Remuneration to Body corporate nominee

Hi Haripara Sachin,

That's a thoughtful and practical query — especially relevant for LLPs having body corporate partners (like companies or LLPs) and their individual nominees managing day-to-day affairs.

Let’s break this down from both LLP Act and Income Tax Act perspectives:

✅ 1. Can LLP pay remuneration to nominee of a body corporate partner?

🔹 Under the LLP Act, 2008:

• An LLP can have a body corporate (like a company or another LLP) as its partner.

• Such body corporates nominate individuals to act on their behalf in the LLP.

• LLP Act does not prohibit payment of remuneration to an individual nominee, if he is actively involved in the management or operations.

✅ So, yes, an LLP can pay remuneration to a nominee of a body corporate partner — as long as:

• The LLP Agreement specifically permits it.

• The nominee is involved in active day-to-day operations.

💰 2. Who should receive the remuneration — Body Corporate or the Nominee?

• If the nominee is paid for services rendered personally (i.e. managerial or operational work), payment should be made to the nominee, not the body corporate.

• The remuneration is then treated as income in the hands of the nominee (individual) and taxed accordingly.

❌ Do not pay remuneration to the body corporate, as that could create legal/tax complications unless the body corporate is rendering services directly (which is rare in LLPs).

📘 3. Under Income Tax Act — Is the remuneration allowed as a deduction?

Yes, remuneration paid to a working partner (including a nominee) is allowed under Section 40(b), subject to the following conditions:

✅ Conditions under Section 40(b):

1. Remuneration is paid only to working partners

2. It is authorized by the LLP Agreement

3. It is within the limits prescribed under Section 40(b)(v):

   • On first ₹3 lakh of book profit or loss: up to ₹1.5 lakh or 90% of book profit (whichever is higher)

   • On balance of book profit: 60%

✅ If the nominee is effectively a working partner (on behalf of body corporate) and the remuneration is authorized in the LLP Agreement, it is allowed as a deduction under Income Tax.

✳️ Practical Points to Keep in Mind

📝 Summary