Quick Summary
Increase in limit of remuneration to working partners of a firm allowed as deduction Section 40 of the Act provides for amounts that shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". Sub-clause (v) of clause (b) of the said section provides for disallowance of any payment of remuneration to any partner who is working partner which is authorized by and is in accordance with the terms of the partnership deed and relates to any
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FAQ :
The main change proposed is an increase in the limit of remuneration that can be deducted for working partners in a partnership firm.
For the first £6,00,000 of book profit (or £3,00,000 in case of a loss), the limit is 90% of book profit, whichever is more. For the balance of book profit, the rate remains at 60%.
The amendments will take effect from April 1st, 2025.
The changes will apply in relation to assessment year 2025-2026 and subsequent years.
The previous limit was £3,00,000 of book profit (or £1,50,000 in case of a loss) or 90% of book profit, whichever was more, on the first £3,00,000 of book profit.
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