Approval Requirement from Audit Committee for Related Party Transactions under Section 188 Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs) and specifies when prior approval is required. Additionally, the Companies (Meetings of Board and its Powers) Rules, 2014 and SERead more
Approval Requirement from Audit Committee for Related Party Transactions under Section 188
Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs) and specifies when prior approval is required. Additionally, the Companies (Meetings of Board and its Powers) Rules, 2014 and SEBI (LODR) Regulations, 2015 impose further compliance requirements.
1. Applicability of Section 188
Section 188 applies when a company enters into a transaction with a related party, including: ✅ Sale, purchase, or supply of goods/materials ✅ Selling or disposing of property ✅ Leasing of property ✅ Availing or rendering services ✅ Appointment of related party to office or place of profit ✅ Underwriting of securities
If these transactions exceed the prescribed threshold limits, approval from the Board of Directors and in some cases, shareholders is required.
2. Threshold Limits for Shareholder Approval under Section 188
As per Rule 15(3) of the Companies (Meetings of Board and its Powers) Rules, 2014, shareholder approval via a special resolution is required if the transaction value exceeds the following limits:
Nature of Transaction
Threshold Limit (Exceeding)
Sale, purchase, or supply of goods/materials
10% or more of turnover
Selling or buying property
10% or more of net worth
Leasing of property
10% or more of net worth or 10% of turnover
Availing or rendering services
10% or more of turnover
Appointment of a related party to an office of profit in the company, subsidiary, or associate company
₹2.5 Lakh per month
Underwriting of securities or derivatives
1% of net worth
Note: The limits are based on the last audited financial statements of the company.
3. Role of the Audit Committee in Related Party Transactions (RPTs)
Section 177(4)(iv) of the Companies Act, 2013 mandates that the Audit Committee must approve all RPTs, including those covered under Section 188.
Even if a transaction does not exceed the monetary limits of Section 188, it still requires Audit Committee approval if the company is required to have an Audit Committee.
Listed companies and certain public companies must comply with SEBI (LODR) Regulations, 2015, which impose stricter approval requirements for RPTs.
4. Exemptions Where Audit Committee Approval May Not Be Required
Audit Committee approval is not required in the following cases: ❌ Transactions between holding and wholly-owned subsidiary (subject to disclosure requirements). ❌ Transactions entered in the ordinary course of business and at arm’s length price.
However, even in these cases, proper documentation and disclosure are essential.
5. Shareholder Approval for Certain Transactions
In addition to Audit Committee and Board approvals, shareholder approval via special resolution is required if the transaction value exceeds the thresholds mentioned above.
Final Answer
✅ Yes, Audit Committee approval is mandatory for all Related Party Transactions, including those under Section 188, unless they are exempted (ordinary course & arm’s length). ✅ If the transaction exceeds prescribed limits, Board and shareholder approval is also required. ✅ Listed companies must comply with SEBI (LODR) Regulations, 2015, which impose additional RPT approval requirements.
Mandatory Conditions for a Partnership Firm in India A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership. 1. Minimum Two Partners (Section 4) A partnership mustRead more
Mandatory Conditions for a Partnership Firm in India
A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership.
1. Minimum Two Partners (Section 4)
A partnership must have at least two persons to form a firm.
The maximum number of partners is:
50 (as per Companies Act, 2013).
No limit for professional firms (e.g., chartered accountants, lawyers).
2. Valid Partnership Agreement (Partnership Deed)
A written or oral agreement between partners is necessary.
A written Partnership Deed is recommended for clarity and legal proof.
Essential contents of a Partnership Deed:
Name of the firm and partners
Capital contribution
Profit-sharing ratio
Rights and duties of partners
Dispute resolution mechanism
3. Profit Motive
The partnership must be formed for lawful business with the intent to earn profit.
Non-profit organizations cannot be partnerships.
4. Shared Responsibility & Liability (Section 25)
Partners have unlimited liability, meaning personal assets can be used to pay business debts.
Each partner is jointly and severally liable for the firm’s liabilities.
5. Mutual Agency (Section 18 & 19)
Each partner can act as an agent of the firm and bind other partners.
Any act done by a partner in the ordinary course of business is binding on the firm.
6. Registration (Optional but Recommended) – Section 58
While registration of a partnership firm is not mandatory, an unregistered firm: ❌ Cannot file legal suits against third parties ❌ Cannot claim set-off in court
Registration requires filing with the Registrar of Firms in the respective state.
7. PAN & Bank Account
A partnership firm must obtain a PAN (Permanent Account Number) from the Income Tax Department.
A separate bank account in the firm’s name is required for transactions.
8. Taxation & Compliance
A partnership firm must file Income Tax Returns (ITR-5) annually.
GST registration is required if turnover exceeds ₹40 lakh (₹20 lakh for services).
TAN (Tax Deduction & Collection Account Number) is needed if TDS is applicable.
