FINANCIAL STATMENTS OF SOLE PROPRIETORSHIP

This query is : Resolved

SHIVAM JHUNJHUNWALA (Querist)
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18 April 2021 sir in sole proprietorship, we say interest on capital. but as business and businessmen are same as per law, so why to allow ioc, salary, I'd, and other as these get deduced form profits and get added to capital. in a way profit is added to capital. sow hy to reduce profit from these expenses and then add it to capital in way if it is not deduced it will go to profits which will ultimately increase profit.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 April 2021 For sole proprietorship interest on capital and salary not allowed.

SHIVAM JHUNJHUNWALA

SHIVAM JHUNJHUNWALA (Querist)
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18 April 2021 SO SIR IS IOD LEVIED BY BUSINESS FROM OWNER....

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SHIVAM JHUNJHUNWALA

SHIVAM JHUNJHUNWALA (Querist)
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18 April 2021 SO SIR WHY IN PARTNERSHIP ALSO WE GIVE SALARY, IOC, IOD AND OTHER THINGS TO PARTNER EVEN IF PARTNERSHIP FIRM AND PARTNERS ARE THE SAME

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 April 2021 In partnership firm is taxed separately at 30% on profit earned. Salary and interest paid to partners taxed in the hands of partners at slab rate.
in the case of prop only single taxation at slab rates.

SHIVAM JHUNJHUNWALA

SHIVAM JHUNJHUNWALA (Querist)
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18 April 2021 SIR I DIDN'T GET WHAT U ARE TRYING TO SAY

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 April 2021 In partnership firm and partners are taxed. salary and interest deducted from firm and taxed at slab rate in the hands of partners.
Prop only individual is taxed at slab rates. ( If salary and int paid same will be added and taxed on prop)

SHIVAM JHUNJHUNWALA

SHIVAM JHUNJHUNWALA (Querist)
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18 April 2021 But sir as partnership is not a separate legal entity the provider of finance I.e. partner is as same as user if finance I.e. firm.. so it should be allowed and same appliees to salary as both employer and employee is same

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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18 April 2021 For the purpose of taxation firm and partners are separate entity and taxed differently.

SHIVAM JHUNJHUNWALA

SHIVAM JHUNJHUNWALA (Querist)
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19 April 2021 Yes sir I understand this that as per income tax you are talking about but see as per law they are not separate legal entity so why to give them the IOC salary Iod and other

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 April 2021 Partners work full time for the firm so they have to take salary for the personal expenses. One partner put only money and take interest and other partner will be working partner take salary.
Capital introduced by the partners may be different, so they take interest based on amount invested. one of the partner may be non working partner for him salary will not be paid.

SHIVAM JHUNJHUNWALA

SHIVAM JHUNJHUNWALA (Querist)
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02 May 2021 SO SIR IT MEANS THAT THESE ARE APPROPRIATIONS AS THEY GET TO COMPENSATEW OR THIER WORK AND TIME..SO IN SHORT WE CAN SAY THATY IT IS JUST ANOTHER NAME GIVEN TO TAKE PROFIT FROM FIRM IN THE FORM OF IOC AND SALARY.. BUT IN CASE OF LOAN GIVEN BY PARTNER TO PARTNERSHIP FIRM, SINCE PARTNERSHIP FIRM IS NOT A SEPRATE LEGAL ENTITY, SO IN SENSE PARTNER IS GIVING LOAN TO HIMSLEF AS PARTNERSHIP FIRM IS NOTHING BUT PARNTERS.. SO HOW IS THIS POSSIBLE???

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 May 2021 Firm is not a legal entity but it's a separate entity having separate PAN. So loan can be given.