Partner's Salary.

This query is : Resolved 

30 July 2010

I want to clarify one doubt relating to Partner's Remuneration.
i.e. Mr.A received Rs.360000/-p.a.from a Partnership Firm as salary, Is it fully taxable in the hands of Mr.A?


CMA. CS. Sanjay Gupta (Expert)

30 July 2010

Yes. Fully taxable subject to individual tax limit.

30 July 2010

the disallowance portion u/s 40(b) will be taxable in the hands of partnership farm.and amount allowable undersection 40(b) will be taxable in the hands of partner.
because double taxation is not permitted.

Aditya Maheshwari (Expert)
30 July 2010

Rs. 360,000/- paid to the partner should be within limits of Section 40(b) and limits specified in the partnership deed.

If no limit has been specified then the same will be disallwed in firms income and not taxable in the hands of the partner.

s.jegadeesan (Querist)
31 July 2010

Thanks for your reply.But I couldn't come to the decision.Because different type of reply.

My query is ,
Mr. A is working in a firm & get Rs.360000/-p.a. this is the limit specified in the deed.Now that Firm's Net Profit is Rs.50000. For Firm's Tax Liability we have to arrive the Book Profit & deduct Allowable salary.But Partner's salary is separate issue. How will it(Allowable salary u/s.40(b)) affect the partner's Tax Liability.

31 July 2010

You have not mentioned whether are there any partner getting remuneration.
Calculate Book Profit in the following format
Net Profit 50000.00
Add: Partner' Salary (360000+ other partner's salary)
Adjust other as per 40(b)

balance will be book Profit.

Now maximum Salary will be as follows
If book Profit is negetive 150000
If book profit is positive
then on first 3,00,000/- Rs. 150000 or 90% of book Profit, which ever is more
On balance - 60% of book Profit.

Aditya Maheshwari (Expert)
31 July 2010

Yes and the new rates as mentioned by pyneji will be applicable only if the same has been incorporated in the partnership deed for the year or the new rates would apply from the date from which the deed has been modified not otherwsie.

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