I have to draft a Partnership firm, and as per partners discuess they would like to pay fix remuneration to all working Partners. so is that Possible?? if yes, please send me clause for partnership firm.
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Partner remuneration
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In case of Parnter's remuneration following are the important poits:
1. Partner to be paid must be a working partner
2. Remuneration or interest must be authorized by the Partnership Deed: As per section 40(b) only that salary, remuneration, bonus, commission etc payable to working partners or any payment of interest payable to any partner will be allowed as deduction only if it is authorized by the partnership deed. If the partnership deed doesnot contain such provisions then the deductions may be disallowed if the same is claimed by the partnership firm.
3. No Remuneration to be allowed which relates to any period falling prior to the date of such partnership deed.
4. Remuneration exceeding the limit prescribed u/s 40(b) to be disallowed:- Limit as under
(a) On the first Rs.3,00,000 of the book-profit or in case of a loss Rs.1,50,000 or at the rate of 90% of the book-profit, whichever is more;
(b) on the balance of the book-profit at the rate of 60 per cent.
Specimen
The remuneration payable to the abovesaid working partners shall be computed in the manner laid down in explanation 3 to section 40(b) of the Income Tax Act 1961 or any other applicable provision as may be in force in the I. T. assessment of the PARTNERSHIP FIRM of the relevant accounting year. Such amount shall be distributed between the said working partners in their profit / loss sharing ratio. Such remuneration shall be calculated at the close of the accounting year and shall be credited to the account of each working partners. The working partners shall be entitled to withdraw out of remuneration for their personal needs from time to time.
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