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Partnership firms

SURESH KABRA (chartered accountants) (121 Points)

13 May 2017

partnership firms income tax return status for the a.y. 2017-18, after calculating profit 44ad - partners remuneration and interest allowable or not

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18 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183048 Points)
Replied 13 May 2017

Dear, Section 44AD & Section 40(b), are independent of salary & interest payable to partners.!!

Only amendment is the of the deduction which was allowed earlier u/s. 40(b) has been withdrawn.

So after calculating profit 44ad - partners remuneration and interest is payable as under:

a) Interest payable to partners shall not exceed 12% per annum.
b) Remuneration payable to partners 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.

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PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1448 Points)
Replied 13 May 2017

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PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1448 Points)
Replied 13 May 2017

Business Income u/s 44AD
Gross Reciepts		4,093,886
Actual Profit		139,803
Add: Remuneration Paid		375,000
Add: Interest Paid		-
Acutal Adjusted Profit		514,803
Actual Profit %age		12.57%
Deemed Profit %age		8.00%
Profit against Turnover		327,511
Higher of Assessable profit		514,803
Business Income From 44AD			514,803

Less : Allowable interest u/s 40b			-
Balance			514,803
Book Profit for Allowable Remuneration	514,803
Maximum Remuneration allowable	398,882
Remuneration Ristricted to	398,882		398,882

Income from Business & Profession			115,921

270000	First 300000
128,882	Balance @ 60%
398882

1 Like

CA. Sunil Gokhale (Teacher) (1484 Points)
Replied 13 May 2017

From AY 2017-18 deduction u/s 40(b) cannot be claimed as deduction. It was allowed earlier

2 Like

RAMA KRISHNAN (247 Points)
Replied 13 May 2017

mr. dhirajlal , 40(b) deductions not allowed on total income declared u/s. 44AD from a.y. 2017-18, as said by mr. sunil. correct me if i'm wrong

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manoj (student) (5205 Points)
Replied 13 May 2017

Ya you are right

1 Like

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1448 Points)
Replied 13 May 2017

Mr. Dhirajlal is right I didn't yet get any details from anywhere that after calculation of 44ad then 40(b) is not allowed it's wrong.

Correct is :- calculation of 44ad then 40(b) is allowed.

CA. Sunil Gokhale (Teacher) (1484 Points)
Replied 13 May 2017

Deductions are covered by sec 30 to 37 & 38 being for proportionate disallowance if not incurred for business. 40(b) is not about deduction but about limit on deduction. Eg deduction for interest will be covered by sec 36 but limit as per 40(b) when paid by firm to partner

RAMA KRISHNAN (247 Points)
Replied 13 May 2017

The presumptive income computed @ 8% is the final income and no further expenses will be allowed or disallowed
Under the normal provisions of the Income-tax Act, taxable business income will be computed after allowing deduction in respect of expenses which are deductible as per the Income-tax Act and after disallowing expenses which are not deductible as per the Income-tax Act. In case of a person who is opting for the presumptive taxation scheme of section 44AD, the provisions of allowance/disallowances as provided for under the Income-tax Act will not apply and income computed at the presumptive rate of 8% will be the final taxable income of the business covered under the presumptive taxation scheme. In other words, the income computed @ 8% will be the final taxable income of the business covered under the presumptive taxation scheme and no further expenses will be allowed or disallowed. While computing income as per the provisions of section 44AD, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.
this article is income tax department website after the amendments made as per finance act 2016

so 40b deduction not allowed from this a.y. ie 2017-18

1 Like

k. srinu (B.Com) (52 Points)
Replied 15 May 2017

who is elegible for linking pan card aadhar card please explain.

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CA Santosh Mohkar (Audit Senior) (22 Points)
Replied 15 May 2017

from AY 2017-18 interest and remuneration not allowed under section 44AD.

Jagdish Vishanji Mehta (Proprietor) (27 Points)
Replied 23 October 2017

Assessee not opting for 44AD showing Net profit above 8% before Interest on Capital and Remuneration to Partners, in that case is it necessary to do Tax Audit U/s 44AB, since net taxble income will be below 8% of business. Assessee will be maintaing Books of accounts.

1 Like

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183048 Points)
Replied 23 October 2017

Originally posted by : Jagdish Vishanji Mehta
	Assessee not opting for 44AD showing Net profit above 8% before Interest on Capital and Remuneration to Partners, in that case is it necessary to do Tax Audit U/s 44AB, since net taxble income will be below 8% of business. Assessee will be maintaing Books of accounts.