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Does partners salary allow as deduction

Tax queries 410 views 1 replies

Priyanka

Chartered accountant

371 Points Joined September 2007

Hello

Section 44AD clearly disallowed deduction of partners salary and interest from presumptive profit. But what if firm maintains proper books of accounts and get it audited u/s 44AB. e.g. firms book profit is 15% of turnover. Firm maintaied proper books of accounts and claim deduction of salary interest as per section 40b and Net profit comes around 5% of turnover.

can firm pay tax on 5% of turnover after claiming deduction of interest & salary by proper maintaining books and get it audited u/s 44ab?

kindly clarify

Replies (1)

peddi rajesh

11 Points Joined May 2017

YES,If a person who opted for presumptive income in relation to such person only deduction under sec 40(b) is not allowed.in the above case such person not opting sec 44AD it means deduction under sec 40(b) is applicable.But Subjected to limits specified under sec 40 (b). i.e, in case of loss(or) profits upto 300000, 150000 (or) 90% of book profit which ever is higher and profits in excess of 300000, 60% of book profit(note this limit is not for individual partner this is for all the partners} as per ammendment to sec 44AD if you eligible for opting sec 44ad and if you not opting sec 44 ad then you need not have a choice to opt for presumptive income for the next five years succeding the AY in which youn are not opting sec 44AD