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Partnership firm - presumptive taxation 44ad

17 May 2018

As amended in 44AD, interest and remuneration to partners is not allowed after declaring profit at 8%. However in my case I maintain books of accounts and my Turnover is 1.5Cr. as I can opt for 44AD upto 2Cr i am opting for 44AD and i dont want my Books Audited. Now After allowing all expenses including Remuneration to Partners and Interest on capital is 9%. My question is Remuneration and Interest allowed or not as 44AD Says it deemed to be allowed Sec 30 to 38 but Int and Rem. Mentioned in 40(b). Kindly Resolve

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15 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160322 Points)
Replied 17 May 2018

The section 44AD itself starts with........... 44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" :

So, anything stated in section 40(b) not applicable to section 44AD.. Earlier the deduction was allowed from the deemed profit of 6/8% (vide sec, 44AD(2)) which has has been specifically removed by finance act, 2016.

The provision specified that the deductions u/s. 30 to 38 have deemed to have taken effect, but not 40(b), so if any deduction u/s. 40(b) taken by firm, it will be reversed !!!

So, the amount deducted by the partners can be tax-exempt capital, but not salary or interest!!! (when already 9% profit declared).

1 Like

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 17 May 2018

Yes... I agreed to Mr Dhirajlal Rambhia Sir...

If the Firm opt under sec 44ad then no way for claim Remuneration and Interest...

shashank hebbar (9 Points)
Replied 18 May 2018

TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.03.2018

To	Opening Stock	1,85,10,000.00	By	Sales	1,12,50,000.00
"	Purchases	1,15,90,000.00	"	Closing Stock	2,30,00,000.00
"	Wages	37,250.00				CY	36.56%
"	Gross Profit	41,12,750.00				PY	35.69%

		3,42,50,000.00			3,42,50,000.00	-

To	Total Expenses	4,91,020.00	By	Gross Profit	41,12,750.00
"	Interest on Partners Capital A/c		"	Interest on Drawings	9,125.00
	Sch -3	9,61,449.00	"	Jewell Design Consultancy fee	1,17,000.00
"	Remuneration to
	Working partners - Sch - 3	16,91,644.00				C.Y.	9.63
"	Net Profit	10,94,762.00				P.Y.	9.38
		42,38,875.00			42,38,875.00

In the above example I am declaring 9.6% profit after debiting Remunereation and Interest. Is this allowed?

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 18 May 2018

No...

Please understand in 44AD no way for Remuneration and Interest to partners...

So,

If you will opt u/s 44AD then you must declare without Remuneration and interest...

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 18 May 2018

But.,

Why not you opt u/s 44AA with 8% of profit...?

Without 44AB....??!!!

shashank hebbar (9 Points)
Replied 18 May 2018

I have turnover of Rs. 1.5CR

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 18 May 2018

Originally posted by : shashank hebbar
	I have turnover of Rs. 1.5CR

If opt u/s 44AD then you must show profit @ 8% = Rs. 12,00,000/-

*Once again I says, No way for claim Remuneration and Interest on Capital...

Also if You will file u/s 44AA (Without 44AB) then You can claim Partners remuneration, Interest on Capital and depreciation (If available)

1 Like

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 18 May 2018

Please go to this forum...

You can get some more clarity about the new activities u/s 44AD....

https://www.caclubindia.com/forum/44-ad-and-partnership-income-after-salary-and-interest-432606.asp

1 Like

shashank hebbar (9 Points)
Replied 18 May 2018

Thank you Sir.

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 18 May 2018

You are Most Welcome Dear...

GOOD LUCK... 😊😊😊😊😊

(Guest)

Originally posted by : RAJA P M
	Originally posted by : shashank hebbar I have turnover of Rs. 1.5CR If opt u/s 44AD then you must show profit @ 8% = Rs. 12,00,000/- *Once again I says, No way for claim Remuneration and Interest on Capital... Also if You will file u/s 44AA (Without 44AB) then You can claim Partners remuneration, Interest on Capital and depreciation (If available)

The firm has turnover of 1.5CR. So, if ITR 5 is used tax audit will be necessary. The limit of 2Cr for tax audit is only for those assessees who are opting for ITR 3(44AD etc).

1 Like

RAJA P M ("Do the Right Thing...!!!") (127053 Points)
Replied 03 July 2018

Originally posted by : Madhavi Pandit
	Originally posted by : RAJA P M Originally posted by : shashank hebbar I have turnover of Rs. 1.5CR If opt u/s 44AD then you must show profit @ 8% = Rs. 12,00,000/- *Once again I says, No way for claim Remuneration and Interest on Capital... Also if You will file u/s 44AA (Without 44AB) then You can claim Partners remuneration, Interest on Capital and depreciation (If available) The firm has turnover of 1.5CR. So, if ITR 5 is used tax audit will be necessary. The limit of 2Cr for tax audit is only for those assessees who are opting for ITR 3(44AD etc).