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Salary to partner

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Ajay Paul Singh

Lawyer

28 Points Joined October 2014

Dear

Please advise me about the salary payable to partner my query is that the profit of the firm is around 11 lacs which include Bank interest and FDR Interest . The Interest on FDR is regular feature . Salary to partner is 6 lacs as provided in the books . Weather the same is allowable U/s 40(b) of the Act . I we treat the bank interest as business incom then the same is allowable as per the Comp Chart and if we reduce the same from business income and treat as income from other sources then the allowable salary is reduced accordingly.

Please advise me

Regards

Ajay

Replies (1)

Swami Ayyappa Nuli

TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH

1372 Points Joined June 2012

Limits u/s40(b) are assessed based on Book profits. Here book profits are Profits of firm. Income source may be Capital gain or Other sources or House property income as Firm is assessed for all of such Incomes. Hence source of Income is irrelevant. Therefore in your case as Book profits are 17 Lakhs( After remuneration is added), Maximum remuneration is allowable is 11,10,000. Hence entire Remuneration paid to partner is allowable.