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Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024
Section 40 of the Act provides for amounts that shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession”. Sub-clause (v) of clause (b) of the said section provides for disallowance of any payment of remuneration to any partner who is working partner which is authorized by and is in accordance with the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all partners during the previous year exceeds the aggregate amount computed as hereunder:
(a) | on the first Rs. 3,00,000 of the book-profit or in case of a loss | Rs. 1,50,000 or at the rate of 90 per cent of the book-profit, whichever is more; |
(b) | on the balance of the book-profit | at the rate of 60 per cent : |
2. This limit was put in place on the statute w.e.f AY 2010-11. It is now proposed to amend the limit of remuneration to working partners in a partnership firm, which is allowed as deduction. It is proposed that on the first Rs 6,00,000 of the book-profit or in case of a loss, the limit of remuneration is increased to Rs 3,00,000 or at the rate of 90 per cent of the book-profit, whichever is more as follows:
(a) | on the first Rs. 6,00,000 of the book-profit or in case of a loss | Rs. 3,00,000 or at the rate of 90 per cent of the book-profit, whichever is more; |
(b) | on the balance of the book-profit | at the rate of 60 per cent : |
3. The amendments to sub-clause (v) of clause (b) of section 40 of the Act will take effect from the 1st day of April, 2025 and will, accordingly, apply in relation to assessment year 2025-2026 and subsequent years.
[Clause 14]
Full Text:
Remuneration limit for working partners raised, permitting higher deductible partner compensation starting in the next assessment year. The Finance Bill raises the allowable deduction threshold for remuneration to working partners under section 40(b)(v), preserving the two-tier structure that gives a more favourable limit on the initial portion of book-profit and a lower ceiling on the balance. The amendment takes effect from 1 April 2025 and applies to assessment year 2025-26 and subsequent years, with deductions permitted only where remuneration is authorised by and accords with the partnership deed. of Press 'Enter' after typing page number.
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