Hi, I need advice on PF contribution for one of the company directors. We have been depositing PF for one of the company's directors (above 65+ years, 40% stake) who has not been paid monthly; however, remuneration is paid as and when needed since we registered for PF (it's a 6-year-old company). Now, the stake of this director is reduced to 0%. Do we still need to deposit PF for this director? What is the process if we want to stop depositing PF contribution only for this director as a non-salaried person? Please share your knowledge with accuracy.
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Director's Role and Remuneration
Firstly, a Director is not an employee; they are an agent. Unless there is a specific contract or resolution that entitles a director to remuneration by appointing them as an employee, they will not be treated as such. In such cases, the director is entitled to sitting fees, not remuneration. Sitting fees are taxable under Section 194J of the Income Tax Act and are subject to reverse charge of Service Tax, classifying it as professional income rather than a salary.
Provident Fund (PF) and Salary
Provident Fund (PF) is levied on an employee's salary. Therefore, if you are paying a salary to the director, PF deduction is applicable. Since you mentioned that you are not paying the director regularly (presumably indicating the absence of a contract), PF deduction is not required. However, you must deduct TDS from their payment under Section 194J.
For more information on Income Tax Deductions, visit http://incometaxsahayak.blogspot.in/.
Regards
From India, Kolkata
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Firstly, a Director is not an employee; they are an agent. Unless there is a specific contract or resolution that entitles a director to remuneration by appointing them as an employee, they will not be treated as such. In such cases, the director is entitled to sitting fees, not remuneration. Sitting fees are taxable under Section 194J of the Income Tax Act and are subject to reverse charge of Service Tax, classifying it as professional income rather than a salary.
Provident Fund (PF) and Salary
Provident Fund (PF) is levied on an employee's salary. Therefore, if you are paying a salary to the director, PF deduction is applicable. Since you mentioned that you are not paying the director regularly (presumably indicating the absence of a contract), PF deduction is not required. However, you must deduct TDS from their payment under Section 194J.
For more information on Income Tax Deductions, visit http://incometaxsahayak.blogspot.in/.
Regards
From India, Kolkata
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Thank you for your response. Now my query is if we have been depositing PF so far for this director can we stop it now and what is the process ? do we need to notify ?
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf