Salary Paid To Wife

This query is : Resolved

balaji (Querist)
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05 May 2009 A Businessman employs wife in his proprietory firm and pays a salary of Rs.16,000 per month. Wife has no technical qualification, knowledge or skill.He includes the salary paid to wife along with salary paid to other staffs. My question is:

1.Whether salary paid to wife will be disallowed under the head profits and gains from business or profession? If yes, under what section?

2.If not, Whether salary received by wife will be clubbed with the husband's income u/s 64(1)? If it is clubbed, under what head of income it will be clubbed?

3.Will there be any difference if wife possess technical qualification and she was previously employed in another firm, where she was drawing a salary of Rs.1500 per month?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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05 May 2009 1.The assessing officer can disallow the amount paid to wife if he cosiders that the payment is excessive and unreasonable as compared with the prevailing value of the services. Ref Section 40A(2).

2.Clubbing is possible u/s 64(1)(ii).

3.40A(2) will definitely attract and not 64(1)(ii).

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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06 May 2009 agree with expert

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taxindiaconnect

taxindiaconnect (Expert)
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06 May 2009 Agreed.

CA.Pujah

CA.Pujah (Expert)
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06 May 2009 Section 40A(2) will be attracted, as it's a pymt to relative. It will be disallowed to the extent the AO considers it excessive.
Also, Section 64(1) (ii) will be attracted & the income will be clubbed in the hands of the husband.
But, Sec64 will not be attracted if the wife possesses a professional skill/ qualification.