1 partner was forced to retire from firm and he was not paid anything for goodwill or capital.
what will be taxabiliity on partnership firm and other partners who acquired retiring partners profit share without any cost?
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Partner retirement
Replies (4)
There is no tax liability on unpaid balance to retiring partner.
You have to clear balance to the credit of retired partner afap.
About Goodwill , it's Firm's internal matter or firm has to comply with clauses of Partnership Deed
You have to clear balance to the credit of retired partner afap.
About Goodwill , it's Firm's internal matter or firm has to comply with clauses of Partnership Deed
I will transfer the capital of retiring partner to others partners
Do whatever suits you with proper documentation
1. It is normal for the firm to pay the balance standing in the capital account to the retiring partner as soon he is relieved from the firm.
2. However, the retiring partner will hold rights over the share capital of the company even if not for goodwill. There will not be any capital gain tax of the payment is made only towards capital standing in the account of the partner and no amount in excess of it.
3. In your case since you have not made any payments towards capital or goodwill, there is no income which is subject to tax.
Please correct me if the above solution has an alternative view.
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