Taxability of firms

Sir,

    if a partnership firm makes net profit and the same net profit is trasnferred to partners capital account without paying income tax for the profit is valid or paying lesser income tax in relation to the same net  profit is valid and section 10(2A) is applicable for the same profit

also enlighten me  if the tax amount is calculated 30% on the same net profit and deducting the same to be transferred to partners capital

actually i am little confused

Replies (1)

Dear Sir,

In partnership firm case if you are getting net profit then you have to pay taxes @ 30%. After paying taxes if any amount is left then the same is distributed to partners in profit sharing ratio. 

The amount of share received by partner is exempt of tax in individual hands. 

The concept behind is since the profit is taxed in the hands of firm it cannot be taxed again in the hands of the partners. 

i hope answer is clear 

regards 

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