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Partnership firm taxation for a.y.2018-19

Gaurav (CA final ) (93 Points)

01 July 2018

What will be consequences of declaring net profit above 8% and then taking deduction for partners remunaration and interest on capital @ 12%?? is it required to audit the books of account even if turnover is below audit limit?? Presumptive taxation for firms require 8% profit and partners remunaration and interest is presumed to be is alllowed.what is prevailing practice to reduce tax liability??

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20 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 01 July 2018

" What will be consequences of declaring net profit above 8% and then taking deduction for partners remunaration and interest on capital @ 12%??

No problem, unless the amount is offered to tax again in the hands of partners !!!

"is it required to audit the books of account even if turnover is below audit limit??"

Once income is offered under presumptive assessment, question of maintaining books does not arise...... so, where is the question of tax audit u/s. 44AB...

1 Like

Gaurav (CA final ) (93 Points)
Replied 02 July 2018

suppose a partnership firm is having turnover of 15 lakhs .if it pays tax as per presumptive taxation .will result in paying 30 tax on 8 profit ,i.e.36000.now if it adopts to file normally and declare profit say 15 and then claims partner's remuneration and interest on capital @ 12.will firm require to audit books of account as it is declaring below 8 after remuneration and interest on capital.though turnover limit for audit is not applicable.please advise.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 02 July 2018

Yes, tax audit will be madatory, because eligible assessee has to declare deemed profit of 6/8% when business is also eligible u/s. 44AD. Otherwise sub-clause 44AD(4) gets triggered.

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Gaurav (CA final ) (93 Points)
Replied 02 July 2018

sir,firm didn't pay tax as per presumptive taxation. us 44AD in any of previous year,after charging remuneration and interest on capital profit is below 8.in that case is it mandatory to get account audited even if turnover is below limit ?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 02 July 2018

The amendment was applicable from AY 2017-18; earlier to that firms were eligible to declare profits under normal assessment without tax audit.

Gaurav (CA final ) (93 Points)
Replied 02 July 2018

"Yes, tax audit will be madatory, because eligible assessee has to declare deemed profit of 6/8 when business is also eligible u/s. 44AD. Otherwise sub-clause 44AD(4) gets triggered." 44AD(4) won't get triggered as previously no return was filed under 44AD.is my contention right?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 02 July 2018

First of Clarify Assessment Year.....

For AY 2017-18, audit u/s. 44AB applicable......

CA Umesh Shah (2 Points)
Replied 05 October 2018

If Firm having Profit of Rs. 134000/- and claim Remuneration to partners Rs. 148000/- net Loss Rs. 14000/-.

Since there is not any Taxable Income, Whether Firm Required to Get Audited its Book?. Turn Over is Rs. 23,00,000/-

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 06 October 2018

For AY 2018-19, audit u/s. 44AB (a) or (b) not applicable.

But applicability of sub-sec. 44AD (4) &(5) are to be checked.

For firm having eligible business, not opted sec. 44AD in preceeding year, declaring income under normal assessment i.e. with P&L acc & BS (in ITR5), audit not applicable.

But If opted for sec. 44AD.. ... sub-sec. 44AD(4) triggers!!!

1 Like

s v ramana (proprietor) (22 Points)
Replied 26 October 2018

the turnover for AY 2018 - 19 is Rs. 80 lakhs and profit is less than 8 %. previous year ie AY 2017 - 18 it was under tax audit. is tax audit applicable for AY 2018 - 19.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 26 October 2018

Is the business is eligible business as per sec. 44AD? If yes, audit applicable.

CA. Rajesh Kumar N (CA) (25 Points)
Replied 12 January 2019

Sir,

Is 8% or 6% limit applicable for a new firm having turnover of 39,00,000 and net profit of 3,15,000 before interest and remumeration but net profit of 35,000 after interest and renumeration,Is audit necessary u/s 44AB

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 12 January 2019

If the business is eligible business as per sec. 44AD, audit applicable; because min. 6/8% profit margin essential. (even though offered to normal assessment)

CA. Rajesh Kumar N (CA) (25 Points)
Replied 12 January 2019

Dear sir ,If a partnership declares 8% profit then interest and renumeration will become to have taxed twice once in partner ship firm a/c and then in individual partner a/c ie two times..pls clarify