Tax Liability of Partners in case of Exempt Income withdrawn

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  1. Amol Paranjpe

    Amol Paranjpe New Member

    In case the Partnership firm or Llp earns tax free income from sale of long term equity shares & the partners withdraw the profits as remuneration or interest income , wud it be taxable in hands of partners ....as the income withdrawn is tax free income of firm/Llp
     
  2. Company Formation

    Company Formation New Member

    In case of Partnership firm Tax on LLP
    Mr. X and Mr. Y are the partners of M/s XY Enterprises. They had the credit balance of their capital on 01.04.16 Rs.300000/=. The interest on capital was paid to them for financial year @ 18%. The net income the firm after allowing the interest on capital of partners @ 18%, was Rs.260000/= Calculate the taxable income of the firm as per Indian Income Tax Act.

    Solution:

    Interest paid on capital (Rs. 300000/= @ 18% ) Rs.54000/=

    Interest allowed as per income tax act @12% Rs.36000/=

    Dis-allowance of interest (Rs.54000/= less Rs.36000/=) Rs.18000/=

    It means that Rs. 18000/= shall be added back to the income of firm for calculation of income tax. Therefore the taxable income of the firm during financial year 2016-17 shall be Rs.260000/= +Rs.18000/= i.e Rs.278000/=.
     
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