Final Answer
For a valid Partnership Firm in India, these conditions must be met: ✅ Minimum two partners ✅ Partnership Deed defining terms ✅ Profit-sharing agreement ✅ Unlimited liability & mutual agency ✅ Optional but recommended registration ✅ Compliance with tax laws (PAN, ITR, GST, TAN, etc.)
Yes, expenses can be adjusted against income of a similar nature under certain conditions, but this depends on accounting standards, tax laws, and specific business circumstances. Let’s analyze this from an accounting and Ind AS/AS perspective. 1. Accounting Treatment as per Ind AS & AS (A) IndRead more
Yes, expenses can be adjusted against income of a similar nature under certain conditions, but this depends on accounting standards, tax laws, and specific business circumstances. Let’s analyze this from an accounting and Ind AS/AS perspective.
1. Accounting Treatment as per Ind AS & AS
(A) Ind AS Perspective
📌 Ind AS 1 (Presentation of Financial Statements):
It generally requires income and expenses to be shown separately in the financial statements.
Offsetting is allowed only when:
Required or permitted by another Ind AS
It reflects the substance of the transaction
📌 Ind AS 18 (Revenue Recognition) & Ind AS 115 (Revenue from Contracts with Customers):
Expenses that are directly linked to revenue (such as cost of sales in case of trading income) can be adjusted against income.
📌 Ind AS 37 (Provisions, Contingent Liabilities, and Contingent Assets):
If an entity incurs an expense that leads to a compensating claim (e.g., insurance claims, government subsidies), it can be recognized net of the claim if realization is virtually certain.
(B) AS Perspective (Indian GAAP – Accounting Standards)
📌 AS 9 (Revenue Recognition):
It does not permit netting off expenses against revenue unless they are directly related (e.g., trade discounts, returns).
📌 AS 5 (Net Profit or Loss for the Period, Prior Period Items, and Changes in Accounting Policies):
Extraordinary income and expenses should not be offset against each other but separately disclosed.
2. When is Offsetting Allowed?
✅ Examples Where Adjustment is Allowed:
Commission Income vs. Commission Paid: If a company earns commission and pays a commission for the same transaction, they may be netted off.
Trading Businesses: Cost of goods sold (COGS) is deducted from sales revenue.
Banking Transactions: Interest income and interest expense of the same nature can be reported net if permitted by the standard.
❌ Examples Where Adjustment is NOT Allowed:
Different sources of income (e.g., rental income vs. business expenses).
Operating expenses against unrelated income (e.g., office rent cannot be adjusted against interest income).
3. Taxation Perspective
📌 Under Income Tax Act, 1961, netting off is not generally allowed except:
Section 70 & 71: Business losses can be set off against business income but not against salary or capital gains.
Depreciation as per Section 32: Can be adjusted against business profits.
Capital gains adjustments (short-term vs. long-term).
Final Answer:
Ind AS & AS generally prohibit offsetting unless specifically permitted.
Business-related expenses can only be adjusted against income of a similar nature (e.g., direct expenses against trading income).
Tax laws have specific rules for set-offs, so compliance with Income Tax Act, 1961 is necessary.
Yes, GST applicability on advance payments depends on whether the transaction involves goods or services as per the GST law: 1. Advance Payment for Goods 📌 As per Notification No. 66/2017 – Central Tax, GST is NOT required to be paid on advances received for the supply of goods (except in cases coveRead more
Yes, GST applicability on advance payments depends on whether the transaction involves goods or services as per the GST law:
1. Advance Payment for Goods
📌 As per Notification No. 66/2017 – Central Tax, GST is NOT required to be paid on advances received for the supply of goods (except in cases covered under the reverse charge mechanism). 📌 The supplier should issue a Proforma Invoice followed by a Tax Invoice at the time of supply.
2. Advance Payment for Services
📌 As per Section 13(2) of the CGST Act, 2017, GST must be paid at the earlier of:
The date of invoice (or the last date on which the invoice should be issued).
The date of receipt of advance payment. 📌 The supplier must issue a receipt voucher for the advance amount received.
3. ITC (Input Tax Credit) on Advance Payment
📌 The recipient (buyer) can claim ITC once the Tax Invoice is received and the supplier has reported the GST payment.
✅ Final Answer:
For Goods ➝ GST not required on advance payments.
For Services ➝ GST must be paid at the time of advance receipt.
Ensure proper documentation like receipt vouchers & tax invoices for compliance.
Under Section 184 of the Income Tax Act, a partnership firm can claim deduction for remuneration and interest paid to partners, but it must fulfill the following conditions: Conditions for Claiming Deduction under Section 184 1️⃣ The Firm Must Be a Valid Partnership Firm The firm must be a genuine pRead more
Under Section 184 of the Income Tax Act, a partnership firm can claim deduction for remuneration and interest paid to partners, but it must fulfill the following conditions:
Conditions for Claiming Deduction under Section 184
1️⃣ The Firm Must Be a Valid Partnership Firm
The firm must be a genuine partnership as per the Indian Partnership Act, 1932.
The firm should be assessed as a partnership firm under the Income Tax Act.
