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Sec 44ad for professional firm

N GANESHAN (Accounting & Tax Laws Practice - [Again Student after a gap of 3 Yrs]) (83 Points)

06 September 2016

Sir-Greetings for the Day-Ours is a professional firm notified by Board, and can opt for Sec:44AD. The question is whether parterns salary, int. can be deductable in case of professional firms whose turnover is less than Rs:50.00 lakhs. Our firm TO is Rs:30.00 lakhs and wish to go for Presumtive Tax ... Pl clarify....;SGT Contractors

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7 Replies

ajay (Student) (178 Points)
Replied 06 September 2016

Dear sir,

as per section 44 AD, if eligible assessee is a firm, it can claim deduction of salary, interest subject to provisions of 40(b)

Thanks & Regards

Ajay

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saurabh kumar (Tax Consultant) (348 Points)
Replied 06 September 2016

Yes you partners salary and interest is allowed to be deducted as per sec 40(b) even if you opt for presumptive tax u/s 44 AD.

On the first book profit of Rs. 300000 or loss------------------Remuneration to partner up to Rs. 150000 or 90% of book profit whichever is more

On the balance of book profit @ 60%(up to)

Interest to parttners -----------------up to 12%(up to)

provided these should be payable as per partnership deed.

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 06 September 2016

Hi,

44AD is not available for profession, 44ADA is available to profession from 1.4.2017. As far as your net question, interest and salary shall be deductible to the extent allowable u/s 40b.

Regards

Karthik V Kulkarni

ANKUR TAH (Teacher Consultant and CA finalist.) (543 Points)
Replied 06 September 2016

Budget 2016 Update: The benefit of Section 44AD has now been extended to Professionals as well. Any professional whose gross total receipts during the year are less than 50 Lakhs can make use of this Section and disclose Income equivalent to 50% of the Gross Receipts.

Moreover, if an assessee is applying section 44AD and assuming his income to be 8% of total turnover, he won’t be allowed to claim any expense or depreciation. Any deduction allowed under provisions of Section 30 to 38 shall, for the purpose of income computed under this section be deemed to have been already given full effect and no further deduction shall be allowed under these sections.

However, remuneration or interest paid to partners shall be allowed as deduction from the income computed under this section. Such deduction shall be subject to conditions and limits specified u/s 40(b).

Thank you

N GANESHAN (Accounting & Tax Laws Practice - [Again Student after a gap of 3 Yrs]) (83 Points)
Replied 06 September 2016

Thanks sirs for your relpy Whether this is applicable for Financial yr 2015-16...

Some one may clearly say that sec 40[b] shall applicable for Profesional firms too. when adopting sec 44AD or other equivalent Sec, in the Act

Regards sirs

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N GANESHAN (Accounting & Tax Laws Practice - [Again Student after a gap of 3 Yrs]) (83 Points)
Replied 06 September 2016

• There is no provision in section 44ADA permitting a professional firm to deduct interest / remuneration paid to partners from the presumptive income offered -

Sorry to note that NO 40[b] is allowed when opt for Sec:44 ADA,

Hence Mr V Kulkarani is wrong it seems...

Hi, 44AD is not available for profession, 44ADA is available to profession from 1.4.2017. As far as your net question, interest and salary shall be deductible to the extent allowable u/s 40b. Regards Karthik V Kulkarni

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