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

Deductibility of partner remuneration: strict deed authorization, working partner requirement, and book profit limits apply.

Section 40(b) permits deduction of partner remuneration only if paid to a working partner, authorized by the partnership deed by amount or method, and relating to periods after the deed; payments to non working partners are disallowed. Interest is allowable when authorized by the deed, may be paid to working or non working partners, and is subject to a prescribed simple interest ceiling; lower deed rates govern. Book profit computation for remuneration excludes non PGBP items, deducts depreciation, excludes brought forward losses and Chapter VI A deductions, and adds back remuneration debited to profit and loss.