salary limit to relatives

if a Mr.x starts a business, can he pay or how much is the limt to pay salary to his

brother, sister, mother or father (tax laws regarding salary payment to such relatives)

Replies (10)

Dear John,

All legitimate expenses can be claimed as deduction and there is no limit as such prescribed under any provision.

However in case of payments made to person specified under sec 40A(2) {relatives, etc}, AO can disallow to the extent it is unreasonable.  

He can pay as much amount as reasonable.

By reasonable, you may estimate that what other similar institutions are providing for the same job.

Until its reasonable, its perfectly ok. After that limit, it could be disallowed by AO.

There is no upper limit to making any payment to any of your relatives...

But then the payment should be reasonabe i.e. it should be justifiable..and also genuine that it is should not only be a book entry.

The salary paid should be such that the assessing officer should not get any doubts... this matter purely depends upon the assessing officers thoughts...

there is no such upper limit

but the salary should be reasonable as per the qualifications of the relatives.

As per section 40A(2) if an assesse provide salary to relative then it should be disallowed by A.O. if he thinks fit is unresonable.

No Limit for this purpose.

HEELO JOHN

IT WILL DEPEND ON THE OCCUPATION OF THER PERSON DONE BY HIM/HER.

Hi there,

As far as payment to relatives are concrened, there is not any limit undet I.Tax Act, and the A.O.'s role will be limited (no discretion on reasonability) if the payment to relatives are approved by Ministry of Corporate Affairs. under the relevant provisions of the Company Act. A.O. can not question the approval of M.C.A.

Dear John...

As freinds say....there is no upper limit.....

Payments made to relatives should be reasonable i.e.as per the qualification of the person....otherwise the AO can disallow to the extent it is unreasonable. 

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