ICICI

Calculation of Remuneration to Partners in a Firm


CA Shree Jain (Chartered Accountant)     12 June 2010

CA Shree Jain
Chartered Accountant 
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Under the existing provisions of the Income-tax Act, the payment of salary, bonus, commission or remuneration (hereinafter referred to as “remuneration”) to a working partner of a partnership firm is allowed as deduction if it is authorised by the partnership deed and subject to the overall ceiling of monetary limits prescribed under sub-clause (v) of clause (b) of section 40. The existing limits are as under:

(I) in case of a firm carrying on a profession—

(a) on the first Rs. 1,00,000 of the book-profit or in case of a loss

(b) on the next Rs. 1,00,000 of the book-profit

(c) on the balance of the book-profit

Rs. 50,000 or at the rate of 90 per cent of the book-profit, whichever is more; at the rate of 60 per cent; at the rate of 40 per cent;

(2) in the case of any other firm—

(a) on the first Rs. 75,000 of the book-profit, or in case of a loss

(b) on the next Rs. 75,000 of the book-profit

(c)  on the balance of the book-profit

Rs. 50,000 or at the rate of 90 per cent of the book-profit, whichever is more; at the rate of 60 per cent; at the rate of 40 per cent:

The Act has been amended to make upward revision of the existing limits of the remuneration and also to prescribe uniform limits for both professional and non professional firms for simplicity and administrative ease.

The revised limits as under:

(a) on the first Rs. 3,00,000 of the book-profit or in case of a loss

(b) on the balance of the book-profit

Rs. 1,50,000 or at the rate of 90 per cent of the book-profit, whichever is more; at the rate of 60 per cent;

Applicability - This amendment has been made applicable with effect from 1st April, 2010 and will accordingly apply in relation to the assessment year 2010-2011 and subsequent assessment years.

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SIVASIVA (FCA, Future CA)     12 June 2010

SIVASIVA
FCA Future CA 
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ash,

 

i don't understand the revised limits what you said:

whether for pfofession is it enhanced to Rs.3.00.000

and for Business to Rs.1,50,000

ANY OTHER ELSE.

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CA Shree Jain (Chartered Accountant)     12 June 2010

CA Shree Jain
Chartered Accountant 
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Under the existing provisions of the Income-tax Act, the payment of salary, bonus, commission or remuneration (hereinafter referred to as “remuneration”) to a working partner of a partnership firm is allowed as deduction if it is authorized by the partnership deed and subject to the overall ceiling of monetary limits prescribed under sub-clause (v) of clause (b) of section 40. It is proposed to make upward revision of the existing limits of the remuneration. It is also proposed to prescribe uniform limits for both professional and non professional firms for simplicity and administrative ease. The revised limits are proposed to be as under:

 

(a) On the first Rs. 3,00,000 of the book-profit or           Rs. 1,50,000 or at the rate of 90 per cent of the

      in case of a loss                                                    book-profit, whichever is more;

 

(b) On the balance of the book-profit                  at the rate of 60 per cent;

 

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SIVASIVA (FCA, Future CA)     12 June 2010

SIVASIVA
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Thanks for the Clarification "Ash"

 

Suresh (0)     10 July 2012

Suresh
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if partneship firm has loss are partners entitled to remunaration??????????

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Pallavi (PCA)     19 July 2012

Pallavi
PCA 
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Yes, if partneship firm has loss are partners entitled to remunaration. It is clearly written that in case first Rs. 3,00,000 of Book Profit or in Case of Loss. Only Book Profit should be positive as you have to calculate 90% of book profit for calculating remuneration.

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KMS Mumbai (Partner)     05 December 2012

KMS Mumbai
Partner 
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Hi,

Does this same calculation of remuneration and salary to partners apply when one partner is retiring? In other words, if the partnership ratios are Partner1 - 70% to Partner2 - 30% in the partnership deed but the mutually accepted salary ratio is Partner1 - 3/8th and Partner2 - 5/8th, then if Partner1 is retiring, will Partner2 pay Partner1 70% of profit or will the salary component apply? If the salary component applies, then Partner1 will get much less because Partner2 has a higher salary component.

Please let me know if the question is not clear. Need help urgently.

Thanks a lot!

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DIKSHA SHARMA (Student)     24 August 2016

DIKSHA SHARMA
Student 
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what if the book profit of the firm is Rs. 50000.

At that time how can we calculate partners remuneration?

 


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