tax levy on incentive paid to director who is not being paid regular salary

[V Sathyanarayan]

is there levy of tax on incentive of Rs.2cr paid to managing director of private company who is not being paid salary by the company. If so, what rate

[Kiran Tahelani]

To the best of my knowledge company will be liable to pay tax under RCM, if the test of employer and employee relationship fails to establish to the extend of said service.

Relavent entry is reproduced for the sake of brevity:

Notification No. 13/2017- Central Tax (Rate) 28.06.2017 (as amended)

6

Services supplied by a director of a company or a body corporate to the said company or the body corporate.

A director of a company or a body corporate

The company or a body corporate located in the taxable territory.

[Shilpi Jain]

Is he an independent director for which he is getting paid or he is being paid due to any of his services provided to the company in his professional capacity?

In the caee of former there is liability under rcm. Else director liable to pay assuming services are taxable

[Ganeshan Kalyani]

Rightly said by both the experts. The liability depends upon the agreement between the company and the Director.

[Ganeshan Kalyani]

* person liable to pay tax depend upon ...*

AI Summary

Tax Implications of Rs. 2 Crore Incentive to Director Without Regular Salary: Is Reverse Charge Mechanism Applicable? A discussion on a tax levy concerning a Rs. 2 crore incentive paid to a managing director of a private company who does not receive a regular salary. The primary issue is whether the company is liable to pay tax under the reverse charge mechanism (RCM) if the employer-employee relationship is not established. One expert references Notification No. 13/2017, indicating a tax liability under RCM for services supplied by a director. Another expert questions the director's role, suggesting liability varies based on the nature of services provided. The consensus is that tax liability depends on the agreement between the company and the director.