My query is that what shall be the treatment of excess amount that we pay to the retiring partner over and above his capital contribution in the partnership firm.....
For instance, there is already a firm having a capital of say Rs 1000/- and now some new partners shall be inducted who shall introduce the capital of say Rs 1500/- and then the old partners shall retire from the firm and shall be paid by the firm Rs 1500/- against their contribution of Rs 1000/-...
My query is what shall be the treatment of Rs 500/- extra/premium paid by the firm to the partners in the hands of the partners?????
Also what shall be the tax treatment, is the firm liable to deduct some TDS etc on such an extra payment????
13 February 2013
The account of retiring partner shall become an ordinary account as Current Assets or Current Liabilities.
No TDS.
However, the share of profit or loss earned by the retiring partner shall be accounted for in his account. Retiring partner him/herself is responsible to pay tax on such profit.
CAclubindia
