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Remuneration to partner

Sejal Patel (ca) (61 Points)

22 June 2016

our assesse having partnership firm, firm has only income of rent.

can firm give remuneration to it's partner from rental income?

under which head rental income is taxable?

1) under PGBP & allow regular business expenditure?

2) rental income taxable as income from HP and allow only slandered deduction of 30% u/s 24 & if any interest on loan ?

whats about remuneration to partner from rental income only.

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3 Replies

Shishir Nayak ((Expert)) (369 Points)
Replied 22 June 2016

Can you clarify what is main business of firm even it is not started.?

Sejal Patel (ca) (61 Points)
Replied 22 June 2016

science last 3 years assessee having only rental income & no other income.

from this year only want to give interest & remuneration to partners, can they give?

Shishir Nayak ((Expert)) (369 Points)
Replied 22 June 2016

As per Income Tax Act 1961 ::> Main criteria for deciding whether the rent is assessable as income from house property or as business income depends upon the fact that whether the assets are exploited commercially or whether the same are let out for enjoying the rent.:::::::: Even if a company is formed for the sole object of acquiring and letting out immovable properties, the rental income would be taxable as “Income from House property” and not as business income.::::: There are many case law which are supporting this situation both as HP income as well as PGBP income. :::: Now the point is if you want to consider it as PGBP income than you can claim Interest & Remuneration to Partners U/s. 40(b) of the Income Tax Act, 1961 subject to the fulfillment of conditions mentioned therein. but you cannot claim if you are considering that as HP income as you are getting Standard decution of 30%.