Assessment of partner income

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TRIPATI (Querist)

22 January 2013 A firm having book-loss of Rs.126969.00 and paid Rs.252000 to three partners i.e. A, B,C in equal ratio as remuneration. So my qus. is that how much salary is taxable in the hand of partner A

Thanks in advance!

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

22 January 2013 Rs. 84,000/-

TRIPATI

TRIPATI (Querist)

22 January 2013 Sir, But Rs. 150000.00 is to be allowed as expense while calculating the income of partnership firm .so this amt. should be taxable in hands of partner

Plz sir explain it

CMA Nishad Patkar

CMA Nishad Patkar (Expert)

23 January 2013 Since it is a Book Loss Maximum Amt. of deduction which Firm Can Claim is Rs. 150000.And This is the amount which is taxable in the Hand of Partner according to his or her remuneration sharing Ratio. Hence Amount Taxable in the Hands of Partner A is Rs. 50000/-

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

23 January 2013 Rs. 50,000/- only as per section 40(b) read along with proviso to section 28(v) of the Income tax Act,1961. My earlier observation stands corrected to this extent.

TRIPATI

TRIPATI (Querist)

23 January 2013 Sir, I am very confused so plz tell me what to do and what is the right ans. and why

Thanks Sir for consider this query

CMA Nishad Patkar

CMA Nishad Patkar (Expert)

23 January 2013 You need not to be confused . I am elaborating my earlier answer for your better clarity.

Section 40(b) provides for disallowance of Salary, interest , remuneration in the hands of Firm.
As per the Section 28 of Income Tax Act- Any Salary, Interest, remuneration, bonus, commission receive by any partner is chargeable to Tax, which is Rs. 84000/- in this case. . However as per the proviso of sub section (v) of said section provides for an adjustment to the extend it is disallowed u/s 40(b) in the hands of Firm, Hence Partner needs to pay tax on balance amount of Rs. 50000/- (84000-34000).

As Mr. Chakarapni Warrier said, Rs. 84000/- is the Taxable income of Partner as per Section of 28 , but Proviso of Section 28(v) will provide a deduction of Rs. 34000/- , therefore one needs to read section 40(b) along with the proviso of section 28(v) of Income Tax Act 1961 .

So , income chargeable to tax in the hands of Mr. A is Rs.50000/-

Now, I hope you must have got a clarity of both the sections and its applicability

TRIPATI

TRIPATI (Querist)

24 January 2013 Thank you Very Much Sir for giving such a better explanation .

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