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basis of profit calculation in patnership firm

27 January 2018

1)what is the basis of profit calculation in patnership firm??

2)is salary to patner allowed as expenses in it??
3 ) is profit earned by a patner is again taxed in his individual income tax return?

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8 Replies

CA Sahil Thakral (CHARTERED ACCOUNTANT ) (242 Points)
Replied 27 January 2018

first 3 lac profit of the partnership salry would be 150000or 90% of profit whichever is higher

for remaining profit 60% of profit could be salary for more detail read section 40b

partner salary would be taxable in hand of partners

it

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Abhishek Jain (90 Points)
Replied 27 January 2018

thank u
how much profit is calculated on turnover

rate of profit on turnover?
i heard 8 per on turnover
is it right

CA KANJ GOEL (OWNER) (1378 Points)
Replied 27 January 2018

as per the provisions of section 44AD 8% of the turnover is taxable income when sales are made in cash as well and 6%when all receipts are through normal banking channel.
if you opt for 44 Ad then no deduction for salary to partners, interest on Capital is allowed to partnership firm.

CA Sahil Thakral (CHARTERED ACCOUNTANT ) (242 Points)
Replied 27 January 2018

Abhishek I would correct myself here salary would be taxable in hand of partner but profit shere would be nontaxable

CA Sahil Thakral (CHARTERED ACCOUNTANT ) (242 Points)
Replied 27 January 2018

if you have opt 44Ad then u can't deduct any exp after taking profit 8% or more of your turnover

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Abhishek Jain (90 Points)
Replied 27 January 2018

i am planning to form a patnership firm with my father having turnover of only 50 lakh per year ..
should i opt for 44Ad or 40b or anything else to save tax??

CA Sahil Thakral (CHARTERED ACCOUNTANT ) (242 Points)
Replied 27 January 2018

if your margin is below 8% in your business then you have to go for complete book maintain under section 44AA where you can claim all exp of your business and salary also

if you have more than 8 % profit and not interested to maintain complete books of accounting you can go for the 44 ad

for more detail you can reach me @ casahilthakral7 @ gmail.com