So, he is not an employee and hence there need not be any bifurcation of emoluments. You may pay him consolidated remuneration (at Rs. 40k). You further note the following in this regard.
A directorship is an office, not necessarily an employment. If, however, the company enters into a service contract with the director, the terms of which make the Director an employee under the usual common law, then the Director becomes an "employee". Many companies' Directors are in this position.
Since you said excluding EPF/ESI, he's anyway outside the limits. But it's only optional. As regards to PF:
Directors on salary should also be counted for computation of employees for coverage. Deduction towards PF can be made if he is not opted for excluded employee within the meaning under the Act. Directors getting remuneration shall be excluded.
'Salary' consists of yearly gross wages. An employer can be paid on an hourly rate or a fixed amount on a regular basis, monthly also. Remuneration can include salary, commission, compensation. Hence, salary & remuneration is one and the same thing, remuneration being a wider term which includes salary also.
Since Rs. 40k earmarked seems to be within the limits of remuneration provided under the Companies Act there's no difficulties.
The Act provides ceiling limits for remuneration in case of Public Companies. Here, total remuneration shall not exceed 11% of the net profit of the company. Total returns and remuneration paid to Managing Director, Whole-time Director, and Manager shall not exceed the limits as described under the act.
Maximum remuneration for a Director:
Capital (Rupees) Highest limit for Remuneration to a Director
Less than 5 crores 30 lakhs
5 crore or more but less than 100 crores 42 lakhs
100 crores or more but less than 250 crores 60 lakhs
250 crores and above 60 lakhs along with 9.99% of the capital
in excess of Rs. 250 crores
These are subject to Adv. Tax/TDS as the case may be.
Also, please go through the attached write-up on the subject which gives you overall knowledge for better admin.
From India, Bangalore
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1274A directorship is an office, not necessarily an employment. If, however, the company enters into a service contract with the director, the terms of which make the Director an employee under the usual common law, then the Director becomes an "employee". Many companies' Directors are in this position.
Since you said excluding EPF/ESI, he's anyway outside the limits. But it's only optional. As regards to PF:
Directors on salary should also be counted for computation of employees for coverage. Deduction towards PF can be made if he is not opted for excluded employee within the meaning under the Act. Directors getting remuneration shall be excluded.
'Salary' consists of yearly gross wages. An employer can be paid on an hourly rate or a fixed amount on a regular basis, monthly also. Remuneration can include salary, commission, compensation. Hence, salary & remuneration is one and the same thing, remuneration being a wider term which includes salary also.
Since Rs. 40k earmarked seems to be within the limits of remuneration provided under the Companies Act there's no difficulties.
The Act provides ceiling limits for remuneration in case of Public Companies. Here, total remuneration shall not exceed 11% of the net profit of the company. Total returns and remuneration paid to Managing Director, Whole-time Director, and Manager shall not exceed the limits as described under the act.
Maximum remuneration for a Director:
Capital (Rupees) Highest limit for Remuneration to a Director
Less than 5 crores 30 lakhs
5 crore or more but less than 100 crores 42 lakhs
100 crores or more but less than 250 crores 60 lakhs
250 crores and above 60 lakhs along with 9.99% of the capital
in excess of Rs. 250 crores
These are subject to Adv. Tax/TDS as the case may be.
Also, please go through the attached write-up on the subject which gives you overall knowledge for better admin.
From India, Bangalore
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Thank you for your detailed information sir. Regards, Prakasam
From India, Chennai
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From India, Chennai
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(Fact Check Failed/Partial)-The user reply does not address the original post. The original post inquired about ESI & PF liability on a company director's remuneration. There is no detailed information provided in the user reply to address this query.
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Dear Sir,
Our Managing Director has decided to take a salary from Jan 2021. I would like to know whether PF should be deducted, as he is already receiving a salary from another company. Our company is a private limited company. Our MD is already a member and is receiving payment from that company.
Please advise.
Regards,
Uma
From India, Hyderabad
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Our Managing Director has decided to take a salary from Jan 2021. I would like to know whether PF should be deducted, as he is already receiving a salary from another company. Our company is a private limited company. Our MD is already a member and is receiving payment from that company.
Please advise.
Regards,
Uma
From India, Hyderabad
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(Fact Check Failed/Partial)-The Managing Director's PF should be deducted as per the law, regardless of drawing salary from another company. The PF liability applies to each employment separately. Thank you for seeking clarification on this matter.
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CiteHR.AI
(Fact Checked)-The user reply contains accurate information regarding the treatment of company directors in relation to EPF and ESI liabilities. The explanation provided aligns with the legal framework and practices in this context. (1 Acknowledge point)