Capital gain profit distribution among partners of partnership firm
This query is : Resolved
05 July 2026
Dear Experts,
A partnership firm is selling a property to 3 individuals , out of which 1 is existing partner.
This transaction results in capital gain for the partnership firm. After capital gain tax is paid, can the partnership firm distribute the balance amount to existing partners including to the partner who has purchased the property? Will distributing share of capital gain result in taxable transfer?
Please advice
Regards,
A partnership firm is selling a property to 3 individuals , out of which 1 is existing partner.
This transaction results in capital gain for the partnership firm. After capital gain tax is paid, can the partnership firm distribute the balance amount to existing partners including to the partner who has purchased the property? Will distributing share of capital gain result in taxable transfer?
Please advice
Regards,
05 July 2026
Can the balance be distributed? Yes. After the firm pays the capital gains tax, the remaining profit can be distributed to all partners in their profit-sharing ratio, including the partner who was one of the property buyers.
Is the distribution taxable? No. Under Section 10(2A) of the Income Tax Act, a partner's share in the profit of a firm is exempt from tax in their hands, as the firm has already paid the tax on the gains.
Is the distribution taxable? No. Under Section 10(2A) of the Income Tax Act, a partner's share in the profit of a firm is exempt from tax in their hands, as the firm has already paid the tax on the gains.
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