Employment of assistant - Tax and other issues

Tax queries 585 views 4 replies

Chandresh Sanat Jatania

Chartered Accountants

116 Points Joined July 2008

Hi Everyone.

Thank you for your responses. I have few additional queries with respect my earlier query (reproduced below).

1. The assistant is to be hired for personal work. If the person decides to pay the assistant from his own pocket what heading should he use in his books of account

a. If he shows it as salary then is he liable to deduct Profession tax, TDS, etc. on such payment?

b. If he shows it as profession fees then is he liable to deduct TDS on such payment?

c. Should the amount directly be transferred to other withdrawals?

2. Is the person required to get himself registered with some tax authority (especially if shows the payments as salary / fees)? If yes, which ones?

3. What returns will be required to be filed by the person hiring the assistant?

4. Is there any limit specified in the act so as to skip the requirement of such registration(s) / filing(s)?

5. Would it be viable for the person to enter into a written contract with assistant (especially if the payment is shown as professional fees?)

6. What additional care will have to be taken by the person hiring the assistant?

For those who would be reading this post for the first time. The original query is provided below

“I have a certain query and would be highly obliged if anyone could help me with the solution.

A director of a private limited company wants to hire a private assistant / secretary for himself who would help him in his office related duties and also take care of his personal records. (His other sources of incomes include income from firms as a partner, rental income, capital gains and bank interest).

What modes of payment (salaried / fees, etc) are available to him for hiring such a person considering the following additional details:

1. The private limited company is currently not making enough profits to justify such a hire.

2. If the person is hired and paid for by the firm(s), the other partners may object as he would be working exclusively for one partner.

One of the payment options is that he can pay the person from his own pocket. However this will be shown as personal withdrawals and cannot be claimed as expenses.

Request if you could provide with additional solutions available for the above.

Also if such payment can be shown as an expense, what additional steps are to be taken with regards the same."

Thank you in advance.

Thanks and Regards,

CA CSJ

Replies (4)

Mihir

Wealth Manager

5293 Points Joined December 2008

He may hire a assistant not as salaried employee but as a consultant who is paid professional fees. If the professional fees paid exceeds Rs. 30,000/- pa, then TDS u/s 194J will have to be deducted. If he already has a TAN, then he will have to file TDS return, and the assistant will have to claim TDS credit in his ITR. Preparing a contract/agreement with the assistant is optional depending on the nature of work.

Chandresh Sanat Jatania

Chartered Accountants

116 Points Joined July 2008

Dear Mihir.

Thanks for the reply.

The person in question is an individual with no business in his own name. The fees may exceed Rs. 30,000/- PM. He currently does not have a TAN. If he gets a TAN he will have to file a TDS return as well. But he does not have any taxable income other that that mentioned earlier. Is there a way out in such cases.

Thanks and Regards,

CA CSJ

Mihir

Wealth Manager

5293 Points Joined December 2008

If he hires him as a salaried employee, then profession tax registration will have to be obtained, and deduct profession tax every month from salary. The employee may furnish details of investments u/s 80C that will make his tax nil for the employer to not deduct TDS.

Swami Ayyappa Nuli

TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH

1372 Points Joined June 2012

T.D.S provisions will apply only if you are liable to tax audit u/s.44AB. If and only if you have business then only you may cover under the Tax audit provisions. As you said you don't have any personal business,you need to get TAN and file TDS returns. Indeed even you have business and if you expend it for your personal purpose then TDS provisions will apply. So in your case it would be better for you to book such expense as Professional fee. If you book it as salary then as Mihir said, you will be liable to pay and file Professional tax returns.