Hi,
I am a new partner of a firm receiving salary which I resume come under drawings. I just wanted to know when calculating my statement of income do these show up anywhere?
I understand that remuneration to partners and interest on capital appear on the statement but what about income from salary? It is not shown right as I am a partner and it is treated as drawings?
Sorry for asking but I am really new to this and want to file my returns correctly.
Many thanks
it is your income chargeable to tax if exceeds basic exemption limit.
1) If you receive share of profit from partnership firm that income Exepted under sec 10(2A) of Income tax act while computing your individual income.
2) If your receive as salary(based on Ageed in Partnership deed) need to be comput as salary income.
A Partner can recive any amount from a firm by following ways
1) As Remuneration, salary, bonus, commission
2) As Interest on Capital invested
3) Share of profit
4) Withdrawal of invested amount
The partner is liable to pay tax on income by way of 1 and 2 (meansby way of remuneration, salary, bonus, commission, and interest). As per section 28 clause (v) of the Income Tax Act interest, salary, remuneration, commission by whatever name called will be taxed under head "Incom from business or profession". I would like to bring to your attention that salary received by a partner from firm would not taxed under head " Income from salary" because their is no employer employee relationship.so it willnot taxed under section 15.
Amount received by way of 3 and 4 (means share of profit and withdrawal of invested amount) willnot be taxable in the hands of partner. As per section 10(2A) of the Income Tax Act share of profit is exempt in the hands of partner.Because it will be taxed in the hands of firm. Withdrawal of invested amount is not income at all. Because it is the amount partner invested in the firm and withdrawn from it. so it is not the partners income.
Facts of the case
You stated here that you received income by way of salary and it is shown as drawings. Salary cannot be recorded as drawings in the books of firm.Salary should be charged to profit and loss account or profit and loss appropriation account.If it again deducted from capital account it willnot be a proper accounting.
So deceide whether you received salary from firm or you withdrawned invested amount from firm.
Any way, it will be taxable only when you received salary from firm under head "profit and gains of business or profession" as stated above. If it is drawings it is not taxable at all.
Any doubt please call Hemanth Pullanikkat-7403 87 89 85
CAclubindia
