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Partner remunaration taken less than the actual

Antony Raj (Accountant) (81 Points)

04 November 2017

Dear Experts,

Please explain the following case:

we are the partnership firm, and we have got the profit of 22 Lakhs nearly in last year.

Our partners have taken only 9 Lakhs as a remunaration but actual working as per 44ab is coming nearly 15 Lakhs. How to treat this whether balance amount of remunaration should be taken further or can we leave as it is.

But our partners are not willing to take the whole amount and the 9 Lakhs taken is enough to them.

and one more problem is that the individual partners ITRs are already filed in July with 9 Lakhs of Remunaration.

How to go about it. Kindly explain.

Thanks in advance.

ANTONY RAJ

BANGALORE.

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4 Replies

Parv Kumar (Student) (4037 Points)
Replied 04 November 2017

Limit of Rs.1500000/- is maximum & it is not mandatory to claim whole

Partners will take lesser amt i.e. 900000.- in above case.

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 04 November 2017

22 - 9 = 13 lakhs.....

Are you (the firm ) paid Tax for 13 lakhs...?

Sri Lakshmi (14 Points)
Replied 04 November 2017

Dear Antony Raj,

Remuneration to partners should be written and authorised according to the terms of partner ship deed. But per Income tax act, there are conditions to be allowed as deduction as per section 40(b) of Income tax act 1961 during calculation of income tax liabilty of partner ship firm.
The amount of remuneration is paid as deduction it it is within the following limits.
(a) On first 3,00,000 of books profits ( excluding remueration paid) or less Rs. 1,50,000 or 90% of book profits ( which ever is higher)
(b) On remaining book profits 60% of book profits

Hence total deduction can be claimed is RS. 14,10,000. The remuneration paid to partners is within the limit.

Hence whole amount of remuneration paid can be claimed as deduction as per section 40(b) of when income tax return is prepared.

2 Like

ASHISH GHORPADE (8 Points)
Replied 04 November 2017

As sri Lakshmi said maximum remuneration that partnership firm allow to be paid to its partners is 14,10,000.
remuneration paid by the firm rupees 9lakh is under the provisions of law .. the question arises only of 5,10,000 remuneration that partners not yet claimed..since partners already shown only 9lacks in there returns show only 9lacks in p&l statement to avoid conflicts under the income tax act..if you show 1410000 as remuneration to partners it will resulted in tax evasion bcoz remaining 5lacks will not be get taxed either in the hands of partners and partnership firm also claim 5lacks as expenditure in the previous year..