Paying salary to mother - Income Tax

Hi TaxFull Team,

I have a proprietorship business on my name. I have employed mother for office maintenance. I pay her 5K monthly using online transfer or cheque. Do i need any other documents besides online transaction receipt to show her as an employee? Will i be eligible for deductions showing it as expenditure? 

I was also curious to know if she needs to file ITR as her total income is not in taxable range. If yes then which ITR form (ITR1 or ITR4) she needs to fill?   

Regards,
Gautam
Asked 1 month ago in Income Tax from Patna, Bihar
Dear Gautam,

You don't need any other documents. How many number of people you employee in your organization? 

Yes, you will be eligible for deduction. However, if the tax department feels that the amount is high, they can disallow it. However it does not seems to be high.

If her income is below taxable limit, she is not required to file ITR but it's always better to file ITR. She can file ITR 1.

Please feel free to call/revert in case of any doubts

Thanks and Regards
Abhishek Dugar
CA CS B.Com
caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
766 Answers
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Dear Gautam,

Whatever amount you pay, you have to prove reasonableness of the amount.

In my opinion 20k is on higher side.
Abhishek Dugar
CA, Mumbai
766 Answers
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HI,
happy diwali!
if you are paying your mother the salary in her professional capacity, and if the amount is reasonable, then yes you can show it as an expense and she can file ITR 1.
you need to check if professional tax is applicable or TDS.
Vishakha Agarwal
CA, Bangalore
213 Answers
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You need to prepare a appointment letter appointing your mother . There is no harm in appointing her. There is no need to file her It Returns if her income is below taxable.

Only thing to be taken care is that it should not be seen that you are only giving money to save tax
Shyam Sunder Modani
CA, Hyderabad
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Hello Sir,

On the basis of the details provided by you, It should not be a problem paying salary to your mother. I assume that your mother stays in the same city in which you conduct your business to actually prove her managing your business.

On the part of documentary evidences, online transaction of transferring salary is good.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
Rohit R Sharma
CA, Mumbai
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Paying to mother as an employee is not an issue but the important things is that you must be able to justify that the expenses are for the legitimate need of the business  and further the amount paid is fair , if that would have been paid to a third person . Please ensure that payment is made through proper banking channel .
Since her total income from salary is 2000X 12 = 240000, is less than the taxable limit of 2.5 lacs ( considering that she does not have any other income ) , she is not required to file the ITR as per the law . However it is better to file the ITR .
Prakash Sinha
CA, Delhi
112 Answers
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Dear Gautam,

The amount paid by you to your mother is less than taxable limit i.e 2,50,000 (Assuming that she does not have any other income). Also TDS provisions are not applicable on the same assumption. 
 
As per provisions of income tax Act 1961, it is not necessary to file ITR in your mother case. However its better to file ITR 1. 
On the part of documentary evidences, online transaction of transferring salary is sufficient.

For any further clarification feel free to contact us.
 
Shiv Kumar Agarwal
CA, Delhi
197 Answers
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