BusinessFY 2026-27 (AY 2027-28)
Director Salary vs Dividend Calculator
Should the director take a salary or a dividend? Compare net cash in director's hand and total cost to the company.
Payout details
Director marginal rate
Recommendation
Dividend
Net advantage: ₹0 in director's hand
Salary route
₹34.40 L
Net in director's hand
Co. tax saved₹12,58,500
Director's tax−₹15,60,000
Cost to co.₹37,41,500
Dividend route★ Better
₹34.40 L
Net in director's hand
Co. tax on profit₹16,81,812
Director's tax−₹15,60,000
Cost to co.₹66,81,812
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Salary is deductible expense for the company (saves company tax) and taxed at slab in director's hand. Dividend is non-deductible (paid from post-tax profits) and taxed at slab. DDT was abolished in FY 2020-21 — dividends are now taxable in shareholder's hands.
FAQs
Frequently asked questions
Is salary always better than dividend?+
For most owner-directors, yes — salary is deductible for the company. Salary nearly always wins when company is in 25.17% (Sec 115BAA) regime and director is in 30% slab. Exception: when director's marginal rate is materially lower than company's.
What about buyback?+
Effective 1 Oct 2024 (Finance (No. 2) Act 2024), buyback proceeds are deemed dividend in shareholder's hands at slab — same as dividend. Earlier 20% buyback tax on company is repealed for distributions on/after that date.
Can I take both — salary AND dividend?+
Yes — most owner-directors do. Optimal blend depends on your slab, company's tax regime, retained earnings strategy, and whether you want to build distributable reserves vs immediate liquidity.
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