably high remuneration is paid...is paying unreasonably high remuneration illegal?

I mean the income tax authorities might consider it "unreasonably high"....thats OK...but can they do or say anything against it-thats the question

NB: Rest be assured.....if i cannot work out a solution, I would stop accepting payment above 50 lakhs