Today, I am here on my Blog with a special Post which perhaps may not concern to most of my Readers who are not involved in business. Actually, this Article was written for my community members of Accounting and Taxation on PeerPower, an Exclusive web site of Times Group for Professionals only; but, being the same to be extensive to the limit of number of certain words, I thought to publish it here. Our family businesses fall under various categories of firms such as Proprietary, Partnership, Private Company as well as Professional. We are not purely dependent on our Tax Consultants and therefore we take keen interest in Taxation and its planning limited to our own concerns for fair discussion with them prior to finalize the documents of taxation.
To make my Article precise, I’ll discuss only the provision of Remuneration to Partner/s under Section 40 (B). Up to Ass. Year 1992-93, the Partnership Firms (Both Business and Professional) were levied Firm Tax; and over and above, the Partners also had to pay Individual Personal Tax on share of profit earned from the firm. Thereafter, as per provision of Financial Act 1992, the Partnership firms have to pay tax on total income at the flat rate of 35% and later on from Ass. Year 2006-07at the rate of 30% with applicable Surcharge as well as Education Cess. The Partners have to mention their share of profit as Non-Taxable Firm Profit in their Income and Expense A/c and such income is tax exempted u/s 10 (2-A).
As per above Financial Act of 1992, some notable provisions were made in Clause 40 (B) and accordingly the working partner/s are allowed to have Firm Management Remuneration. Following Table indicates what amount the working partner can have based on Book Profit of the firm. Remuneration to partners can be paid only to working partner/s authorized by the partnership deed. It should not pertain to period prior to partnership deed and must not exceed the limits prescribed.
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