HUF or Partnership Firm

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Milan Dhorda (Querist)
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22 April 2016 For the business purpose which one is better to form.. HUF or Partnership Firm.. plz elaborate their reasons in detail..

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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23 April 2016 HUF and partnership firm differ in their status from income tax point of view. while partnership firm is assessed to tax at a flat rate of 30% of book profit left after payment of interest on capital and remuneration to partners, HUF is assessed to tax as per normal income tax slabs applicable to individuals and HUFs. No income tax exemption limit is applicable to a partnership firm while HUF enjoys a income tax exemption limit of Rs. 250000/-. It also enjoys benefit of section 80C, 80D etc which are not available to a partnership firm. HUF can also get deduction of remuneration paid to karta for managing business out of business profits.

Milan Dhorda

Milan Dhorda (Querist)
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23 April 2016 Goyal Sir.. Assume if A Partner is taking remuneration and interest of Rs. 500000 from the firm. so that partner's tax would be calculated as per Individual?? Exemption of 250000 nd otherb exemption of Sec.80 would be applicable to that partner..??

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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25 April 2016 Yes partner will file his return in his individual capacity separately since status of firm and partner is separate. He will get deduction u/s 80C and income tax slab will also applicable to him separately.

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