Partnership Firm and etc.

This query is : Resolved

Madhav Pandharinath Khot (Querist)
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02 September 2009 1)In Partnership Firm scrutiny is going on ACIT ask for regarding u/s 14A so i got confused what he is asking exactly related firm ?

2) Interest recd to partners from partnership Firm whether it is taxable or exempt?

3)what about FBT for the AY 2010-11 is it applicable or not pertaining to this year?

4) Regarding TDS -surcharge is applicable for the AY 2010-11?

5) what is tax slab for the AY 2010-11 ?

chetan soni

chetan soni (Expert)
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02 September 2009 1. Interest received by partners is taxable in the hands of partners.

2. FBT is not applicable for the A.Y. 2010-11

3. Surcharge & education cess on TDS is removed w.e.f. 01-Oct-09. Till this date it is applicable.

4. For income tax slab rates, you can get this from shared files.

Deepak Goel

Deepak Goel (Expert)
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03 September 2009 Agree with Chetan

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Madhav Pandharinath Khot

Madhav Pandharinath Khot (Querist)
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06 September 2009 Dear Sir,

My Query no. 1 is still unresolved, I would like to know about the section 14A

Thanks & Regards

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 Here are detailed responses to your queries regarding partnership firms and related tax matters:

### **1. Section 14A Scrutiny in Partnership Firms**

**Section 14A of the Income Tax Act** deals with the disallowance of expenses incurred in earning exempt income. In the context of a partnership firm, if the firm has income that is exempt from tax (like dividends or interest on certain bonds), the Assessing Officer (AO) may scrutinize whether any expenses have been claimed that relate to earning this exempt income. The AO would like to ensure that:

- The firm has not claimed deductions or expenses that are associated with exempt income.
- The firm has accurately computed and disallowed the expenses as per Section 14A and the corresponding Rule 8D, if applicable.

**Action Steps:**
- Review the firm’s financials to identify exempt income and related expenses.
- Ensure that any expenses related to exempt income are disallowed as per the provisions of Section 14A and Rule 8D.
- Provide the required details and calculations as requested by the AO.

### **2. Taxation of Interest Received by Partners**

**Interest received by partners from the partnership firm** is generally considered taxable under the head "Income from Other Sources" in the hands of the partners. The firm pays interest on capital or loans to partners, and this interest is taxable as income for the partners. The partnership firm is allowed to claim the interest paid as a business expense, reducing its taxable income.

**Tax Treatment:**
- **For the Firm:** Interest paid to partners is a deductible expense.
- **For the Partners:** Interest received is taxable under "Income from Other Sources" in their individual tax returns.

### **3. Fringe Benefit Tax (FBT) for AY 2010-11**

**Fringe Benefit Tax (FBT)** was applicable for the assessment years up to AY 2009-10, but it was abolished from AY 2010-11 onwards. Hence, for AY 2010-11 and subsequent years, FBT is not applicable.

**Key Points:**
- For AY 2010-11, FBT is not applicable, and the tax treatment for fringe benefits is as per the regular provisions of the Income Tax Act.

### **4. Surcharge on TDS for AY 2010-11**

**Surcharge on TDS** applies based on the total income and the applicable tax slabs. For AY 2010-11, the surcharge rates were:

- **For Individuals and HUFs:** Surcharge of 10% on income exceeding ₹10 lakh.
- **For Firms and Companies:** Surcharge of 10% on income exceeding ₹1 crore.

**TDS Rate Considerations:**
- Ensure that the TDS is deducted at the appropriate rate, including any surcharge if applicable.

### **5. Tax Slabs for AY 2010-11**

For **Assessment Year (AY) 2010-11**, the tax slabs were as follows:

**For Individuals (Below 60 Years):**
- **Income up to ₹1.6 lakh:** Nil
- **Income from ₹1.6 lakh to ₹3 lakh:** 10%
- **Income from ₹3 lakh to ₹5 lakh:** 20%
- **Income above ₹5 lakh:** 30%

**For Senior Citizens (60 Years and Above):**
- **Income up to ₹2.4 lakh:** Nil
- **Income from ₹2.4 lakh to ₹5 lakh:** 10%
- **Income above ₹5 lakh:** 20%

**For Super Senior Citizens (80 Years and Above):**
- **Income up to ₹5 lakh:** Nil
- **Income above ₹5 lakh:** 20%

**Note:** These tax slabs are indicative of individual tax rates. Partnership firms are taxed differently, with a flat rate of 30% applicable to the firm's income.

### **Summary**

- **Section 14A Scrutiny:** Ensure compliance by reviewing exempt income and related expenses.
- **Interest to Partners:** Taxable under "Income from Other Sources" for partners.
- **FBT:** Abolished from AY 2010-11.
- **Surcharge on TDS:** Apply the surcharge as per applicable rates.
- **Tax Slabs for AY 2010-11:** Follow the specified tax slabs for individuals, senior citizens, and super senior citizens.

If you need specific advice or further assistance, consulting with a tax professional or chartered accountant is recommended to ensure compliance with all relevant provisions and to address any complex scenarios.