Remuneration to partners section 40(b)

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This discussion clarifies the deductibility of partner remuneration under Section 40(b) for service industry partnerships. It outlines the specific limits for salary deductions based on book profits, stating that remuneration cannot exceed certain thresholds. The calculation of book profit for this purpose involves adjusting the net profit by adding back any partner remuneration previously deducted.

MAKARAND DAMLE

MAKARAND DAMLE (Querist)
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09 February 2021 We are Partnership engaged in service industry
For F Y 19-20 Net profit after remuneration paid to partners is Rs.10,76,119/-
Remuneration paid to partners is Rs.41,10,000/-
Income from other sources included in Rs.10,76,119/- is of Rs.8,19,344/-
My question is what will be amount deductible towards partners remuneration u/s 40(b) ?

MAKARAND DAMLE

MAKARAND DAMLE (Querist)
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13 February 2021 can any expert reply please

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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01 December 2021 the payment of remuneration should not exceed the following amounts. Any amount in excess of the below mentioned limits will be disallowed:-
Salary Allowed
a. On the first 3,00,000 of book profits or in case of a loss ..........
Rs. 1,50,000 or at the rate of 90% of the book profit (whichever is higher)

b. On the balance of book profits ................ at the rate of 60%

The computation of Book Profit for the purpose of Section 40b would be the net profit as shown in the P&L A/c for the previous year and increased by the aggregate of the remuneration paid or payable to all partners of the firm is such amount has been deducted while computing the net profit.

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