I am a self-funded entrepreneur and employ about 5 people. I have been paying salary to them and have been deducting TDS on their salary and remitting it regularly.
This query pertains to self - I accrue my salary in book of accounts with no payment (if my own money is brought into business and pulled out as salary, it did not make sense and hence just shown in the book as accrued salary).
In this situation, should the TDS for my salary be paid now or when the actual payment is made?
22 February 2016
From the query posted by you, it is understandable that your's is a proprietary concern. There is no provision in the Income Tax law to allow salary of a proprietor to allow as deduction. Whatever, the salary you are drawing will be treated as personal drawings and has to add back to the net income to arrive at income under the head PGBP.
TDS is not required, however, you may need to pay advance tax.
22 February 2016
Thanks for the reply. But my company is a private limited company. Does the above explanation apply for that too?
I want to be in right side of the law and hence this query. The situation on the company holding is like this
(1) We are a pvt ltd company with two founders. Both the founders have been working full-time as well as funding the day-to-day expenses of the company (2) We have employed 5 employees and they are paid salaries. We do TDS for the salaries paid to them (3) In my accounts book, for both the founders we are provisioning a nominal salary for each of us, and the idea is when there is sufficient cash-flow for the company in future, we can pay ourselves.
So in this context, as we (both founders) are not paid a salary, would we need to show them as Income as pay appropriate Income Tax or wait for the actual payment and show in that appropriate time.
22 February 2016
The salary can be drawn from a company by executive / whole-time or managing directors of the company. A simple director (non working by designation) cannot draw salary. He however, can draw commission on sales.
If you are working director (by designation) can draw salary and TDS has to be deducted as per the provisions of the IT Law.
Both of us are working directors and are drawing salary as of now. The query is whether TDS for us is applicable as when it is 'accrued' or as and when 'paid'
CAclubindia
