Assessment of Partnership Firm

Assessment of Partnership Firm
Income of Partnership firm is calculated as usual but while computing business
income of partnership firm, deduction for remuneration and interest shall be
allowed as deduction subject to following conditions and limits:‐ 
Conditions:‐
 ‐ As per section 184 :‐  
1) The firm should be evidenced by an instrument(Partnership deed)
2) Profit Sharing Ratio should be specified in such instrument
3) A certified copy of such instrument should be filed along with the first
return of income & whenever there is change in constitution of the firm ,a
revised copy of such instrument should be filed
4) The firm should not make an default u/s 144
Section 40 (b)Disallowance in cases of Partnership Firms
‐ The partnership deed should be registered.
‐ Remuneration should be paid only to working partners.
‐ The remuneration should be mentioned in the partnership
deed.
‐ The remuneration should not relate to a period before the
partnership deed.
‐ Interest payable to the partners in excess of 12% will be
disallowed.
Minimumallowable Remuneration
Max allowable Remuneration                           Book profit
90% *Book profit                                                 1st  RS. 300000 Or Book loss
RS 150000
60% * Balance Book profit                                    Bal Book Profit

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