Founder Salary Optimiser
Founder Salary
Optimizer
Find the most tax-efficient way to pay yourself. Compare Director remuneration vs. retained profit in a Pvt Ltd, or Section 35(b) (formerly 40(b)) remuneration in an LLP.
Executive directors drawing salary
Corporate tax
₹5.20 L
10.4% of profit
Personal tax (per founder)
₹1.30 L
8.7% of salary
Total tax burden
₹7.80 L
Effective 15.6%
Net take-home / founder
₹13.70 L
After income tax
Money flow — ₹50.00 L profit
Why ₹12–15L is the sweet spot for Pvt Ltd directors
Every rupee paid as salary reduces the company's taxable profit, saving 26% corporate tax. The founder pays personal income tax on that salary instead. As long as the personal tax rate is below 26%, paying salary is net beneficial.
₹3–7L salary
Personal tax: 5%
✅ Save 21%
₹7–12L salary
Personal tax: 10–15%
✅ Save 11–16%
₹12–15L salary
Personal tax: 20%
✅ Save 6%
₹15L+ salary
Personal tax: 30%
⚠️ Net cost 4%
New income tax regime slabs (FY 2024-25) + 4% cess. Standard deduction of ₹75,000 applies.
Pvt Ltd vs LLP — total tax at ₹50.00 L profit, 2 founder(s)
Pvt Ltd
Lower taxOptimal salary: ₹15.00 L/yr each
LLP
Max §35(b): ₹14.85 L/yr each
Assumes: new income tax regime, standard deduction ₹75K, 4% cess throughout. Corporate tax at 26% effective (25% + cess), LLP at 31.2% (30% + cess). Choice of entity should not be driven by tax alone — factor in compliance costs, investor expectations, and operational flexibility.
Common questions
Founder pay, statute-cited.
How is a director's salary taxed in a Pvt Ltd?+
Salary paid to a director is an expense of the company — deductible against corporate profits — and is taxed in the director's hands at their slab rate under the Income-tax Act 1961. The tax waterfall therefore has two stages: corporate tax on retained profit (the tool uses 26% effective) plus personal slab tax on salary, which is why the ₹12–15 lakh zone is usually the sweet spot.
What is the Section 40(b) limit on LLP partner remuneration?+
Under s.40(b) of the Income-tax Act 1961 (s.35(b) of the Income-tax Act 2025), an LLP can deduct remuneration paid to working partners only up to a statutory cap: the higher of 90% of book profit or ₹1.5 lakh where book profit is up to ₹3 lakh, and ₹1.5 lakh plus 60% of the excess above ₹3 lakh beyond that. Any amount paid above the cap is disallowed and taxed at the LLP level.
Why is paying yourself a salary better than leaving profits in a Pvt Ltd?+
Every rupee of salary reduces the company's taxable profit, saving the 26% corporate tax, while the founder pays slab-rate personal tax instead — so as long as your slab rate is below 26%, salary extraction is net beneficial. Above the 30% slab (roughly ₹15 lakh+), paying yourself more becomes a net cost versus retained earnings.
What are the new-regime slab rates used here?+
The tool uses the new-regime slabs for FY 2024-25: 0% up to ₹3 lakh, 5% to ₹7 lakh, 10% to ₹10 lakh, 15% to ₹12 lakh, 20% to ₹15 lakh, and 30% above, with the ₹75,000 standard deduction and the s.87A rebate of ₹60,000 where taxable income is up to ₹12 lakh. Tax is grossed up by 4% health and education cess.
Is an LLP partner's profit share taxed twice?+
No — the LLP is taxed on its profits, and the partners' share of those profits is exempt in their hands under s.9(1)(i) of the Income-tax Act 2025 (formerly s.10(2A) of the Income-tax Act 1961). Only remuneration actually drawn is taxed at slab rates in the partner's hands. The optimizer models both layers so you see the total burden.