Question

I need an explanation of the correct answer in 150 words at least.

Which of the following types of payments made by a private organization would be subject to all statutory deductions?

a) Signing bonus

b) Death benefits

c) Directors' fees

d) None of the above

Answer 1

Correct answer would be a) Signing Bonus & c) Director's Fee. Please refer below explanation for your reference.

Signing Bonus-

A signing bonus or sign-on bonus is a sum of money paid to a new employee by a company as an incentive to join that company. They are often given as a way of making a compensation package more attractive to the employee (e.g., if the annual salary is lower than he or she desires).

To encourage employees to stay at the organization, there are often clauses in the contract whereby if the employee quits before a specified period, they must return the signing bonus. In sports contracts, the full amount of signing bonuses is not always paid immediately, but spread out over time. In such cases, the main difference between a signing bonus and base salary is that the former is "guaranteed" money meaning the team is obliged to pay the bonus when due even if it cuts the player, unless the player retires or the contract is otherwise terminated due to a significant breach on the part of the player.

Joining bonus is also considered as a part of salary (unless it’s a reimbursement in a rare case).

There is NO special rate of tax or NO special provision to tax joining bonuses in income tax.

Hence, the total amount of joining bonus received, is added in your salary and tax is calculated as per normal slabs on your total income from salary and other sources(if any).

Director's Fee

Director's Fees means the annual cash fees paid by any Employer, including retainer fees and meetings fees, as compensation for serving on the board of directors of an Employer. This is no the part of salary, it is over and above the salary part.

Director's Fee can include:

• Sitting Fee
• Fees for attending meetings
• Remuneration
• Commission
• Brokerage

TDS is required to be deducted on all these type of payments and there is no particular threshold limit for this.

For example:

ABC Ltd paid Rs. 20,000 per month to Mr. B who is director of the company along with Rs. 8,000 per year for the sitting fees

TDS is required to be deducted on monthly salary payment as per the normal slabs and TDS of Rs 800 @ 10% shall be deducted for the sitting fees paid to the director.