Treatment of income or loss from partnership firm

This query is : Resolved

Quick Summary

Loss incurred by a partnership firm cannot be set off by partners against their personal professional income. Only remuneration from the firm is taxable in the partner's return, while the firm itself can carry forward and set off business losses.

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2014 I am filing my return as Tax Consultant. I have joined new partnership firm of Manufacturing. In first year we will have Loss. What will be the effect in my personal return of Business Loss. Whether can I get setoff of loss against my Professional Income?

TKKKKKK

TKKKKKK (Expert)
Follow

20 November 2014 it is allowed to set off business loss with business profit no matter both business are different. Only business loss from speculative business cannot be set off from non speculative business. But you cannot set off loss from partnership firm.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
Follow

20 November 2014 1. Profit of a partnership firm is exempt in the hands of the partners. Similarly loss of partnership firm has no impact on the income of the partner.

2. Only the partnership firm can set off or carry forward & set off the loss.

3. The partners CANNOT set off the loss of the FIRM from their individual income.

4. The FIRM can carry forward the loss for 8 Assessment Years.

Message likes : 7 times

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2014 Thanks for reply.
Say for example.
I have professional income of Rs. 350000/-. In the same year My firm Business Loss is say
Rs. 15,00,000/-. Remuneration is 150000/-. What will be treatment in my return?

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2014 Partners profit sharing ratio is 33.33%.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
Follow

20 November 2014 1. Remuneration received from partnership firm is taxable in the hands of the partner/s u/s 28 as Income from Business or Profession.

2. Loss incurred by partnership firm has NO treatment in the hands of the partner/s.

3. Your total income will be Rs. 5 lakhs (3.5+1.5)

Message likes : 6 times

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2014 Thanks.
Whether I have to transfer all Loss to Capital account of Partners? i.e. 33.33% to each 3 partners? And if yes, what will be the effect in my personal return and accounts?
Under which head I have to show it in my return?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now