07 September 2014
If a Part. firm is having a net profit before Int on Cap and remuneration is Rs. 7 lacs and Interest on Capital comes to Rs. 12 lacs @12%. Can a firm declare lower int on capital to the tune of Rs 7 lacs so as to benefit tax in the individual partners' return ?
07 September 2014
As per the Income Tax Act, interest @12% on partners capital is allowed as expenses and taxable in the hand of partners.
Hence, Interest of Rs. 12 Lakh (@12% on Capital) is allowed as expenses and loss will be recorded by Firm. Interest of Rs. 12 Lakh is taxable in the hand of Partners.
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