Employees of a pvt. ltd. company?

Question

A pvt. ltd. company has the following as its employees :
1) Mr. X = Managing Director who is also a shareholder in that co. Sal = Rs.75000/- per month.
2) Mr X's wife = Chief Accountant with a salary of Rs. 35000/- per month.
3) Mr X's son = Cashier with a salary of Rs. 25000/- per month.
4) Mr X's daughter = Secretary with a salary of Rs. 25000/- per month
5) Mr X's son-in-law = Sales Executive with salary of Rs. 40000/- p.m.

In short all employees are close relatives of the Managing Director drawing hefty salaries.

Is such an organisational set-up good in law?
Further are such salary expenses of the co.are allowed as admissible expenses from Income Tax point of view?

Answer 1

This is certainly not illegal and is what the term "family business" means. As long as each of the family members declares his/her salary in full and pays the necessary personal income tax, I don't think any law has been contravened.

Answer 2

according to law i dont know much but as per income tax it can be a great sucess bcz here it is not neccessary to show the actual salaries of the staff so it can save your tax which u have to pay on such high salaries and yes these are expenses as normal