Difference between net porfit and book profit

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Querist : Anonymous

Querist : Anonymous (Querist)

25 October 2012 Please provide a detail answer on difference between net profit and book profit
can you provide a article on it ?

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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25 October 2012 Net profit means profit according to the company's books.

And Book profit means profit according to the Income tax act after adjustments if any according to such act to the net profit for the purpose of Income and tax on it computation.

For example according to the Income tax act in the case of partnership firm maximum interest rate on partner's capital subject to the partnership deed is 12% eventhough partnership deed provided more than 12% interest income tax act should be allow interest on capital upto 12% only as expenditure.

In this case partnership firm has to pay interest to the partner's on their capital according to the partnership deed i.e more than 12% but Income tax allows maximum of 12% only. So after making the adjustments to the net profit regarding with the income tax act allowable and non-allowable expenses is called the BOOK PROFIT.

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