Rendering of professional services by a non - executive director in his professional capacity does not amount to holding of office or place of profits. However if the services are rendered on regular retainer basis, it would amount to holding of office or place of profit.
Under which head it would be taxable in the hands of director i.e. Other sources (Director Fees) or PGBP(Proffesional Fees)?
Also whether the Reimbursement of expenses incurred by the director for providing the financial service would be taxable in the hands of director?
Also whether the same provisions/principle applies if the director is a Non- Resident? whether there would be withholding of tax (TDS) on the above fees?
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Taxability of Director Fees
Replies (2)
Dear Robin,
Since you have mentioned that serices are provided on retainership basis so correct head will be "PGBP".
As far as reimbursements goes the net effect will be "Nil" but any profit element shall be taxable.
Where Director is a Non resident then Sec 195 will apply in place of sec 194J. Relevant DTAA will also be referred.
According to me the income shall be chargeable to tax u/s 56(1) i.e. under income from other sources. as Amir said as far as reimbursement of expenses goes, the same shall not have impact on taxable income. The treatment shall be the same in case of non-resident as well. Just make sure u refer to the provisions of dtaa for deduction of tax at source.
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