if a Mr.x starts a business, can he pay or how much is the limt to pay salary to his
brother, sister, mother or father (tax laws regarding salary payment to such relatives)
10 Replies
Amir
(Learner)
(4016 Points)
Replied 02 April 2010
Dear John,
All legitimate expenses can be claimed as deduction and there is no limit as such prescribed under any provision.
However in case of payments made to person specified under sec 40A(2) {relatives, etc}, AO can disallow to the extent it is unreasonable.
CA. Abhishek K. Pandey
(Manager (Advance))
(901 Points)
Replied 02 April 2010
He can pay as much amount as reasonable.
By reasonable, you may estimate that what other similar institutions are providing for the same job.
Until its reasonable, its perfectly ok. After that limit, it could be disallowed by AO.
ganesh bhandari
(B.Com Final C.A. Final CS Article Clerk )
(239 Points)
Replied 02 April 2010
There is no upper limit to making any payment to any of your relatives...
But then the payment should be reasonabe i.e. it should be justifiable..and also genuine that it is should not only be a book entry.
saranraj
(CA FINAL)
(419 Points)
Replied 02 April 2010
The salary paid should be such that the assessing officer should not get any doubts... this matter purely depends upon the assessing officers thoughts...
CA Devender Chauhan
(Group Financial Accountant)
(1526 Points)
Replied 02 April 2010
there is no such upper limit
but the salary should be reasonable as per the qualifications of the relatives.
CA Babit Khurana
(learning is my passion)
(338 Points)
Replied 02 April 2010
As per section 40A(2) if an assesse provide salary to relative then it should be disallowed by A.O. if he thinks fit is unresonable.
Darpan aggarwal
(Article assitiant)
(141 Points)
Replied 03 April 2010
HEELO JOHN
IT WILL DEPEND ON THE OCCUPATION OF THER PERSON DONE BY HIM/HER.
CS PAWAN KUMAR
(PROP.)
(38 Points)
Replied 03 April 2010
Hi there,
As far as payment to relatives are concrened, there is not any limit undet I.Tax Act, and the A.O.'s role will be limited (no discretion on reasonability) if the payment to relatives are approved by Ministry of Corporate Affairs. under the relevant provisions of the Company Act. A.O. can not question the approval of M.C.A.
C.Balaji
(Learner)
(1867 Points)
Replied 03 April 2010
Dear John...
As freinds say....there is no upper limit.....
Payments made to relatives should be reasonable i.e.as per the qualification of the person....otherwise the AO can disallow to the extent it is unreasonable.
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