Partners remuneration from firm is considered as business income or salary income ?

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  1. H Shrinath Bhat

    H Shrinath Bhat New Member

    1. The Remuneration received from the partnership firm, will be treated under which head ?. Whether it is business income or it is salary income. ?. If it is business income, can the partner file his returns u/s 44AD ?.

    2. In partnership firm, which files return u/s 44AD, deducts partners remuneration as prescribed under section 40. Can firm actually pay, remuneration to the partner more than what is mentioned in the section 40, but as per the partnership deed ?.

    3.
     
  2. ZED

    ZED Well-Known Member


    S.28. The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",—
    (v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm :

    Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ;


    The firm should claim the benefit u/s 44AD, since it is the firm which is carrying the business. Partner is not carrying a business he is receiving salary , interest, bonus, commission & remuneration for performing his services.
     
  3. ZED

    ZED Well-Known Member

    Yes, it can , but deduction shall not be allowed for income tax purposes.

    KINDLY NOTE that there is an amendment in this respect [For the purpose of S. 44AD]

    The following proviso has been deleted w.e.f. 01.04.16
    [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.]
     
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