Remunaration to the partner

Tax queries 1434 views 9 replies

Dear member

Please tell me that can a partnership firm running construction business give remunaration (Sec 40b) to its partners even in the first and second  year there is no sale of any unit i.e. no profit?

Thanks in advance

Replies (9)

No profit no remuneration to partners

But Aditya sir there is a provision in which a firm can give remunaratio to its partner even in case of loss. Further my query is that all the expenses on consturction are being debited in the WIP a/c and I want to know whether firm can give remunaration to partner as per provisions of IT act and debited to the WIP a/c as other expenses.

 

A minimum remuneration of Rs.50,000/- to partners is permissable under Income tax Act,1961even when the business has no profit. But the partnership deed should authorise it.

 In case of Construction business, profit is divided during the project period & there will be no loss as such in any year [AS - 7]

So,you will be able to give remuneration.

 

W.e.f. AY 2010-11, can provide 150000/- as remuneration to partners even if book profit is negative.

 "Even in case of loss". They are saying that minimum Rs.50,000 as remuneration. Even though you are debiting all expenses to WIP partners worked. They will have to remuneration. 

Remuneration of Rs.50000/- can be allowed for AY 2009-10 and Rs.150000/- wef AY 2010-2011 even if a loss is incurred.

Agree with Sunil, Deepak and Rahul

FROM THE A.Y. 2010-11 ONWARDS,

1.IF BOOK PROFIT IS NEGATIVE     - Rs. 150,000

2.IN CASE BOOK PROFIT IS POSITIVE

    i) ON THE FIRST Rs. 3 LACS OF BOOK PROFIT     -Rs 1,50,000 OR 90 PERCENT OF BOOK 

        PROFIT ,WHICHEVER IS MORE

    ii) ON THE  BALANCE OF THE BOOK PROFIT      - 60 PERCENT OF THE BOOK PROFIT

 


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