Partners remuneration under partnership act 1932

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srinu mupparaju

srinu mupparaju (Querist)
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25 February 2018 Can avail exemption under income tax act partners get salary and remuneration under income tax act

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)
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25 February 2018 Remuneration To partners under section 40(b)
As per Section 40(b) of income tax act any interest, salary, bonus, commission or remuneration paid to partners by the partnership firm are allowed to be deducted as an expenses subject to such conditions mentioned in the income tax act.

Remuneration shall be allowed as deduction only if it is paid to working Partner

2. Remuneration must be written/authorized and should be quantified in partnership deed

3. Remuneration must be related to the period after the partnership deed

4. Interest paid to partner should not exceed 12%
a. On first 3 lakhs of book profit or loss Rs 1,50,000 or 90% of book profits
(whichever is higher)
b. On the balance book profit 60% of book profit

Whatever interest, salary which is claimed expenses is taxable in individual capacity of Partners as same is claimed in exemption by Firm.

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