Tax Planning for companies

• December 16, 2019
• CA Chandan Agarwal's Office

Startup expense –  professional charges paid for incorporation, drafting of MOA and AOA, Printing cost of documents, fees paid to ROC, stamp duty etc.

Salary to director – For example, Let us say XYZ private limited company is making a profit of 5 lacks which is to be shared among the founder/director in equal ratio. So Instead of showing 2.5 lakhs as profit-sharing; one can show salary of Rs. 2.5 lakhs to each director. The result of the same will be that taxation on XYZ Pvt Ltd will be nil as there is no profit left and also no taxation on salary also as there is no tax up to income of Rs. 2.5 lac for an individual.

Sitting fees to director– The rules notified under section 197 of companies act 2013 says, “a company may pay sitting fee to a director for attending meetings of board or committee thereof. Such sums as may be decided by the BOD thereof which shall not be exceed 1 lakh per meeting of the board or committee thereof.” As per the clause (1)(ba) in section 194j of income tax act,1961, TDS on any remuneration or fees or commission by whatever name called shall be liable to be deducted @ 10%.

Read more on: https://taxguru.in/income-tax/tax-planning-companies.html