Amit Kulkarni (Software Professional) (30 Points)
12 January 2022Hi ,
I am working with Company A as a software professional consultant. Is it possible for me to join the same company as a Director and get draw my remuneration as professional fees. Basically, I want to see if I would be able to get benefit of section 44ADA and file my return under presumptive taxation ?
Regards,
Amit
rd sharma
(partner)
(118 Points)
Replied 31 January 2022
After becoming a director in a company, you will have to draw directors salary which will be subject to income tax under section 192. In the present capacity of professional consultant, u can get the benefit of section 44ADA
Amit Kulkarni
(Software Professional)
(30 Points)
Replied 07 February 2022
Thank you for your response. I would like to know, if director's remuneration has to be salary or can it be professional fees as well ?
rd sharma
(partner)
(118 Points)
Replied 08 February 2022
If you are executive director (whole time director), then you are full time employee of that company and hence you can draw director remuneration (taxable under section 192) and can not draw consultancy fees.
Amit Kulkarni
(Software Professional)
(30 Points)
Replied 14 February 2022
Thank you for your response. Can I be non-executive director and do the same ?
rd sharma
(partner)
(118 Points)
Replied 14 February 2022
How much percentage of shares, you are holding in that company and who are other directors (your relatives) in that company and nature of your duties in the company from morning till evening in the company office, these things you have to check before taking a decision on consultancy fees instead of salary.
Amit Kulkarni
(Software Professional)
(30 Points)
Replied 21 February 2022
Share holding will be 50-50 between me and my other colleague (not my relative).
I spend 25% of my time in management activities and 75% of my time in technical/professional activity. I am a computer engineer by qualification and perform my professional activity in the same capacity. So let's assume my total annual income is going to be 30 lakhs, then can I take 7.5 Lakh as Director's salary and 22.5 Lakh as professional fees? Will this allow me to use section 44ADA on my professional income of 22.5 Lakh ?
rd sharma
(partner)
(118 Points)
Replied 21 February 2022
As you are having 50% shareholding , whole time director, related party, as well as have significant control over the management of the company, hence your remuneration will be taxable under section 192, other wise it will be presumed that you are taking prof fees, instead of salary only and only to save income tax.
Please take upmost care in taking any decision for which you will be responsible in dual capacity one in director capacity and other in whole time employee capacity..
Amit Kulkarni
(Software Professional)
(30 Points)
Replied 22 February 2022
Thank you for all your responses so far. I really appreciate you taking time to help me answer my query. However, I still have a doubt on the above query, I wanted to have a clarification if I can take remuneration (for management activities) and then professional fees (for technical activities), and can it be taxed separately.
Or is it that I cannot take professional fees, since I have significant shareholding.
rd sharma
(partner)
(118 Points)
Replied 22 February 2022
Yes, you should take director remuneration instead of fees, as later on it can create problem later on and then income tax and penalty will cost you more than income tax u/s 192. Bening in a director position, you should refrain from this type of activities and focus more on your operational activities.
Mahesh Malhotra
(CSA)
(67 Points)
Replied 30 June 2022
Nidhi Company is a financial advisory firm that can help you save money by providing a variety of products and services. They offer products such as mutual funds, insurance, and bonds. They also offer services such as accounting and investment consulting.
eNidhi Company offers a variety of products and services that can help you save money.
LIVE Course on Foreign Exchange Management Act (FEMA)(with recording)
CAclubindia
