Remuneration & interest Calculation method

Muhammad Arshad Ashrafi (Accountant) (184 Points)

23 March 2011  


Dear Sir/Madam  
Please resolve my problem to khow how can i calculate the remuneration & interest 
interest calculate on partner's caplital ? and remuneration calculate on ?
From 01.01.2011 X Color become a partnership firm some sentences is  written in deed as below
That the interest shall be paid to the partners @ 12% p.a. or at such other rate as may be prescribed u/s40(b) of the incometax act, or any other provision of income tax act 1961 as may be applicable for allowability of interest paid to the partners of partnership firm for the relevant accounting period on the credit balance of partners however when the profit is less than the amount of interest calculated as above , the rate of interest shall be proportionately reduced so as to bring the quantum of interest wquivalent to the profit of the firm
That the both partners shall be working partner and shall be paid remuneration calculated at the percentage of the profit of the firm for each year as under
a) book profit upto 150,000/- to the extent of book profit 
b) book profit exceeding 150,000/- and upto 300,000/- 150,000/- or at the rate of 90% of the book profit whichever is higher
c) on the balance of book profit  at the rate of 60%
That however , where the profit of the partnership firm is less than the remuneration as above , the remuneration shall be restricted to the profit of the partnership firm , the total remuneration as worked out above shall be equally divided between both the partners.
For the purpose of above calculation 'PROFIT' shall be computed as defined in explanation 3 or any other explanation to Section 40(b) of the income tax act 1961
That the profits and losses of the partnership business after payment of interest & remuneration to the partners shall be divided between and borne by the partners as under
Party no.1 35%
Party no.2 65%
total  100%
thanks in advance