The government today proposed a 10% income tax on remuneration of directors of companies.
"It is proposed to amend section 194J to provide that tax is required to be deducted on the remuneration paid to a director, which is not in the nature of salary, at the rate of 10% of such remuneration," Union Budget 2012-13 presented by Finance Minister Pranab Mukherjee said.
For TDS (Tax Deducted at Source) on such remuneration, the Income Tax Act, 1962, would require an amendment. The government aims at implementing the tax from July 1, 2012.
The amendment in the Income Tax, 1962, will come into effect from July 1, 2012.
A company, being an employer, is required to deduct tax at the time of payment of salary to its employees, including managing director and whole time director.
However, there is no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary.