Partners remuneration
This query is : Resolved
17 October 2014
1} if partnership firm charge interest on partners drawing, can remuneration be paid out of such interest charged?
2} can partners remuneration be paid out of capital gain?
2} can partners remuneration be paid out of capital gain?
17 October 2014
Under income tax act remuneration clause covered under section 40(b).
According to 40(b) remuneration payable after considering interest on capital i.e., book profit.
Interest on capital is business expenses then interest on drawing shall be business income it shall not be taxed under other source .
So Answer to the Q.No., 1
Yes Remuneration allowable / chargeable on interest on drawings.
Remuneration provided on business income not on capital gain or other source of income earned by partnership firm .
So answer to the Q No., 2
No
Partners remuneration not be calculated on capital gain of firm.
According to 40(b) remuneration payable after considering interest on capital i.e., book profit.
Interest on capital is business expenses then interest on drawing shall be business income it shall not be taxed under other source .
So Answer to the Q.No., 1
Yes Remuneration allowable / chargeable on interest on drawings.
Remuneration provided on business income not on capital gain or other source of income earned by partnership firm .
So answer to the Q No., 2
No
Partners remuneration not be calculated on capital gain of firm.
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