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Discussion > Income Tax >

Remuneration to partners

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CA Final


[ Scorecard : 76]
Posted On 16 September 2010 at 17:15 Report Abuse

The partnership deed lays down the manner of quantifying the remuneration which is as per the limits specified under The Income Tax Act. For example, suppose the firm has to pay Rs. 100 as per the calculation on the profits as per the Income Tax Act. But the firm wants to pay Rs. 60 as remuneration. Can the firm pay Rs. 60 to the partners or it has to pay minimum Rs. 100?


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sudhakar ca cwa
service


[ Scorecard : 1498]
Posted On 16 September 2010 at 17:22

what is the need of paymet lower remuneration.

ok if did it so then it has to pay more income tax.

in my opinion income tax dept will accept becoz they are getting more revenue.

but next yesr if they want to cliam minimem remuneration they need to explain the reason to IT dept





CA.G.Muguntha Narayanan
Internal Auditor at TVS Motors


[ Scorecard : 2175]
Posted On 16 September 2010 at 17:33

Dear Surabhi,

           As per Income tax act, it can claim Rs.100, coz, the section says that amount payable as per P.D. In the given case, amount payable as per P.D is Rs.100. however, if its gonna claim deduction of Rs.100, it definitely has to show tha balance amount of rs.40 as liability to partners




M .K. Jha
CA Final


[ Scorecard : 484]
Posted On 16 September 2010 at 18:17

 

As Per Ur case, Firm Can pay Rs 60/- as partner remuneration but firm can't pay more than allowable remuneration as per Income Tax Act, 1961.

If Firm pays more remuneration then allowable as per Income Tax Act, 1961 the excess amount disallowable U/s 40(b)(v)

Firm can pays Partner's remuneration :-

(a) on the first Rs.3,00,000/- of the book-profit or in case of a loss

Remuneration :-Rs 1,50,000/- or at the rate of 90% of the book-profit, whichever is more

 

(b) on the balance of the book-profit

Remuneration :- at the rate of 60%;

 




Santosh
Student ( Final Year - New )


[ Scorecard : 343]
Posted On 17 September 2010 at 12:09

Originally posted by : Mayank Kumar Jha
 
As Per Ur case, Firm Can pay Rs 60/- as partner remuneration but firm can't pay more than allowable remuneration as per Income Tax Act, 1961.
If Firm pays more remuneration then allowable as per Income Tax Act, 1961 the excess amount disallowable U/s 40(b)(v)
Firm can pays Partner's remuneration :-
(a) on the first Rs.3,00,000/- of the book-profit or in case of a loss
Remuneration :-Rs 1,50,000/- or at the rate of 90% of the book-profit, whichever is more
 
(b) on the balance of the book-profit
Remuneration :- at the rate of 60%;
 



Suresh Prasad
www.aubsp.com


[ Scorecard : 15305]
Posted On 17 September 2010 at 13:08

Dear Surabhi,

  As the partnership deed lays down the manner of quantifying the remuneration which is as per the limits specified under The Income Tax Act, the firm has to follow IT provisions for giving remuneration to its Partners.

The deduction for remuneration can be claimed u/s 37 but subject to conditions laid down by sec. 40(b).

According to sec.40(b):---

>  Any payment to non working partner as remuneration will be disallowed.

>  Payment to working partner will be allowed if it is in accordance with Partnership Deed.

>  The deduction for payment to working partner shall be allowed to the extent provided in deed but subject to maximum limit on Book Profit(BP) prescrived in the IT Act.

   @ in case of loss---------- ---------------    Up to Rs.1,50,000

   @ on first Rs.3,00,000 of BP -------  90% of book profit or Rs.1,50,000 whichever is more

   @ on balance of BP ------------------------ 60% of BP

                                       i. e. in your case it will be Rs.100.

From above provisions and discussions it can be said that (Assuming all are working partners) THE FIRM CAN PAY Rs. 60 WHICH IS LESS THAN LIMIT (Rs.100). And there is no restriction on payment of less remuneration than the limit provided by prtnership deed and It Act. Thus the firm is not bound to Pay Minimum of Rs.100 as Remuneration.




Rahul Ramesh
CA Final, BCom, MBA


[ Scorecard : 1083]
Posted On 17 September 2010 at 15:58

Originally posted by : Mayank Kumar Jha
 
As Per Ur case, Firm Can pay Rs 60/- as partner remuneration but firm can't pay more than allowable remuneration as per Income Tax Act, 1961.
If Firm pays more remuneration then allowable as per Income Tax Act, 1961 the excess amount disallowable U/s 40(b)(v)
Firm can pays Partner's remuneration :-
(a) on the first Rs.3,00,000/- of the book-profit or in case of a loss
Remuneration :-Rs 1,50,000/- or at the rate of 90% of the book-profit, whichever is more
 
(b) on the balance of the book-profit
Remuneration :- at the rate of 60%;
 



CA ravi kisore
practicing chartered accountant


[ Scorecard : 54]
Posted On 18 September 2010 at 02:26

deduction will be allowed only if the partnership deed specifies the amount of remuneration or lays down the manner of deteremination of quantum of remuneration and subject to within the limits specified in the Act




Manoj R. Agrawal
Service


[ Scorecard : 63]
Posted On 18 September 2010 at 11:13

better to have addendum to partnership deed showing revised remuneration, so that there would no chance of disallowance of the same.




CA Parag Jani
BCom CA DISA Forensic Auditor


[ Scorecard : 271]
Posted On 18 September 2010 at 15:47

in your case, Rs.100 will act as the MAXIMUM CEILING LIMIT computed as per IT Act & anything paid over & above that will be disallowed in the firm's computation of income. So you can pay anything less than Rs.100 but not more than that.



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