Sandeep (Self Employed) (125 Points)
18 February 2010I run a recruitment proprietorship firm from home, my wife is also working/assisting me in this work. Please let me know if I can pay salary to my wife and claim it as an expense of the business? What basic accounting and other precautions must I maintain to satisfy the ITO in case of query? My wife is an engineer by qualification.
Regards
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 18 February 2010
It is advisable not to pay salary to your wife for recruitment services. you can pay salary to your wife and claim it as expense only if she is qualified for the job she is employed for, As your wife is an Engineer by qualification , she should be rendering service to your organisation thats requires the skill and competence of an engineer and you should be able to prove that she is working like a regular employee (i.e around 8 hours for 24 or 25 days in a month), if you fail to prove 1 or more of any of these said points her income will be clubbed with yours. as recuritment(most of the time) doesnot need qualification of an engineer, there is a risk that the expense might get disallowed
Dintakurthi Tirumala
(CA FINAL)
(15994 Points)
Replied 19 February 2010
Sandeep ji Please refer section 60 t0 64 of income tax act 1961 it gives u clarification
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C.Balaji
(Learner)
(1867 Points)
Replied 19 February 2010
Dear Sandeep...
Always keep in mind that you have to prove if questioned that your wife performs work with her skill and knowledge...simply paying salary to wife the dept. will not accept....
You can pay salary to wife but make sure that it is reasonable and acceptable.....Otherwise it will be clubbed in your hands.....
Amol Gopal Kabra (CA,CS,DISA)
(Practicing CA)
(8539 Points)
Replied 19 February 2010
In my opinion there should not be any problem in paying salary. Your wife is an engineer. But still the education required for recruitment firm need not be any specific one. If your wife, despite of being an engineer has the skills for the job, you can pay her salary and claim as expenses in Income Tax. From my point of view, it wont have any problem.
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 19 February 2010
If your wife is actually helping you in your business then you can very well pay salary to your wife. However the amount of salary paid should be in proportion to time devoted and should be reasonable.
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