Salary to Partners in case of loss

Hi,

Can anyone explain with example how to calculate remuneration to partners if firm incurs loss. If there are 3 partners and loss is INR 500000/-

Thanks



 

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Quick Summary
This discussion clarifies how partner remuneration is handled when a business incurs a loss. According to the Income Tax Act, there's a maximum limit of INR 150,000 for partner remuneration, which can be distributed among partners in any agreed ratio. An example illustrates how a loss of INR 500,000 would be allocated based on capital contributions, with specific amounts calculated for each partner.

There is no formula.. as per Income Tax Act, the maximum limit for partner remuneration in case of loss is 150000 which cab be divided among partners in any ratio

If the partners have capital contributions of INR 100,000, INR 200,000, and INR 300,000 respectively, the loss would be allocated as follows:

Partner A: (INR 100,000 / INR 600,000) x INR 150,000 = INR 25,000

Partner B: (INR 200,000 / INR 600,000) x INR 150,000 = INR 50,000

Partner C: (INR 300,000 / INR 600,000) x INR 150,000 = INR 75,000

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