Parnership firm taxation as per finance act 2016

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Querist : Anonymous

Querist : Anonymous (Querist)

16 March 2017 As per FA 2016.

Sec 44AD: Partners Salary and Interest on Capital not deductible from 8% of turnover in case of partnership Firm.

If a firm maintain proper Books of account and after charging remuneration and Interest on capital firm profit is less than 8% of Turn Over. Total TO of the Firm is less than 2 Crores.
Whether accounts( FY 201617) to be audited ?

CA Gopal Somani

CA Gopal Somani (Expert)

16 March 2017 If an assessee claims that his profits and gains from eligible business are less than 8% of the gross receipts and whose total income exceeds the maximum amount not chargeable to tax, the asseessee shall maintain the books of account as prescribed U/S 44AA and get them audited under section 44AB of the Act. Here the catch lies in the words "and whose total income exceeds the maximum amount which is not chargeable to income-tax" Since the words start with ‘and’ therefore both the conditions need to be fulfilled for an assessee to be required to get his accounts audited u/s 44AB if his total income exceeds the maximum amount which is not chargeable to income-tax.

Since, the firm is taxed at an income starting from Rs. one, therefore the maximum amount not chargeable to tax is nil.

In case of loss, since there is no income, therefore it does not exceed the maximum amount not chargeable to tax and so the second condition mandating tax audit u/s 44AB in section 44AD is not satisfied and therefore the assessee is not required to get the accounts audited u/s 44AB. But if there is Profit then firm has to get accounts audited.

Querist : Anonymous

Querist : Anonymous (Querist)

17 March 2017 But The Partnership Firm maintains proper Books of account and NOT want to compute income on Presumptive basis U/S 44AD(Presumptive Taxation Scheme). Last three years computation also not on presumptive basis (U/S 44AD).Gross T.O. for the FY 201617 not exceeding Rs. 2Cr. U/S 44AD Assesse do not require to maintain proper Books of account. After Charging Partners remuneration and interest on Partners Capital the Partnership Firms profit is less than 8% or 6% of total Turn Over.Is the Partnership firm has to get accounts audited.

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