Remuneration allowable u/s 40(b) in partnership.

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mahesh (Querist)

23 June 2017 Kindly, guide me if i am correct as to the following calculation of Remuneration u/s 40(b).

Net profit post remuneration : 36476 (*above 8% of turnover),
Remuneration to partners:240000.,

Therefore, book profit is 276476 (net profit as increased by actual salary).

Allowable remuneration as per sec 40(b) is 248828 ( 90% of book profit)

Tax to be payable by firm is
Profit/(Loss) as per Profit & Loss account 36,476

Add: Inadmissible expenses & Income not included:
Remuneration to partners / members debited in P&L a/c 240,000
Total 276476
Less: Remuneration and Interest to partners - U/s.40(b) (248,828)

Net profit 28657

If the above treatment is correct, I have this doubt " How can we claim more remuneration (248828) than what we have actually incurred (240000).

Awaiting the response

Thanks & Regards,
Mahesh

Amol S Joglekar

Amol S Joglekar (Expert)

23 June 2017 allowable OR actual which ever is lower.
(as per the new section, 8 % profit is presumed to be after partners' salary.... so no separate calculation is now required )

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mahesh

mahesh (Querist)

23 June 2017 Thanks for the speedy reply sir,
I think applicability of 8% profit without remuneration is only for Presumptive taxation u/s 44AD. anyways, thanks

mahesh

mahesh (Querist)

23 June 2017 Thanks for the speedy reply sir,
I think applicability of 8% profit without remuneration is only for Presumptive taxation u/s 44AD. anyways, thanks

Amol S Joglekar

Amol S Joglekar (Expert)

23 June 2017 yes, it is only for presumptive taxation. You are right

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