Sec 44ad in case of firm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2011 Dear sir please clear

Turnover 35Lacs
Profit u/s 44ad 2.80 lacs(8%)
Salary & Intt allowable to partner:Rs 1.50lacs

In ITR -5-P/L schedule in
NO Account Case
i have filled GR:35 lac
Exp:32.20lac
np come to:2.80lacs
NOW where to fill figureof intt & salary to partners:
so that taxablle profit come to 1.30 lac

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 Sir
Please Reply the query

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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23 July 2025 Let's break down your query step by step to ensure proper reporting of the salary and interest to the partners in the **ITR-5** while using **Section 44AD** for presumptive taxation:

### Scenario:

* **Turnover** = Rs. 35 Lakh
* **Profit as per Section 44AD** = Rs. 2.80 Lakh (8% of turnover)
* **Salary and Interest to partners** = Rs. 1.50 Lakh

You are filing **ITR-5**, and you need to show the proper salary and interest to the partners in the right places so that the **taxable profit** comes to **Rs. 1.30 Lakh**.

### Process for Reporting in ITR-5:

1. **Step 1: Presumptive Profit under Section 44AD**

* As per Section 44AD, the presumptive profit is computed at **8% of turnover**, which in your case is Rs. 2.80 Lakh (Rs. 35 Lakh × 8%).

2. **Step 2: Salary and Interest to Partners**

* The salary and interest paid to the partners are **deductions** under Section **40(b)** and need to be deducted from the **presumptive profit**.
* You mentioned that the salary and interest to the partners are Rs. 1.50 Lakh.

3. **Step 3: Taxable Profit Calculation**

* To arrive at the taxable profit of Rs. 1.30 Lakh, you need to deduct the salary and interest from the presumptive profit of Rs. 2.80 Lakh.

$$
\text{Taxable Profit} = 2.80 \text{ Lakh} - 1.50 \text{ Lakh} = 1.30 \text{ Lakh}
$$
* This is the taxable profit that you want to report.

4. **Step 4: Reporting in ITR-5**

* In **ITR-5**, you will enter the **presumptive profit (Rs. 2.80 Lakh)** in the **Profit and Loss Schedule** and then deduct the **salary and interest** under **Section 40(b)**.
* **Where to enter Salary and Interest to Partners**:

* Go to **Schedule B** of **ITR-5** under the section for **Partners’ Remuneration (Salary + Interest)**.
* Enter the total salary and interest paid to partners here (Rs. 1.50 Lakh).
* This will **reduce the presumptive profit** to Rs. 1.30 Lakh.

### Summary:

* **Presumptive Profit under Section 44AD** = Rs. 2.80 Lakh.
* **Salary and Interest to Partners** = Rs. 1.50 Lakh (this will be deducted from the profit).
* **Taxable Profit** = Rs. 1.30 Lakh.

**Where to Enter in ITR-5**:

* **GR (Gross Receipts)**: Rs. 35 Lakh.
* **Profit as per Section 44AD**: Rs. 2.80 Lakh.
* **Salary and Interest to Partners**: Rs. 1.50 Lakh in **Schedule B**.
* This will give you the **taxable profit of Rs. 1.30 Lakh**.

### Important Points:

* **No need for detailed accounts** under **Section 44AD**, as long as turnover is under Rs. 2 Crore.
* The **deductions under Section 40(b)** (Salary and Interest to Partners) are allowed separately from the **presumptive income** calculated under **Section 44AD**.

Let me know if you need further clarification on any of the steps or sections in the return!

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