Partnership firm

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2016 Dear Sir,
Whether a partnership firm can file his return in itr 4S ? As I see firm option in itr 4S of AY 2016-17.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

23 July 2016 ITR 4S can be used for partnership firm if return is filed under presumptive scheme.

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2016 Whether salary and interest @ 12% is allowed from the profit @ 8% for the AY 2016-17 ?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

09 August 2024 **ITR 4S** (also known as the **Presumptive Income Scheme** under Section 44AD) is used for individuals, Hindu Undivided Families (HUFs), and partnership firms (other than LLPs) that opt for the presumptive taxation scheme. Here's a detailed breakdown of your queries:

### **1. Eligibility for Filing ITR 4S**

#### **Eligibility:**
- **Partnership Firm:** Yes, a partnership firm can file its return using ITR 4S if it opts for the **Presumptive Taxation Scheme under Section 44AD**.
- **Conditions:** To be eligible for ITR 4S, the partnership firm must:
- Be a resident in India.
- Have income from business which is presumptively taxed under Section 44AD.
- Have a total turnover of less than ₹2 crore in the financial year.

#### **Filing ITR 4S:**
- **Presumptive Taxation:** Under Section 44AD, the income is deemed to be 8% of the gross receipts (or 6% if receipts are through digital transactions).
- **No Books of Accounts Required:** If the firm’s turnover is below ₹2 crore and it opts for Section 44AD, it doesn’t need to maintain detailed books of accounts or get its accounts audited.

### **2. Salary and Interest under ITR 4S**

#### **Allowability of Salary and Interest:**
- **Section 44AD Presumptive Income:** When a firm opts for the presumptive taxation scheme under Section 44AD, the income is considered to be 8% of the gross receipts (or 6% if the receipts are through digital transactions). The firm is not allowed to claim additional deductions for salaries or interest on capital.
- **Profit Calculation:** The 8% (or 6%) presumptive income is considered as final. Hence, deductions for salaries and interest on capital cannot be claimed separately.

#### **For AY 2016-17:**
- **Income Calculation:** For the Assessment Year (AY) 2016-17, the presumptive income is calculated at 8% of the gross receipts. The firm cannot claim salary or interest as deductions from this presumptive income.

### **Example for AY 2016-17**

Suppose the gross receipts of the firm are ₹10L

- **Presumptive Income Calculation:**
- 8% of ₹10L = ₹80K

This ₹80,000 is considered the firm's income under the presumptive scheme, and no further deductions for salaries or interest on capital are allowed.

### **Summary**

1. **ITR 4S Eligibility:** Yes, a partnership firm can file its return using ITR 4S if it is eligible under Section 44AD (turnover less than ₹2 crore, opting for presumptive taxation).
2. **Salary and Interest:** Under the presumptive taxation scheme, the firm cannot claim additional deductions for salaries and interest on capital. The income is fixed at 8% (or 6%) of gross receipts, and this is considered as final.

For specific guidance and to ensure compliance with all applicable provisions, it is advisable to consult with a tax professional or chartered accountant.

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