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Ay 2017-18 for partnership form

JEEVIKA AND CO (PROPRIETRIX) (153 Points)

05 December 2017

Dear Sir / Madam.,

Our business is Partnership firm. Our Turn over for FY 2016-17 Rs. 38,50,000/-.

we are maintain books of accounts...

My questions are

1. How to show the profit for ITR if books maintained u/s 44AA?

2. How to file without Audit?

3. Can we show Profit less than 8% sec 44AB...?

4. We are not like sec 44AD then how to file ITR?

5. Please confirm If we'll file u/s 44AA and profit above 8% then we can claim depreciation..?

please reply we are not file our ITR till date...

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46 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 05 December 2017

In short, you can declare profits of the firm under normal assessment without presumptive section 44AD.

But even after all expenditures, including remunerations to partners & interest paid &/or depreciation etc......... if you declare minimum 6/8% profit, no audit applicable. Otherwise tax audit mandatory.

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JEEVIKA AND CO (PROPRIETRIX) (153 Points)
Replied 05 December 2017

Thank you for the reply sir. We are ready to show 8%. please clarify this.

> ( including remunerations to partners & interest paid )

Can we claim Remuneration? If yes,

how to calculate the remuneration? (bcoz, the remuneration calculation is 90% & 60%)

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 05 December 2017

Remuneration to partner paid as per section 40b of I T Act, as follows:

Remuneration payable to partners shall be in accordance with the terms of the partnership deed, however, it shall not exceed the following limit:

On first Rs. 3 Lakhs of book profit or in case of loss - Rs. 1,50,000 or 90% of book profit, whichever is more;
On the balance of the book profit - 60% of book profit.

Book profit’ means the net profit computed under the head ‘Business or Profession’ as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit.

But the net profit after deducting the remuneration should not be less then 6/8% (To avoid audit)

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JEEVIKA AND CO (PROPRIETRIX) (153 Points)
Replied 06 December 2017

Sir.,

thanks for the reply. but i can't understand. Bcoz, in ay 2016-17 we are show the profit rs. 500000 remuneration show

90% of 300000 = 270000

60% of 200000 = 120000 and tax paid on 110000...

In Ay 2017-18. How to I calculate this...?

If I show the remuneration before the 8% profit... How i ll take remuneration before profit...?

the above said calculation is profit value. In AY 2017-18 how to take the value...?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 06 December 2017

Here, the 90/60% remuneration is maximum limit and need not be exectly same.

Secondly for your 38.5 lakhs turnover (say totally through bank) minimum 6% profit means Rs. 2.31 lakhs profit is to be declared in firms file to avoid its tax audit. Rest of the amount can be shared as remuneration, which will be taxable in partners' individual hand.

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JEEVIKA AND CO (PROPRIETRIX) (153 Points)
Replied 06 December 2017

Thank you sir...

(Rest of the amount can be shared as remuneration, which will be taxable in partners' individual hand)

Is it taxable in Partners hand...? Already we paid tax and next we are share the amount then how is taxable once again sir...

After paid the tax (8%) The remuneration is taxable in Partners hand or not...

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 06 December 2017

There is difference between remuneration paid to partners and distribution of shares of profits.

Remuneration is paid before tax assessment, which is taxed in the hands of partners.

While any capital distributed after tax assessment of the firm, is not taxed again.

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RAJA P M ("Do the Right Thing...!!!") (127921 Points)
Replied 06 December 2017

My Dear Mr Dhirajlal Rambhia Sir.,

As per one of the discussion ( https://www.caclubindia.com/forum/rebate-u-s-87a-with-44ad-428981.asp )
How is different between this Query and Discussion...?

Please explain or Give Example. Both are different ways of partnership account in FY 16-17....🤔🤔🤔🤔🤔😇😇😇😇😇😊😊😊😊😊

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 07 December 2017

DEAR,

This is the case for normal assessment with books of accounts, and not under presumptive scheme.

There the whole emphasis was based on section 44AD.

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RAJA P M ("Do the Right Thing...!!!") (127921 Points)
Replied 07 December 2017

Thank you for the reply Sir... It's mean, If we file partnership account less than 1cr in AY 17-18 u/s 44AA "without 44AB" we can avail the benefit of remuneration & interest... Can I file the following figures... T/O - Rs. 50lakhs Profit 8% - 4lakhs _ next Remuneration - Rs. 3.30 lakhs Balance - Rs. 70000 Tax on 70000 * 30% = 21000 + cess... Is it correct way...? Please give me your valuable Solution... I'm totally confused Sir. 😇😇😇

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 07 December 2017

Please........... Don't get confused.

In this query the profit margin was more than 8% so the queriest wanted that extra margin to be adjusted against remuneration and finally pay 8% with books of accouts so that tax audit u/s. 44AB not mandatory. In case the remuneration is deducted more and the final taxable income reduced below 8%, tax audit becomes mandatory.

So, note that in both the schemes if profit margin is below 8%, tax audit triggers.

Only difference is under presumptive scheme deduction of remuneration & interest to partners is not allowed (from AY 2017-18), but in normal scheme it is allowed.

Now in your above referred example :

T/O - Rs. 50lakhs Profit 8% - 4lakhs _ next Remuneration - Rs. 3.30 lakhs Balance - Rs. 70000 Tax on 70000 * 30% = 21000 + cess... Is it correct way..

You are straight forward assuming 8% profit, (means u/s. 44AD); so after that remuneration cannot be deducted.

Otherwise, maintain books of accounts........ let the net profit actually be 70000/- as per books. That being less than 8% of TO....... triggers section 44AB........ so prepare Tax Audit report and submit with the said tax liability (and of course, penalty for late filling of tax audit report)

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S ELAVARASI (ACCOUNTANT) (2975 Points)
Replied 07 December 2017

Good Morning Mr. Dhirajlal Rambhia Sir and Mr. RAJA P M Sir.,

Thank You for the reply Mr. Dhirajlal Sir.,

As above example and previous questions....

If the partnership firm less than 1cr no need tax audit as

Sec 44AD - Show profit above 8% (3.30lakhs * 30% = 99000) and no more remuneration. Just transfer the profit amount (3.30lakhs * 30% = 99000) to capital account. It's not taxable in Partners hand.

Sec 44AA & Noramal Filing - Show the profit above 8% (3.30lakhs * 30% = 99000) and its (3.30lakhs / no.of partners) taken as remuneration also its taxable in partners hand once again...

Am I right...?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (166549 Points)
Replied 07 December 2017

Dear,

In both the cases, once tax paid by firm, the remaining amount is called firm's capital.

When that capital amount is distributed amongst partners....... under whatever name or brand........ is not taxable again (in individual hands).

Only in case of normal assessment, whatever amount paid as remuneration to partners, but before arriving at taxable income of firm, is liable to be taxed in partner's hand.

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