Partnership -deed

This query is : Resolved

Avik Banerjee (Querist)
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08 November 2017 sir,

Did in a partnership firm the Partners can distributed all its Net Profit among Partners and make the Net Profit

as Zero,

CA Shubhanshu Jain

CA Shubhanshu Jain (Expert)
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09 November 2017 No, this is not possible because as per section 40b of income tax act there is a bar/limit on salary based on profits and interest paid on capital maximum 12%p.a and salary is discussed as under

- on First 3 lakhs of book profits or in case of loss - 90% of book profits or 150000 whichever is higher

- On balance book profits - 60% of book profits

Amol S Joglekar

Amol S Joglekar (Expert)
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09 November 2017 As per Indian Partnership Act, the profit can be distributed in full... no any problem.....But as per Income Tax Act, the allowable would be as per section 40b

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Avik Banerjee

Avik Banerjee (Querist)
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09 November 2017 so,what for I go for Indian partnership act or income tax act pls solved my query ?

Amol S Joglekar

Amol S Joglekar (Expert)
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09 November 2017 the firms are as such governed by the indian Partnership Act.
So far as income tax is concerned, you can show the "dis allowed" by way of computation sheet.