Section 44ad

idris (article) (177 Points)

25 November 2013  

A Partnership Firm having Turnover Rs. 5000000/- And actual Net profit of Rs.1250000/- @ 25%;

Declares Net profit as Rs.400000/- @ 8% tacking advantage of Section 44AD

Now, remuneration allowed shall be Rs.330000/- and Net profit taxable shall be Rs.70000/- Where as Remuneration according to the actual profit would have been Rs.840000/- and Net profit Rs.410000/-

Now, Please explain the effect of same on personal income tax of partners i.e. say if there are 2 partners, then how to compute their personal income tax. What shall be the taxable remuneration in hands of partners And as the share of net profit is exempted from tax, which amount shall be taken as share of Net profit.

Please explain the effect of same in books of accounts.

An Expert has advised on this topic saying that: If books of account are maintained it shall be open for the AO to scrutinize the same and tax at higher rate.

So now, what is the better way to deal with this case.