Remuneration calculation in partnership firm if ITR filed under 44AD (Presumptive Scheme)

Tax queries 369 views 1 replies


Hello,

I am filing ITR in a partnership firm under presumptive taxation scheme, where it is asking for members capital.

The scenario is as under:

The 2 partners have invested 1Lakh each which was added under partners capital in company's books of accounts.

Now they have set a monthly remuneration of 10,000 per month each which was passed on to the partners capital account via journal entry under partners remuneration.

Partner A has actually withdrawn 70,000 in year and partner B has withdrawn 50,000 in the year.

Now the Capital for partner A became 1,50,000 (1,00,000 + 1,20,000 - 70,000) and partner B capital became 1,70,000 (1,00,000 + 1,20,000 - 50,000).

The gross turnover for the year was 5,00,000 and under presumptive scheme the profit comes down to 30,000 (6% on digital receipts).

Now, while filing the return what amount should be mentioned under "partners/owners capital" head? The Actual remuneration calculated in the books of accounts OR 50% of net profits as calculated under presumptive scheme?

Also, is it legally allowed to calculate remuneration more than the calculated profit (6% of turnover) if filing return under 44AD? We are not claiming any deductions on the same. 

Thank you!

Replies (1)

44AD means you need NOT provide books of accounts. The mandatory reporting are of debtors, creditors, stock and cash.

So no question of reporting partners capital.

Coming to your next query, 44AD amended section does not allow further deduction of interest and remuneration below 6% / 8%. Which means, the net profit of 8% / 6% is after already accounting for those expenses.

So legally, the net profit offered for 44AD minus net profit ( before partners remuneration and interest ) as shown in the books, shall be the Maximum amount which can be allocated for partners remuneration and interest.

Regards,
CA. Raj Doshi
*R C D & Co.*
*Chartered Accountants*
*Understanding Entrepreneurs, Transforming Businesses*

*Linkedin* - https://www.linkedin.com/in/ca-raj-doshi-5b390777/

*Website* - www.rcdco.in


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