Small Business in INDIA ; How to pay yourself!
Yeah ! as the owner of a India small business corporation, definitely you have two options when it comes to paying yourself that is dividend and salary. Let’s discuss the boon and bane of each option.
As the owner or manager of a India small business corporation, you have two great options when it comes to paying yourself.
Dividend and Salary
Here the dividend means an investment return paid out of the corporation’s retained earnings and the salary is defined as an employment return paid out of the corporation’s net income.
There is almost no short-term difference between the total tax paid as a result of a dividend and the total tax paid as a result of a salary. India small business and personal tax rates were designed with this outcome in mind.
We think that dividends are a great way for owners or managers of active small businesses to compensate themselves. But the salaries are good too, especially if you don’t want to go to the trouble of setting up an investment account within your company or ideally through a holding company.
In our vision, corporations consisting of a single person contracting with predominantly a single client are at real risk of being considered a personal service business and should always pay out salaries rather than dividends.