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In this article you will find information on all major concepts related to TDS on Director Remuneration and its latest updates.
Who is a director?
As per companies Act, 2013, a director is person appointed to the Board of a company. There are minimum numbers of directors needs to be appointed mandatorily in private or public company.
What is TDS on Director Remuneration?
A company may appoint a director full time or part time. If he is in full time employment, the company may give him salary for his services.
Such salary is subject to deduction of TDS under section 192.
If director is not in full time employment and charges any remuneration/commission/fee for his services, such remuneration is subject to TDS under section 194J.
As per section 194J TDS needs to be deduced on any payment made to a director under this section except for any amount for which TDS already deducted under section 192.
Example 1-If Mr. A is a part time director in B LTD. & he charges remuneration for some specific services performed of Rs. 1,00,000.
Suppose the TDS rate is 7.5% then tax will be deducted @7.5% on Rs. 1,00,000 which equals to Rs. 7,500. This amount of TDS (Rs.7,500) will be deposited to the government and B ltd. will pay Rs. 92,500 (net of TDS).
Mr. A can see this TDS deducted in 26AS by logging into his Income tax portal. And at the time of Income tax return filing this amount of TDS will be adjusted from the total tax liability of the Mr. A.
When TDS is deducted on remuneration to Director?
TDS is deducted at the time of credit or payment whichever is earlier.
What is TDS rate on remuneration to Director?
Rate of TDS U/S 194J of Income tax Act is 7.5% (earlier it was 10%) of the Director’s Remuneration.
(TDS rate has been reduced to 7.5% due to covd-19 from 14/05/2020 till 31/03/2021.)
Is TDS deducted on sitting fees of Directors?
Sitting fee is paid for attending meetings of the board or committees thereof. Any sitting fee paid to directors will be subject to TDS u/s 194J.
What is the limit for TDS on remuneration to director?
There is no such threshold limit for TDS on director remuneration. TDS needs to be deducted even if you pay Re. 1 to a director.
Example 2- If Mr. A is an executive director in B Ltd. and his remuneration is Rs. 1,00,000 per month and he takes a sitting fees of Rs. 15,000/- for attending a meeting.
Suppose TDS rate is 7.5% then tax will be deducted @7.5% on Rs. 15,000 which is equal to Rs. 1,125. This amount of TDS (Rs.1,125) will be deposited to the government and B Ltd. will pay Rs. 13,875(net of TDS).
TDS will be deducted u/s 192 on remuneration of Rs.1,00,000 as he is an executive (full time) director .
Example 3- If Mr. A is non-executive director in B LTD. & his remuneration is Rs. 1,00,000 and he charges sitting fees of Rs. 15,000/- for attending board meeting.
Suppose TDS rate is 7.5% then tax will be deducted u/s 194J, @7.5% on Rs.1,15,000 which equals to Rs. 8,625.
Latest Notification on TDS on director Remuneration
Due to Covid -19 The Finance Minister has reduced to rate of TDS by 25% to ensure more funds in the hands of Directors , so from 14/05/2020 to 31/03/2021 TDS on Remuneration Paid to Directors U/S 194J is reduced to 7.5% (earlier it was 10%).
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