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Section 44ad

sreenivas (student) (46 Points)

23 December 2015

in one of the expert view,I found an issue with regard to sec 44ad of income tax act,as far as I know in sec 44ad we claim minimum income to be 8% of t/o,and we cannot claim any other expense.but in expert opinion I found remuneration to partner is allowable u/s 44ad if return filed belatedly. please give some insights and correct me if am wrong.

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Ankit Taprania (CA FINAL ) (542 Points)
Replied 23 December 2015

Well , when partnership firm follow presumtive taxation scheme u/s 44AD and file its return ( BELATED OR NOT) no exepense will be allowed to it EXCEPT partners salary and interest on partners capital.

now the question arise ; Do we need to calculate partner's salary as per 40(b) or not AND calculate book profit for that?

YES , you need to follow 40(b) also. this is how all of this works out.

1 . calculate Deemed PGBP = 8% of turnover

2. reduce interest upto 12% on capital from deemed PGBP you will get BOOK ROFIT for section 40(b)

3 . calculate allowable salary as per sction 40(b) on book profit .

4. calculate taxable income = (book profit - allowable salary)

5. ultimately calculate tax on taxable income.