LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Section 44ad apply in partnership firm

Rupesh Soni (Taxation Consultant & CA final student) (493 Points)

10 January 2014

IF PARTNERSHIP FIRM TURNOVER RS.30,00,000/- ACTUAL NET PROFIT BEORE INTEREST & REMMUNERATION TO PARTNER RS.5,70,000/-(NPR=19%)

NOW INTEREST @ 12% ON CAPITAL RS 120000 & REMMUNERATION PAID TO PARTNER RS 3,30,000 (INT+REMM =450000)

SO NET PROFIT AFTR INT & REMM IS RS.1,20,000/-(I.ENPR= 4%)

MY QUE IS WHEATHER FIRM GO TO TAX AUDIT U/S 44AD AS NET PROFIT <8% ?????

NET PROFIT BEFORE INT & REMM OR NET PROFIT AFTR INT & REMMMUNERATION ?? CONSIDER FOR 8% PRESIUMPTION SCHEME REPLYYY EARLY FRIENDS

Reply
Follow
Share

23 Replies

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 10 January 2014

Dear

as per the explanation of the section 44AD this section tell about the taxability of the income on the basis of presumptive basis.

as per your query

taxable income as per the Section 44Ad is 3000000*8/100= 240000

and as per the profit and loss taxbale Income is = 1200000(i.e after the deduction of Salary and Remuneration and Interest as per the section of 40 B

as per the explanation of the section 44AD higher of the above(i.e 240000) shall be considered as income and accordingly shall be chargable to tax.l

1 Like

Ayesha Soni (ACCOUNTANT & AUDITOR) (34 Points)
Replied 10 January 2014

Gentleman...Mr Rupesh Soni

Nice & Debatable Questions but i think

computation is-

3000000*8%=2,40,000 /-

less:interest at 12%=120000/-

now book profit RS.120000

REMMUNERATION ALLOWABLE ON RS.120000/- IS 1,50,000

IT MEANS LOSS OF RS 30,000/- CAN BE CARRY FORWARDED

IF U DECLARE 8%

EVEN IN SEC 44AD U CAN GET DEDUCTION OU/S 40B INTEREST & REMMUNERATION TO PARTNERS OKAY...! NPR CONSIDER BEFORE INT & REMMUNERATION FOR TAX AUDIT PURPOSE IN UR CASE U GO TO REGULAR ACCOUNT AS UR NPR 19%

OKAY...!

Rupesh Soni (Taxation Consultant & CA final student) (493 Points)
Replied 11 January 2014

Yaaa...i read dat section Bt due to resulting figure is loss i hve doubtss.. I want to avoid Risk of tax audit u/s 44AD ...penlty rs.15000/- Thank you

Rupesh Soni (Taxation Consultant & CA final student) (493 Points)
Replied 11 January 2014

Loss can not carry forward as my return is belated ...thanks

Rajesh M Patel (CA Student) (54 Points)
Replied 11 January 2014

Computation of Taxable Profit u/s 44AD in case of Partnership Firm

Profit from Business

Particulars	Amount
44 AD ( Say the turnover is Rs.40 lacs) then the income would be 8%	3,20,000
Less:
Interest allowable u/s 40(b)	1,00,000
Remuneration to partners allowable	1,00,000
Total Income of the Firm U/s. 44AD	1,20,000

2 Like

AVTAR SINGH (Expert) (1873 Points)
Replied 11 January 2014

Rupesh Soni, the penalty is not applicable in your case because where the assessee is partnership firm, the salary and interest paid to partners is deducted from the income computed u/s 44AD.

2 Like

Rupesh Soni (Taxation Consultant & CA final student) (493 Points)
Replied 11 January 2014

THANK YOU CA AVTAR SINGH .......

SO SIR ULTIMATELY

I CAN FILLE RETURN AT LOSS -30000 (NIL) BY OPTING SECTION 44AD AS LOSS CAN NOT CARRY FORWARD ,NO NEED TO TAX AUDIT AS MY NET PROFIT BEFORE INTEREST & REMM IS EXCEDING 8% AM I RIGHT...?

AVTAR SINGH (Expert) (1873 Points)
Replied 11 January 2014

Rupesh Soni, you can file return at Rs.120,000 on the basis of books of accounts prepared by you. You will not be required to get your accounts audited u/s 44AD.

If the books are not maintained and you want to be taxed on presumptive income, you may offer 8% or any other higher amount as earned by the assessee. But it must be remembered that your bank and other accounts should not suggest more income than the declared income. Because, the ITO may ask you to produce sales and purchase bills and the detail of bank accounts to verify your claim.

I hope I am clear. Therefore you cant deposit/make investment exceeding the amount declared by you in that year. For example, if you declare income of Rs.300,000, your net assets should not increase by more than that amount. If the stock/bank deposits have increased by say Rs.400,000 then you will have to explain where this extra amount of Rs.100,000 has come from.

1 Like

Rupesh Soni (Taxation Consultant & CA final student) (493 Points)
Replied 11 January 2014

Yes..SiR Thank you sooo much for ur great support to.me i got best answer from you......Good dayy

Suneet (ASM) (23 Points)
Replied 12 January 2014

Thanks you all this discussion help me also.

ca rajiv narang (ca) (31 Points)
Replied 12 January 2014

good answer avtar ji

Rupesh Soni (Taxation Consultant & CA final student) (493 Points)
Replied 13 January 2014

Now what abt partners 's taxation i opt 8% presumption basis in firm so allowable remmm 150000/- 2partners each get 75000/- what is taxable amt of remm.for partner??in thier return they got 330000/- i.e 115000/- each in real sense in regular book but i opt no books & claim 8% income in firm's Computation... inform me abt remmuneration ???sir

AVTAR SINGH (Expert) (1873 Points)
Replied 13 January 2014

You may opt to be assessed for non maintenance of books u/s 44AD. But for remuneration payable to partners, the firm has to pay interest and remuneration as provided in the Partnership Deed.

The partners will be taxed on the remunaration paid to them on the basis of Partnership Deed.

The firm will be allowed deduction of interest and remuneration paid to partners as per section 40(b).