Taxability of commission - director

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..... Taxability of commission - director
Query (Issue) Started By: - Purshottam Agarwal Dated:- 10-9-2009 Last Reply Date:- 13-9-2009 Income Tax
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Income Tax
I wish to know if any TDS is applicable for the payment made by a company to its independent (non executive) director in form of commission calculated in terms of percentage of profits as per the provisions of sectoin 309 .....

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..... of the Companies Act?. Further under which head the said commission will be taxable in the hands of such director ? Reply By Surender Gupta: The Reply: The term "commission" used in section 309 is creating some ambiguity for the purpose of TDS. But, this ambiguity remains only if you see the provisions of section 309 in isolation. The provisions of section 309 must be read with section 198. Sect .....

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..... ion 198 deals with managerial remuneration. Therefore, even if the amount of commission is paid to independent (non-executive directors) the same would not constitute as an amount towards professional services or brokerage under the provisions of TDS. This amount would remain in the nature of remuneration which is paid to the management (i.e. employee) of the company. Therefore, if the provisions .....

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..... of TDS are needed to be applied than only provisions of section 192 shall be applied. Reply By DEV KUMAR KOTHARI: The Reply: Directorship is a vocation and in particular case of a director he may be considered as a professional director. Such directors are not employees of company, therefore commission cannot be regarded as salary u/s 192.Such director cannot be regarded as contractor, so S. 194 .....

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..... C will not apply.Such directora are not rendering services for earning commission or brokerage within meaning u/s 194H vide Explanation (i) thereto, thereefore S. 194H shall not apply. Such commission is not in nature of professional or technical fees or royalty or any sum u/s 28(va), further more it is not negotiates d as fees so S. 194J is not applicable. Therefore, in case payment is made to a .....

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..... resident, there appears no provision of TDS. In case of payment is made to a non resident, then S. 195 shall apply becasue such commission falls under catagory 'any other sum'.
Discussion Forum - Knowledge Sharing .....

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