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Why salary is not allowed in sole proprietorship firm

Atharv Sankliya (1306 Points)

27 November 2021

why salary to owner is not allowed in sole proprietorship firm although it is allowed in partnership firm ??

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160322 Points)
Replied 27 November 2021

PAN of Sole proprietor is Same. Salary paid by an entity to same PAN???

While partnership is all together different entity, w.r.t. partner/s.

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Atharv Sankliya (1306 Points)
Replied 27 November 2021

Please explain in detail!

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160322 Points)
Replied 27 November 2021

Well, for partnership firm, the working partners draw salary. As the partnership firm is assessed separately the salary is assessed in the hands of individual partner.

But for proprietor, even if it withdraws salary, the amount gets added to his total income, may not be under PGBP head but Salary head. So, finally there is no change in aggregate tax. This is basic principle....

If you are thinking of deductible perquisites or standard deduction etc. that was not considered while enacting the IT act.

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