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Itr3

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)

13 February 2017

According to section 40(b) Remuneration paid to partner has been disallow with Rs. 20,000 in the hand of the firm. Thant means firm has been already paid tax on that Rs. 20,000/- amount. So this Rs. 20,000/- is exempt in the hand of the partner.

Now partner filing his return with ITR3.

The question is arise that:- Where the partner may declare his 20,000/- exempt income which exempt in the hand of the partner in ITR3? (exempt because firm already paid tax on that amount Rs. 20,000/-)

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9 Replies

Hemanth Pullanikkat (Chartered Accountant) (89 Points)
Replied 13 February 2017

Dear Santu,

As per sub section (b) of section 40, if all other conditions specified in this provision has been complied, maximum amount of remuneration which is allowed to be deducted from the profits and gains from business or profession of the firm is, in case of loss or upto INR 3,00,000 of book profit:- 1,50,000 or 90% of book profiit which ever is higher and for the balance profits 60% of the profits. Even if the firm pays or charges excess remuneration, that amount will be disallowed. Hence the firm is paying tax on the disallowed portion. Since the firm has paid tax on the disallowed portion of remuneration, partner need not to pay tax on the same amount. Hence what ever amount of remuneration has been allowed as expenditure of the firm, partner should have declare those amount in his income tax return and need to pay tax in accordance with the provisions of the Act.

Hope this clarifies your doubts, if not kindly elaborate your doubt.

Regards,

Hemanth Pullanikkat

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PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 13 February 2017

Dear Mr. Hemanth,

I am very sorry to say you that you didn't get my point. I didn't said that partner need to pay tax on that Rs. 20,000/- amount because this is exempt in the hand of the partner. I asked that where the partner may declare this exempt income in ITR3?

Thanks,

Hemanth Pullanikkat (Chartered Accountant) (89 Points)
Replied 13 February 2017

Dear Santu,

Sorry for the misunderstanding and thanks for your clarification.

The Form ITR-3 has been divided into two parts.Part A mainly seeks general information requiring identificatory and other data.Part B requires details of income followed by schedules.

As per the instructions to Form ITR 3 released by department, any amount of Salary, bonus, commission or remuneration and interest on capital received by the assessee from the firm can be mentioned in row number 3 of Part B of the form. Further, details of these amounts can be mentioned in Scehdule BP appended to the form. Besides, details of the firm in which the assessee is a partner must be given in Schedule IF.

Hope this subsides your doubts.

Regards,

Hemanth Pullanikkat.

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 13 February 2017

Mr. Hemanth,

Again I am saying you sorry till now you didn't get my point. Schedule BP is only for taxable income declaration. This is not the part of exempt income. Where the partner declare his exempt income which Rs. 20,000/- which exempt in the hand of the partner because firm already paid tax on that amount?

Question is on:-

Rs. 20,000/- exempt income where he(partner) can able to declare in ITR3?