Whom to tax

Dear Sir, The profits of a partnership firm is taxed in the hands of the firm only and not in the hands of its partners. Therefore, if the partnership is registered, the tax can be paid on the total profit in its name and the share of the partner can be credited to his account. It wouldn't make a difference if the share of your friend's partner is increased to the extent of tax paid on the same by reducing your friend's share by such amount.

Thanks Raghuveer, But it is not a patnership firm , they are doing in the capacity of Individual...

so think twice and tell me the what is best solution for them..

 

I agree with Raghuveer.

But if there is no partnership the entire amount (less the expenses) will be taxed in your friend's hands. He can show that the amount he pays monthly to the other person is salary and claim expenditure. (this will be taxed in other person's hands)

I agree wiht Madhavi pandit

 

Agreed with Madhavi Pandit

Amount paid by your friend to his partner can be shown as salary and same will taxable in his partner's hand and he can claim expenses in his firm.

You can also show the same amount as sales commission depending upon the understanding between the two.

In case your friend dont want his partner to be taxed at all in respect of aforesaid monthly payment than only possible planning that can be done is show this payment as part of your monthly drawings. He won't be able to claim any expenses in this case and it will taxed in your hands and can avoid his partner from being taxed.

I agree with yogesh, But problem is the amount paid to other partner is online transfer...

Thanks yogesh and madavi....

CA Ram, my name is Madhavi.

Ok Ok Madhavi Pandit Garu...