Tax liability

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VINAY SACHDEVA (Querist)

07 October 2011 Sir,

a partnership firm having net profit of Rs. 4000/- and Remuneration to Partners of Rs. 158800/-. Please tell me the Income Tax payable for Firm after disallowing of Remuneration with example.

Vinay Sachdeva

CA PRAVIN

CA PRAVIN (Expert)

08 October 2011 Question is not clear as net profit of Rs 4000/- is after deducting 40(b) remuneration.

If above profit of Rs 4000/- is after deduccting partners remuneration then tax payable is 30% * 4000= 1200 + education & higher education cess.

If remuneration is disallowed then tax will be [ 4000+158800]*30%= 48840

If partners remuneration is disallowed then such remuneration is not taxable in the hands of partners.

If any doubt free to contact me.
CA Pravin
7798887911

CA Ankit Verma

CA Ankit Verma (Expert)

08 October 2011 Net profit after remuneration = Rs. 4000/-
Minimum remuneration available to partners is Rs. 150000/-

Disallowance u/s 40b = 158800 - 150000
= Rs. 8800/-

Recalculation of Net profit of firm

= 4000 + 158800 - 150000
= Rs. 12800

Therefore,
Tax payable = 12800 x 30.9%
= Rs. 3955.20/-

Tax payable after Rounding off tax u/s 288B
= Rs. 3960/-

CA PRAVIN

CA PRAVIN (Expert)

08 October 2011 I think minimum partners remuneration is Rs 270000/- i.e. [ 90% * 300000]

slab for partners remuneration is as follows

Up to first 300000 = 150000 or 90% whichever is more.

balance = 60%

CA Ankit Verma

CA Ankit Verma (Expert)

08 October 2011 For AY 2011-12, On the first 3 lakh of book profit or in case of loss, the limit would be the higher of 1,50,000 or 90% of book profit and on the balance of book profit, the limit would be 60%..

So in the given case,150000 will be more than 90% of Rs. 162800 (4000 + 158800) which comes to Rs. 146520/-

Hence partners shall be allowed remuneration of150000/- & not146520 or158800/-

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