Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Salary of partners in partnership firm

02 February 2017

Hi Expert,
Very warm greetings !! I have a partnership firm started 2 months ago. I am novice to tax and accounting hence I need your help. Please guide me. We are two partners in our firm and I have following queries to get enlightened.
1) This is our first year. No book profit. So what amount of salary partners can take.As we don't have other income source.
2) Let's say after all expenses, our saving is 1 Lakh per month so would we have to pay tax on 12 Lakhs and what % it would be?

Waiting for your advice.

Many Thanks

Reply
Follow
Share

7 Replies

CA VIRAL SANGHVI (Finance head) (681 Points)
Replied 02 February 2017

1) This is our first year. No book profit. So what amount of salary partners can take.As we don't have other income source.

Ans. the criteria for remuneration is

For first 3 lakhs of profit = 90 % of profit and 1.5 lakhs whichever is higher

After 3 lakhs = 60 % of profit

so in your case please give salary of Rs.1.5 lakhs if there is no book profit

2) Let's say after all expenses, our saving is 1 Lakh per month so would we have to pay tax on 12 Lakhs and what % it would be?

Ans. In case of firm you have to pay taxes @ 30%.

1 Like

Moz SEO Consultant (6 Points)
Replied 04 June 2017

Thank you vey much Viral.

So 90% of monthly profilt up to 3 lakhs or annual profile.

2) Also please guide as this is very small IT company so instead of partnership company ( after closing ) which other we can register. In which only we both will be included and Tax implications should be less or exempted to some extent.

3) In case of partnership company what is the last date to file income tax.

My Best Regards

Moz SEO Consultant (6 Points)
Replied 04 June 2017

Also with mutual consent, can we open OPC if yes then what are tax slabs.

RAJA P M ("Do the Right Thing...!!!") (127475 Points)
Replied 04 June 2017

Agreed CA VIRAL SANGHVI....
Mr. Moz,
The above quoted profits calculation for yearly basis. Not in monthly. If your company runs on profit mode then you get remuneration for above slab.
For example :
If your company get Rs. 10,00,000/- profile. First 3lakhs you get 90% remuneration (3l * 90% = 270,000. 135,000 + 135,000).
Balance 7lakhs

RAJA P M ("Do the Right Thing...!!!") (127475 Points)
Replied 04 June 2017

Balance 7lakhs you get 60% remuneration.
(7l * 60% = 420,000. 210,000 + 210,000 each) Balance will be shown income tax liability. You'll get Above remuneration

RAJA P M ("Do the Right Thing...!!!") (127475 Points)
Replied 04 June 2017

You'll get above remuneration if your company have tax audit. The last date of filing ITR with tax audit 30th Sep. Without tax audit case 31st July... If you're file your accounts without tax audit you can't get remuneration...