Income Tax for Director's Remuneration
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Director's Remuneration Income
Calculate professional tax on Director's remuneration and find out the taxability on Salary to Directors. Know more about Remuneration to Directors and Taxes.
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What is the Director's Remuneration Income?
Broadly, directors can be classified as whole-time / executive directors or independent / non-executive directors.
The executive directors are involved in day to day activities of the company and are paid salary/remuneration as an employee whereas, the executive directors are involved in managerial activities of the company and are paid sitting fees/commissions.
An 'independent director' should not have been an employee or proprietor or a partner of the said company, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed in the said company.
Important Taxation Services
Income Tax Return for Salaried Persons
GST Applicability on Director's Remuneration
Thereby, as the 'independent director' is ousted from the definition of an 'employee', the services provided by such director would not fall within Schedule III of the CGST Act and instead qualify as 'supply of service' Taxable under reverse charge in the hands of the Company.
For the levy of GST on 'whole time directors', the Circular elucidates that in terms of Section 2(94) of the Companies Act, such directors may or may not be employees of the company. Therefore, in such cases, it is opposite to look into the activities provided by such directors to the Company as well as the accounting of their salaries in the books of account of the Company.
TDS Applicability on Director's Remuneration
The remuneration received by such directors can either be treated as 'Salaries' in the Company's account and subjected to TDS under Section 192 of the IT Act or as 'fees for professional or technical Services' in the Company's account and subject to TDS under Section 194J of the IT Act.
i. Remuneration, Salary, Commission, Perquisites, Sitting Fees, etc., whatever the form of payment, it is Taxable under the Income Tax Act, 1961 either under the head "Income from Salary" (if the Director is an employee)
ii. Under the head "Profits from Business or Profession" if the Director is an agent–supplier of services.
Income Tax Filing Packages
Tax Robo Basic
Director's Remuneration
₹3499 .00
* All Exclusive tax
- Income less than 10 Lakhs
- Salary
- House Property
- Interest Income
- Pension Income
- Donation
Tax Robo Family Auditor
Director's Remuneration
₹4999 .00
* All Exclusive tax
- Income More than 10 Lakhs
- Salary
- House Property
- Interest Income
- Pension Income
- Donation
- More than One Form 16
- Free Tax Consulting
- Free Tax Planning
Five Main Heads of Income
Income from Salary
- Salary is defined as the remuneration that a person receives periodically for rendering services based on an implied or express contract.
- The Salary for the purpose of calculation of income from Salary includes:
- Wages
- Pension
- Annuity
- Gratuity
- Advance Salary paid
- Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
- Annual accretion to the balance of Recognized Provident Fund
- Leave Encashment
- Transferred balance in Recognized Provident Fund
- Contribution by Central Govt. or any other Employer to Employees Pension A/c as referred in Sec. 80CCD.
Income from House Property
i. Basis of Charge [Section 22]:
- Income from house property shall be Taxable the house property should consist of any building or land.
ii. The Gross Annual Value of the house property shall be higher of following:
- Expected rent
- Rent actually received or receivable after excluding unrealized rent but before deducting loss due to vacancy
iii. Deductions
Municipal Taxes
Standard Deduction [Section 24(a)]
30% of net annual value of the house property is allowed as deduction
Interest on Borrowed Capital [Section 24(b)]
Let-out property - Actual interest incurred on capital borrowed
Self-occupied property - Interest incurred on capital borrowed allowed as deduction upto Rs. 2 lakhs. The deduction shall be allowed acquisition or construction of house property is completed within 5 years.
Maximum loss set off allowed in a Financial Products year is limited upto Rs. 2 lakhs, remaining loss can be carried forward to future years, 8 years in total
Income from Capital Gains
Any Income derived from a Capital asset movable or immovable is Taxable under the head Capital Gains under Income Tax Act, 1961.Short Term Capital Gains:
- Sold a Capital asset within 36 months and Shares or securities within 12 months of its purchase then the gain arising out of its sales after deducting there from the expenses of sale (Commission etc) and the cost of acquisition and improvement is treated as short term capital gain and is included in the income of the Taxpayer.
Taxability of short term capital gains:
- Section 111A of the Income Tax Act provides that those equity shares or equity oriented funds which have been sold in a stock exchange and securities transaction Tax is chargeable on such transaction of sale then the short term capital gain arising from such transaction will be chargeable to Tax @10% upto assessment year 2008-09 and 15% from assessment year 2009-10 onwards.
- A Capital Asset held for more than 36 months and 12 months in case of shares or securities is a long term capital asset and the gain arising there from is a long term capital gain. Long term capital gains are arrived at after deducting from the net sale consideration of the long term capital asset the indexed cost of acquisition and the indexed cost of improvement of the asset.
Taxation of Long term capital gains
- The long term capital gains are Taxed @ 20% after the benefit of indexation as discussed above. No deduction is allowed from the long term capital gains from Section 80C to 80U. But in case of individual and HUF where the Income is below the basic exempted limit the shortage in basic exemption limit is adjusted against the long term capital gains.
Income from Profits and Gains of Business or Profession
Under Section 28, the following income is chargeable to Tax under the head "Profits and Gains of Business or Profession":
- Profits and Gains of any Business or Profession.
- Any compensation or other payments due to or received by any person specified in Section 28(ii).
- Income derived by a trade, professional or similar association from specific services performed for its members.
- The value of any benefit or perquisite, whether convertible into money or not, arising from Business or the exercise of a Profession.
- Any interest, salary, bonus, commission or remuneration received by a partner from firm .
- Fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner.
- Income from speculative transaction.
Income from Other Sources
"Income From Other Sources" is any income which is not specifically Taxed under any other head of income will be
- Taxed under this head.
- Section 56(2)(i), Dividends
- Winnings from lotteries, crossword puzzles, races including horse races, card game and other game of any sort, gambling or betting of any form whatsoever, are always Taxed under this head.
- Interest Income
- Gifts received by an individual
Advantages of Filing Income Tax (IT) Returns
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- No Benefits In the Future For Mere Filing Of NIL Income Tax Returns.
- Tax Returns Are Now Eligible Documents.
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Document Required for E-Filing Income Tax Return
Proof of Income
- Form 16 Copy – Part A & Part B
- Fixed Deposits
- Capital Gain Statement Share Broking
- FD Interest Certificate
- Invoice Copy
- Contract Copy
Proof of Deduction
- Life Insurance Premium
- Medical Insurance Premium
- School Fees Receipts
- House Property Tax
- Interest Certificate Housing Loan
- Tax Savings Documents
- Additional Deduction Documents
This may come as a surprise but you don't need any documents or proofs to attach with your Income Tax Returns.
All you need is your Aadhar ID linked with your PAN.
You need documents ONLY IF YOU SEEK TO CLAIM DEDUCTIONS while filing Income Tax.
You DO NOT NEED TO ATTACH ANY DOCUMENTS in your IT return application. Fill your Income Tax return honestly and claim deductions that genuinely apply to your application.
You may need documents only if an Income Tax assessing officer sends you a notice asking you to present those documents before them. Till then, procure all the documents that may be needed and keep them safe.
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