27 June 2010
According to section 10(2A)of the Income Tax Act,1961 Share of profit of a Partner in a Firm, which is seperately assessed to tax, is exempt.
Suppose in a firm consisting of two partners, there is reconstitution of partnership where one of the partners retires and a new partner is admitted on the same day (say Jan 31st) and the firm has incurred loss upto the date of reconstitution and it has made profits from the date of reconstitution upto 31st March of a Particular Financial Year.
But the profits made after the date of reconstitution is not sufficient enough to cover the losses incurred during the financial Year. Hence the Firm Files a Loss Return. Both the Retiring Partner and the Continuing Partner Have Share of Loss. But the Incoming Partner has Share of Profit.
My Query is whether the Share of Profit is Taxable in the hands of the Incoming Partner as the firm has not paid the tax on such income?
27 June 2010
dont calculate profit in terms of the accounting concept... whatever profit or loss of the firm is, just keep it with Firm only.. partner dont have to pay any extra tax on it...... If there is net profit than Tax will be paid by firm only.... Partner is separate identity for Taxation....
CAclubindia
