27 June 2023
we, a partnership firm, follow fixed capital method of accounting. 1. according to our deed partners are entitled to interest @12% on there capital account credit balance, calculated on actual duration of credit balance. now my question is section 40(b) allow any payment of interest to partner s.t @12% limit, in view of this should i need to consider debit balance of current account to calculate allowable deduction under income tax act? if yes please guide me to the relevant section/provision. 2. Does remuneration to partners need to be shown as expense in the profit or loss statement? we show it as an appropriation in our p&l appropriation statement. which treatment is correct in view of ITR and accounting standard for non corporate entity level iv.
28 June 2023
1 Yes, as per general accounting practices. 2 Show it as expense in the p and l account as it's an allowed expense for income tax payment.
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