Suppose a partnership firm has gross turnover of 10 lakhs, and opts for presumptive taxation under section 44AD. it will declare a profit of 80 thousand and pay tax accordingly.
if however, the actual profit is 2 lakhs. the question is:
1) how much max profit can it distribute to its partners
2) if it distributes 2 lakh, will it be tax free in hands of partners.
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Distribution of profit by a firm opting 44AD, to partners
Replies (5)
Quick Summary
IF you are showing deemd profit U/S 44AD in return of income then how can u show the declared profit at the same time ?
IT has to be either one of them deemed profit or declared profit.
IT has to be either one of them deemed profit or declared profit.
Distribution of profit mention in your partnership deed.
@ Pradum: Not showing any declared profit. Deemed profit under 44 AD is 80K. and retention in bank balance is 2 lakh. ( which is nothing but the diff between deemed profit and actual profit)
@ Karan yes mentioned.
@ Karan yes mentioned.
Just to avoid any confusion please consider below example. Bank balance is 1,76,000 and profit after tax is 56,000.
The question is
1) how much money t can be distributed to partners as profit 56,000 or 1,76,000.
2) If only 56,000 can be distributed what is the way to give the 1,20,000 back to partners.
| Bank Statement | |||
| DR | CR | Balance | |
| Opening Balance | 0 | ||
| Gross Receipts | 1,000,000 | 1,000,000 | |
| Misc. Business Expenses | 800,000 | 200,000 | |
| Income Tax | 24,000 | 176,000 | |
| Closing Balance | 176,000 | ||
| Calculation of Tax U/s 44AD | |||
| Gross Receipts | 1,000,000 | ||
| Deemed profit u/s44AD @ 8% | 80,000 | ||
| Tax @ 30% | 24,000 | ||
| Profit after Tax | 56,000 | ||
| Difference between profit and bank balance | 120,000 | ||
You can distribute Rs. 1,76,000/-
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