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Section 40(b) - Payment of interest, salary etc. made by firm to its partners

Income Tax - Profit and Gains of Business or Profession - 57 - SEC - 40(b): PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION MADE BY FIRM TO ITS PARTNERS Interest and remuneration paid to the partners by a firm are not deductible. Howev .....

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on-working partner, the same shall be disallowed. ii. The remuneration shall be admissible only if the partnership deed either specifies the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such .....

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iv. The payment of interest to a partner should not exceed the amount calculated at the rate of 12% per annum simple interest (any interest in excess will be disallowed). NOTES: If a firm pays interest to a partner and the partner pays interest to t .....

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le as per section 40(b). Interest paid by the firm to its partners on their fixed capital account, current capital account and loan account is allowable as deduction to the firm provided the partnership deed specifically authorizes the payment of int .....

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to the firm. v. The payment of remuneration should not exceed the following amounts (Any amount in excess shall be disallowed) On the first 3,00,000 of book profit or in case of loss 1,50,000 or at the rate of 90% of the book profit, whichever is mor .....

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ucted. (Section 32) Brought forward losses will not be deducted. (Section 72) Chapter VI-A deductions are also not to be deducted. Remuneration is to be added back if it is debited to Profit & Loss A/c. Interest paid to the partners to the extent .....

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. 2. To an individual only. To any partner. 3. Should be authorized by partnership deed. Should be authorized by partnership deed. 4. In the partnership deed: either specify the amount of remuneration payable to each partner or lay down the manner of .....

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partner in a firm in a representative capacity, then interest paid by the firm to him in individual capacity, shall not be taken into account for the purposes of Section 40(b) and if the interest is paid to such individual as partner in representativ .....

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