Share of Profit which is exempt u/s 10 (2A)

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Abhi123 (Querist)
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18 August 2007 Above section say that in th case of partner of a firm, his share in the total income of the firm shall be exempt from tax.

1. Whether total income of firm means income before tax or after making the provision of tax.

Total income of firm X partner's share in profit/ Total profit of the firm

It is no where stated abt the definition of total income for this purpose

2. if above is after tax, how will we provide for tax If we are maintaning books of accounts on cash basis

shipra walia

shipra walia (Expert)
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18 August 2007 Total Income of firm which is which is exempt u/s 10 (2A) is before tax.

There is no clause for making provisions of tax in case of firms, Individual and Huf.It is a madatory clause for companies as per companies act and therfore, the provisions are created only in case of companies.

further, if you are maintaning the books on cash basis, the question does not arose for maintaining the provision for tax in the books

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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18 August 2007 Total Income is defined as follows:

“total income” means the total amount of income referred to in section 5, computed in the manner laid down in this Act ;

Further section 5 states as follows:

"5. Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which—

(a) is received or is deemed to be received33 in India in such year by or on behalf of such person ; or

(b) accrues or arises or is deemed33 to accrue or arise to him in India during such year ; or

(c) accrues or arises to him outside India during such year :

Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6)* of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which—

(a) is received or is deemed to be received33 in India in such year by or on behalf of such person ; or

(b) accrues33 or arises or is deemed to accrue or arise to him in India during such year.

Explanation 1.—Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.

Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued33a or arisen33a or is deemed to have accrued33a or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India."

THEREFORE THE SHARE OF PROFIT OF A PARTNER IS BEFORE TAX .

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