Presumptive Tax

[Ethirajan Parthasarathy]

As per section 44AD, even a partnership firm can avail the benefit of presumptive tax.

In view of omission of proviso to section 44AD(2), 6% or 8% of turnover will be treated as taxable profit after giving effect to remuneration and interest on capital of partners.

Let us assume 6% of turnover of a firm works out to ₹ 10 lakh. In such a situation, whether working partners have to offer salary which is deemed to have been allowed as income in their hands. If yes, how to arrive at the same.

AI Summary

Section 44AD Presumptive Tax: Partnership Firms Can Benefit; Working Partners Must Declare Salary as Income A discussion on the presumptive tax under section 44AD highlights that partnership firms can benefit from this provision, treating 6% or 8% of turnover as taxable profit after accounting for partners' remuneration and interest. One participant queries whether working partners must declare this salary as income and how to calculate it. A response confirms the need to distribute the salary amount to working partners, ensuring the firm's net profit is 10 lakhs. Another response suggests a tax audit if the book profit before partner remuneration is high, advising against it only if real profit sufficiently covers remuneration and book profit.