💰 Tax Savings · Structure & split income
Put family on the payroll — split income, cut tax
✍️ EaseValue Advisors · Updated 17 Jul 2026 · FY 2025-26
In short
Employing a spouse or adult child who genuinely works in your business moves income to their (lower) slab and is deductible for the company — provided the pay is reasonable for the work (Section 40A(2)).
Why it saves
The salary is a deductible expense for the company, and it's taxed in the family member's hands — where they get their own basic exemption, 80C, standard deduction, etc. Income that would sit in the 30% bracket can be taxed at a much lower slab.
The guardrails
- The employment must be genuine and the person must actually work.
- Pay must be reasonable for the role — Section 40A(2) lets the officer disallow excessive payments to relatives.
- For a spouse, salary escapes clubbing only if they have the relevant technical/professional qualification and the pay is for that (proviso to Sec 64).
- Keep appointment letters, attendance and deliverables on record.
The law behind it
Section 40A(2) Section 64
General information for FY 2025-26 (AY 2026-27), not advice on your specific case. Limits, rates and conditions
change with each Finance Act and depend on your facts — confirm before acting. © EaseValue Advisors LLP.
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