Krishna seva das (TAX CONSULTANT) (1070 Points)
29 July 2014DOES IN PARTNERSHIP FIRM CALCULATION OF REMUNERATION INCL. SALARY TO EMPLOYEES???
EXAMPLE : BOOK PROFIT :400000
REMUNERATION TO PARTNER : 800000
SALARY TO EMPLOYEE : 400000
SO HOW WILL BE CALCULATION UNDER SECTION 40(b) WILL BE DONE
CA J.Alamelu lakshmi
(Chartered Accountant)
(857 Points)
Replied 29 July 2014
Book Profit means Net Profit as per P/L Account + Remuneration to Partners.
For eg - if Net profit after all expenses is Rs.400,000 and salary to PARTNERS is Rs.800,000, Book profit is Rs. 12,00,000.
Allowable remuneration to partners : on first 3Lacs of Book profit 90% ie Rs.270,000 and on the rest 60% ie Rs. 540,000. Total Rs. 810,000.
Since allowable remuneration u/s40b is higher than the actual rem. to partners, the entire amount shall be allowed.
If, the allowable rem comes to rs.7 lacs only, the excess salary paid to partners to the extent of Rs.1 lac shall be disallowed.
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