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Substantial interest in a firm

Mazhar Shaikh (Intern) (72 Points)

27 February 2012

Can ayone help me in knowing how to check sustantial interest in case of a fim

A and his wife are partners in a firm having 12.5% share of profit each. Does Mr A or his wife have a substantial interest in a firm

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Anumanchipalli Sathikonda (Tax Consultant) (1559 Points)
Replied 27 February 2012

Mr.Mazhar Shaik

If any person is, at any time during the previous year, beneficially entitled to not less than twenty percent of the profits of the business or profession he is having substantial interest in the business. Please see Section 40A(2)(b)-Explnation of the Income-tax Act, 1961.

Best Wishes

Sathikonda

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Mazhar Shaikh (Intern) (72 Points)
Replied 28 February 2012

Thanks

But to check the substantial interest do we need to see the sustantial interest jointly or on individual basis.

like in my example If i tke the Substantial interest jointly than the percentage is more than 20% but if taken on idividual basis than its less than 20%