A partnership firm shall be assessed as firm only if
a. The partnership is evidenced by instrument (partnership deed) and
b. Individual share of partners are specified in partnership deed.
Procedure for calculation of taxable income
|Taxable profit as per Books of Account||XXX|
|Add: salary of partners||XXX|
|Add: Interest on capital||XXX|
|Add: salary bonus commission to non-working partner||XXX|
|Less: salary as per section 40(b)||XXX|
|Less: Interest on capital at a rate specified in deed||XXX|
Maximum Salary of Partners
a. On the first 3,000,000.00 Rs. Of book Profit
Rs. 1,50,000.00 or 90% of book Profit whichever is higher
a. On the balance amount of Profit
At a rate of 60%
Condition for allowability of remuneration to partners
a. Remuneration to working partner only
b. Remuneration to individual only
c. Remuneration should be authorized by partnership deed
d. Partnership deed shall specify either amount of remuneration or lay down manner of calculation of remuneration
e. Remuneration should not be retrospective.
Condition for allowability for Interest
a. Interest on capital account to working and non-working partner
b. Payment of interest must be authorize by partnership deed.
c. Rate of interest should be specified in partnership deed.
d. Interest should not be on retrospective basis.
Tax rate of LLP
a. The partnership firm shall be assessed at rate of flat 30 % plus surcharge 12%, if income exceed Rs. 1 crore, plus 3% education cess
b. LTCG under section 10(38) are exempted in hands of firm
c. As per section 10(2A) share of partner in total income of the firm is Exempted in hands of partner.
d. Interest and Remuneration allowed to firm shall be taxed in hands of Partners and Interest or remuneration disallowed in the hands of firm shall be exempted in hands of partners.
e. Losses of the firm shall only be allowed to carried forward by firm not by partners.