As amended 44AD donot allows partners remuneraton & interest u/s 40 b

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  1. rotesanjay1

    rotesanjay1 New Member


    As amended 44AD donot allows partners remuneraton & interest u/s 40 b
    to avoid personal taxation of partners whether we have to change
    partnership deed accordingly? (i.e. not to take remuneration &
    interest) Also whether sec 40 b is of no use?​
     
    Last edited: Jun 18, 2016
  2. H Shrinath Bhat

    H Shrinath Bhat New Member

    According to me following to be considered.

    1. The following clause is removed from 44Ad with effect from AY2017-18.

    18[Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.]

    2. Under section 40, it is clearly mentioned that what should be deductible and not deductible for the partnership firm in case of remuneration and interest paid to the partners.

    3. Section 44AD does not say, section 40 is not applicable. And hence as far as partners remuneration and interest clause remains as before.

    4. As per Section 28 (v), the amount which is not allowed as deductible, under section 40(b), for partnership firm, forms Income from Business or Profession for the partner. That means, the partner has to treat the interest received as interest income and remuneration received as salary income, as long as these two are under the limit of 40(b).

    5. Now, partner can draw any amount from partnership firm, and treat interest and remuneration within the limit of 40 (b) as interest and salary and remaining about as Income from Business and Profession.

    As income received by the partner from partnership from cannot be a professional income and hence it is purely a business income. Hence this income which is business income , it can be declared under 44AD.

    I am not a taxation expert and whatever I understand from the Act book, I have arrived above conclusions.

    I request tax experts to go through the same and inform views.
     
  3. ZED

    ZED Well-Known Member

  4. rotesanjay1

    rotesanjay1 New Member

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