Salary to partner
This query is : Resolved
Gaurav Gupta
(Querist)
18 August 2014
Whether partner is eligible for salary even if there is loss to partnership firm
Gaurav Gupta
(Querist)
18 August 2014
please reply its urgent
18 August 2014
Yes,if the partnership deed says so.
CA UMESH DULAL
(Expert)
18 August 2014
If there is a provision in partnership deed to pay the salary to partner.
Gaurav Gupta
(Querist)
19 August 2014
but there is loss to firm. whether this salary paid will be allowed as per income tax for deduction.
22 July 2025
Regarding salary to partners when the partnership firm has a loss:
* **Yes, partners can be paid salary** if the **partnership deed specifically provides for it**, irrespective of whether the firm makes a profit or loss.
* **However, from an Income Tax perspective:**
* As per **Section 40(b) of the Income Tax Act**, the salary or remuneration paid to partners is allowable as a deduction **only to the extent prescribed under the Act** and **only if the firm has a positive profit**.
* If the firm incurs a \*\*loss in a financial year, then salary/remuneration paid to partners is **not allowed as a deduction** while computing the firm’s taxable income.
* So, **salary paid to partners during loss years is treated as a distribution of profit and not as an expense** for tax deduction purposes.
If you want, I can help with exact sections and detailed calculations or any further clarifications!
* **Yes, partners can be paid salary** if the **partnership deed specifically provides for it**, irrespective of whether the firm makes a profit or loss.
* **However, from an Income Tax perspective:**
* As per **Section 40(b) of the Income Tax Act**, the salary or remuneration paid to partners is allowable as a deduction **only to the extent prescribed under the Act** and **only if the firm has a positive profit**.
* If the firm incurs a \*\*loss in a financial year, then salary/remuneration paid to partners is **not allowed as a deduction** while computing the firm’s taxable income.
* So, **salary paid to partners during loss years is treated as a distribution of profit and not as an expense** for tax deduction purposes.
If you want, I can help with exact sections and detailed calculations or any further clarifications!
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