Salary and interest received by partner from a 44AD opted firm

It is taxable in personal capacity.

It is taxable in the hands of partner

@ Mr Nitin Arora.,

Can You elaborate Your query with more details...?

Which AY Partner received salary & interest...?

Is firm under 44ad then how can u received Remuneration & interest...?

Are you received Int & remuneration before profit are after profit...?


@ Mr Kunal Mittal & CA Dhruva.,

how is it Taxable in the hands of partner ...?

How can both of you decide its taxable without details...?

What about sec 44ad in current scenario...?


please give suitable reasons...!

@ Mr Raja Pm

Let us assume

A.Y. 2019-2020

FIRM OPTED PRESUMPTIVE TAXATION UNDER 44AD

FIRMS'S TURNOVER = 95 LACS

 SALARY PAID TO PARTNER A AND B 240000 EACH P.A.

INTEREST PAID TO PARTNER A AND B 120000 EACH P.A.

PARTNERS ARE HAVING NO INCOME OTHER THAN SALARY AND INTEREST

NOW MY QUESTION IS 

WHAT IS TOTAL INCOME OF PARTNERSHIP FIRM?

WHAT IS TOTAL INCOME OF PARTNER A AND B?

Firm's income (Profit) has to be minimum 8% or 6% (if digital) of turnover Or actual profit whichever is higher (under 44AD)

8% of 95 lakhs = 760000/-
6% of 95 lakhs = 570000/- if digital
or
actual profit = xxxxx
whichever is higher.
-------
Partner A & B - Salary & interest (as business
income in partner's ITR)

Partner A -- 240000+120000 = 360000/-
Partner B -- 240000+120000 = 360000/-

Originally posted by : nitin arora
	@ Mr Raja Pm Let us assume A.Y. 2019-2020 FIRM OPTED PRESUMPTIVE TAXATION UNDER 44AD FIRMS'S TURNOVER = 95 LACS  SALARY PAID TO PARTNER A AND B 240000 EACH P.A. INTEREST PAID TO PARTNER A AND B 120000 EACH P.A. PARTNERS ARE HAVING NO INCOME OTHER THAN SALARY AND INTEREST NOW MY QUESTION IS  WHAT IS TOTAL INCOME OF PARTNERSHIP FIRM? WHAT IS TOTAL INCOME OF PARTNER A AND B?

 

WELL....

 

IF FIRM OPT U/S 44AD THEN NO WAY FOR CLAIM REMUNERATION & INTEREST BY PARTNERS...

BUT,

THE PROFIT AMOUNT CAN BE SHARE AS PER PARTNERSHIP SHARE. THE SAID SHARE IS NOT TAXABLE IN THE HANDS OF PARTNERS...

NO MORE OTHER PROVISIONS APPLICABLE IF FIRM OPT U/S 44AD...

Certainly Firm while determining the actual profit such payments to partners (salary and interest) are ignored and not taken into consideration.

However if Partnership Deed provides for interest and salary and within 40(b) limits then Firm can pay despite knowing that disallowance under 44AD.

Simply.,

If firm opt presumptive taxation scheme then no way for Remuneration and Interest to it's partners. Bcoz, Income declared presumptive. No way for segregation of the expenditures...

Mr. Raja, I do respect your views but still I prefer to dissociate with your views.

There is no question of segregation of expenses as in fact books of accounts are not required to be maintained.

However partnership firm is governed by Partnership Deed and it's clauses.

So far as it is inconsistent with iTax 44AD profit determination is concerned , such expenses are not considered while actual profit determination.

But 44AD does not ban such payments to partners altogether at a time where there is no infringement of 44AD provisions taxing the Firm's business income which collides with interest of the revenue.

Refer sec 44ad with 40(b) in FA 2016...

If partners claim that Sal & Int then it will be added to Profit...

1. As per sec 44AD, clearly states that not contained anything in sec 28 to sec 43C would have been deemed to have been allowed under sec 44AD of the act if assessee decides to show profit under presumptive taxation scheme. 
2. However, prior to the Finance Act, 2016 deductions were allowed towards interest on capital and partner's remuneration while computing profit under sec 44AD. 
3. From finance Act 2016 the above deductions have deemed to have been allowed and no further deductions will be allowed as interest on capital or partner's remuneration u/s 44AD of the act. 
4. Now, coming to the question of whether the same will be taxable in the hands of partners...? 
5. YES, it will be taxable in their hands as business income. As per sec 28(v), both interest on capital and remuneration (or salary ) received by the partners will be taxable in their individual capacity as income under the head PGBP. 
6. Partnership firm opting to pay tax under presumptive taxation u/s 44AD has no relevance for partners individual's account. 
Please correct me if the above solution has an alternative view. 

Yes.... Correctly state a point by Mr Suresh Thiyagarajan.,

As per FA 2016 if a Firm opt presumptive tax scheme then Partners cant claim Int & Rem...

Bcoz,

No way (or not allowing) for segregation of expenditure u/s 44AD..