Partners Salary for Income Tax Purpose

[Ashoka G]

Sir/Madam,

If a partnership firm pays salary to partners and pays Income Tax under Presumptive Scheme. Here the deduction claimed by the partner is claimed only on 8% of Income computed This salary deduction claimed is as per section 40(b) of the Income Tax Act. Partners were claiming Salary equally. Assumed figures were given below-

Total Income - ₹ 90,00,000/-

Actual Salary claimed by partners - ₹ 10,00,000/-

Assumed Income under Section 44AD - 7,20,000/-

Salary deductions claimed (300000*90/100+420000*60/100) - ₹ 5,22,000/-

Income Tax paid (720000-522000*30/100) = ₹ 1,98,000/-*30/100 = ₹ 59,400/-

Here my doubt is whether the partner needs to pay Income Tax under his own capacity on actual deduction claimed by each partner (i,e, ₹ 2,61,000/-) or on actual salary paid to partners after the value of tax paid under Presumptive Taxation scheme by Partnership Firm ₹ 4,01,000/- (i.e. (Rs.10,00,000-Rs.1,98,000)/2).

AI Summary

Clarification Sought on Tax Liabilities for Partners Under Presumptive Taxation Scheme per Section 40(b) of Income Tax Act A query was raised about the tax implications for partners in a partnership firm paying salaries under the Presumptive Taxation Scheme. The firm claims salary deductions as per Section 40(b) of the Income Tax Act, with partners receiving equal salaries. The question is whether partners should pay income tax individually on the actual deduction claimed (2,61,000) or on the net salary after tax paid by the firm under the scheme (4,01,000). The discussion seeks clarity on the correct tax liability for partners in this scenario.