Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Calculation of Remuneration

21 June 2017

If book profit is less than 300,000 than how to compute the Remuneration and also suggest me that how much amount will be allowed in various conditions.

Reply
Follow
Share

7 Replies

RAJA P M ("Do the Right Thing...!!!") (128106 Points)
Replied 21 June 2017

You can calculate 90% of first 3lakhs profit. After 3lakhs calculate 60% allowed. Working Partners ll be allowed for Remuneration.

K Vijay Singh Chauhan (14 Points)
Replied 21 June 2017

But if the book profit is 140,000 and Remuneration claimed by the firm for working partner is 130,000 than how much remuneration will be allowed.

CA PRADEEP C B (Prop: Pradeep C & Company Chartered Acc) (166 Points)
Replied 21 June 2017

Section 40 (b) of Income Tax Act, 1961.
Refer point no. (v):
-for first 300,000 of book profit or if loss
remuneration can be deducted 150,000 or 90% of book profit which ever is more.
hence, even in case of loss the firm is allowed to deduct 150,000 as remuneration to working partners.
in your case,
book profit = 140,000
A. deduction allowable u/s 40 (b) (v)

1. 140,000 * 90% = 126,000. Or

2. 150,000

Which ever is more = 150,000.

B. Firm already deducted = 130,000.

the firm's deduction is appropriate.