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Proprietor salary

raksha65 (CA Business) (50 Points)

15 May 2015

Question1

Can a proprietor take salary from his own proprietorship business

Question 2

how should the loan given by proprietor to his own business be shown in books of accounts

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8 Replies

Nirav (Accountant) (595 Points)
Replied 15 May 2015

Proprietor is not like a partner. There is no registration of proprietory firm like partnership firm. No different PAN card is applied like partnership firm. Proprietory business is carried on on the basis of PAN card of individual. So tax slab of individual is applicable for proprietorship firm. So this transaction of proprietor giving loan to his business is like individual is starting business from his money. So it should not be treated as a loan. It is a capital of your business. And salary taken from proprietary business is a part of your profit. Whole profit of business from proprietorship is your own. There is nothing like you take salary from ur business. You are not doing job there. Its not your salary.

1 Like

CMA Poornima Madhava (CMA) (13097 Points)
Replied 15 May 2015

@ Nirav: well explained :-)

Jishnu Surendran (Finance Manager) (312 Points)
Replied 16 May 2015

I agree with the explanation on salary....but i believe that the loan taken for starting business should be shown as loan for practical purposes......

1 ) you cannot take loan on your complete investment....ie if your proposed budget on business is 100000 there is definitely a margin for loan ( although we usually artifice this personal contribution of ours..blah blah ! )

2 ) i believe the interest on loan is an allowable expenditure for income tax

Student (b) (875 Points)
Replied 16 May 2015

Is the income from proprietorship business included in the proprietor's Income Tax Return under the head 'Profits/Gains from Business or Profession'?

Are the dedcutions under the head Profits/Gains from Bus./Profession applicable while calculating Taxable income from the proprietorship business?

Nirav (Accountant) (595 Points)
Replied 16 May 2015

If loan is taken for business purpose entry will be Bank A/c debit, Bank Loan A/c credit. If you show it as a loan then interest will be available as expense for IT purpose. But if it is shown as a capital then no interest deduction will be available. Practically it should be shown as a loan. Yes I agree with jishnu surendran. Yes, income to be shown under business and profession while filing return. But status will be individual. So individual's tax slab is applicable for tax calculation.

Jishnu Surendran (Finance Manager) (312 Points)
Replied 16 May 2015

there is no legal identity for proprietorship business different to the proprietor @ student

sadashiv Rupchand Gaikwad (Proprietor) (521 Points)
Replied 16 May 2015

No salary will be debit of proprietor to his P&L A/c.Proprietor cannot given interest to his loan in proprietory concern.

Naresh (student) (22 Points)
Replied 10 August 2017

If proprietor shown interest on loan as expense ,it is allowable expenditure as part of business finally the same received by him only it is taxable under income from other souces in his it return .

is it correct ?