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44ad partnership firm 7.9% income on digital rcpt! then?

Jugal (Business) (32 Points)

04 April 2018

44AD Partnership Firm 7.9% income on Digital rcpt! then?

Digital Rcpt: 1,30,05,085/-
Expenses: 1,20,47,602/-

Gross Profit = 9,57,484/- (7.36%) [ 6% Profit = 780305]

Further Expenses not claimed yet are
Depreciation: 2,54,064/-
Interest on Capital: 2,21,887.00
Partners Remuneration: 4,80,000/-

As per above details we have around 1,77,000/- Extra Income above 6% required for 44AD
what to do with this where should i adjust (Interest/Depreciation/Remunaration) or what exactly i have to do in books of Firm

and what would be the taxable and nontaxable income in the hands of partner?

Pls explain and reply ASAP

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10 Replies

RAJA P M ("Do the Right Thing...!!!") (128004 Points)
Replied 04 April 2018

Your receipts are exactly digital receipts (100%) then you can declare Your profit 6% or above if your business is eligible under the sec 44AD...

The Remuneration and Interest is not available for partners if the Firm opt presumptive scheme. No more tax liabilities to partners after get the profit share. They can equally share the profit as per their capital percentage.
As per Your query in case two partners the profit amount Rs. 957,484 (6% - 780,305) will be share Rs 478742 and it's fully ~~taxable~~ EXEMPTED in the hands of Partner...

As per sec 44AD Depreciation not available as expenditure. But, You can depreciate the Assets values as per Your book keeping...

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A B Kundu (Professional) (1422 Points)
Replied 04 April 2018

Yes, agree with Mr. Raja, if the firm avails the benefit of Sec.44AD then it will be presumed that all the expenditures including depreciation have already been considered and only 6% or more of the turnover will be taken as income.

If the firm doesn't opt for Sec.44AD, then it can claim all the expenses incurred as well as depreciation. But, in that case it has to comply with Sec.44AA and 44AB,i.e., it has to maintain proper books of accounts and as the turnover exceeds Rs.1 Crore, tax audit should be done.

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Jugal (Business) (32 Points)
Replied 04 April 2018

Thankyou for your kind response... but i have little more query that i want to enjoy 44AD for sure... and then rather paying 30% on the remaining 1,77,000/- Extra Income why not partner's should take this as taxable income as interest or remuneration.... would you pls guide me that how can i do the acounting for

do i take this as interest on capital or partner's remuneration

and other question is since last few years every year i was showing partner's remuneration and interest as well as depreciation in expenses and then 8% of profit over that

so if i will change this current year will be ok?

JFI: although i am managing my books of accounts but i am comfortable to file 44AD, to be simple as my turnover is below 2Cr.

RAJA P M ("Do the Right Thing...!!!") (128004 Points)
Replied 04 April 2018

Well...

First of in Previous AYs Partnership Firm opt u/s 44AD and they also avail the benefit of Remuneratiomn and Interest on Capital (Not available Depreciation). After the deductions they will be pay tax @ 30% on balance amount...

In FY 2016-17 the Remuneration and Interest not availbale Bcoz, However, Finance Act 2016 has deleted the proviso appearing in Section 44AD (2), consequent to which, deduction of the partner’s interest and salary is not further allowed for a partnership firm opting for presumptive scheme under Section 44AD of the Act In this context, we would, in this specifically, dwell upon the taxability of the Partner’s salary in the Partner’s hand when the Partnership firm is taxed under Section 44AD on presumptive basis.

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Jugal (Business) (32 Points)
Replied 05 April 2018

Thanks again for your kind and detailed reply

So Two Options>>

#1

So what i understood that as per 44AD if i have all digital rcpt then directly pay tax on 6% profit no need to keep proof of expenses and accounting .

#2

pay tax on the full amount which is around 7.5% as per our own calculation and dont need to make adjustment for interest and salary in books after all income is coming as business income which is tax free in hand of partners

let me know which is the better option for me and what i should do for me

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A B Kundu (Professional) (1422 Points)
Replied 06 April 2018

I think, if you are able to maintain your books of accounts, bills, vouchers properly, then you don't opt for Sec.44AD, because if you maintain proper Accounts you can show any % of profit, you won't have any tension regarding % of profit to be declared at the last moment. Even you can claim loss also by charging any type of business related expenses, which is not possible in case if you opt for Sec.44AD. The disadvantage will be you have to comply tax audit requirements.

Let see what other experts say regarding this.

Jugal (Business) (32 Points)
Replied 06 April 2018

I want to go with 44AD to keep me out of audit and other burdon pls suggest what to do ?

RAJA P M ("Do the Right Thing...!!!") (128004 Points)
Replied 06 April 2018

SORRY DEAR FOR LATE ATTEMPT... NOT AVAILABLE NOTIFICATIONS IN CCI PORTAL

Originally posted by : Jugal

Thanks again for your kind and detailed reply

So Two Options>>

#1

So what i understood that as per 44AD if i have all digital rcpt then directly pay tax on 6% profit no need to keep proof of expenses and accounting .

--->>> YES... YOU CAN. If You are shown @ 6% then the profit will be share 50 : 50 (If 2 partners) as Rs. 390153 each...

#2

pay tax on the full amount which is around 7.5% as per our own calculation and dont need to make adjustment for interest and salary in books after all income is coming as business income which is tax free in hand of partners

--->> - YES... EXACTLY. If You are shown @ 7.5% then the profit will be share 50 : 50 (If 2 partners) as Rs. 478742 each...

let me know which is the better option for me and what i should do for me

--->> Both way is available in this sec.

Also the amount is fully Tax Free in the hands of partners.

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RAJA P M ("Do the Right Thing...!!!") (128004 Points)
Replied 06 April 2018

Originally posted by : Jugal
	I want to go with 44AD to keep me out of audit and other burdon pls suggest what to do ?

No more questions if you are opt u/s 44AD. Keep your Income receipts...

Jugal (Business) (32 Points)
Replied 26 July 2018

Is the Software Development Business in Partnership firm will be eligible for 44AD

which form applied ITR4 or ITR5 ?

and we have to show full details of P&L and Balance sheet in return or only minimum required as earlier in 44AD?

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