2️⃣ Partnership Deed Must Be in Writing
A written partnership deed must exist.
It should clearly mention the profit-sharing ratio of partners.
It must be signed by all partners.
3️⃣ Remuneration & Interest Must Be Authorized in the Partnership Deed
Partner’s remuneration (salary, bonus, commission, etc.) and interest on capital must be mentioned in the partnership deed.
If the deed does not specify these payments, the firm cannot claim deductions.
4️⃣ Interest and Remuneration Should Be Within the Prescribed Limits
Interest on partner’s capital must not exceed 12% per annum (as per Section 40(b)).
Remuneration paid to partners should not exceed the limits prescribed under Section 40(b) (based on book profit).
5️⃣ The Firm Must File a Valid Income Tax Return
The firm must file its income tax return on time.
Delay in filing may lead to disallowance of these deductions.
6️⃣ Changes in the Partnership Deed Must Be Reported
If there is any change in the partnership deed, the firm must submit a certified copy to the Income Tax Department.
✅ Conclusion: To claim deductions for remuneration and interest paid to partners, ensure that: ✔️ A valid partnership deed exists and is filed with the Income Tax Department. ✔️ Interest and remuneration are within the prescribed limits of Section 40(b). ✔️ The firm is assessed as a partnership firm and files its return on time.
Under Section 40(b) of the Income Tax Act, a partnership firm can claim a deduction for remuneration paid to partners, but it must satisfy the following conditions: 1️⃣ Remuneration Must Be Paid to "Working Partners" Only Only working partners (actively engaged in business) are eligible for remuneraRead more
Under Section 40(b) of the Income Tax Act, a partnership firm can claim a deduction for remuneration paid to partners, but it must satisfy the following conditions:
1️⃣ Remuneration Must Be Paid to “Working Partners” Only
Only working partners (actively engaged in business) are eligible for remuneration.
Sleeping (non-working) partners are not entitled to remuneration deduction.
2️⃣ Must Be Authorized by the Partnership Deed
The partnership deed must specify the remuneration amount or the calculation method.
If the deed is silent on remuneration, the firm cannot claim a deduction.
3️⃣ Payment Should Be Within the Prescribed Limits
Remuneration should not exceed the maximum limits prescribed under Section 40(b): ✅ Book profit ≤ ₹3 lakh → 90% of book profit or ₹1.5 lakh (whichever is higher) ✅ Book profit > ₹3 lakh → 60% of book profit
4️⃣ Remuneration Must Be Paid to an Individual Partner
If a partner is a company or LLP, remuneration paid to them is not deductible.
5️⃣ The Partnership Deed Must Be in Effect
The partnership deed should be signed and in force before the end of the financial year.
If the deed is amended to change remuneration, the amendment must apply prospectively, not retrospectively.
6️⃣ Firm Must Be Assessed as a Partnership Firm
The firm must be assessed as a partnership firm under the Income Tax Act.
Firms taxed under presumptive taxation schemes (Section 44AD/44ADA) cannot claim this deduction.
✅ Conclusion: To claim a deduction for partner remuneration, ensure it is paid to a working partner, authorized in the deed, within Section 40(b) limits, and in a firm recognized as a partnership under the Income Tax Act.
The remuneration (salary, bonus, commission, etc.) paid to partners in a partnership firm is allowed as a deduction under Section 40(b) of the Income Tax Act, but only within prescribed limits based on the book profit of the firm. Maximum Allowable Remuneration (as per Section 40(b)) ✅ If Book ProfiRead more
The remuneration (salary, bonus, commission, etc.) paid to partners in a partnership firm is allowed as a deduction under Section 40(b) of the Income Tax Act, but only within prescribed limits based on the book profit of the firm.
Maximum Allowable Remuneration (as per Section 40(b))
✅ If Book Profit is ₹3 lakh or less → 90% of book profit or ₹1.5 lakh (whichever is higher)
✅ If Book Profit is above ₹3 lakh → 60% of book profit
🔹 Important Conditions:
The remuneration must be paid only to working partners.
It must be authorized in the partnership deed.
The remuneration should be within the prescribed limit; any excess is disallowed as an expense.
📌 Example Calculation:
If a firm’s book profit is ₹2 lakh, the max allowable partner remuneration = ₹1.5 lakh (since it’s higher than 90% of ₹2 lakh).
If a firm’s book profit is ₹10 lakh, the max allowable remuneration = (90% of ₹3 lakh) + (60% of ₹7 lakh) = ₹2.7 lakh + ₹4.2 lakh = ₹6.9 lakh.
✅ Conclusion: Partner remuneration is deductible only if it follows Section 40(b) rules. If it exceeds limits, the extra amount is disallowed for tax purposes.
Penalty codes 11C and N11C serve different purposes under the Income Tax Act: 11C is used for general penalties imposed by the Income Tax Department under various sections, such as under-reporting of income (Section 270A) or concealment of income (Section 271(1)(c)). If you have received a penalty dRead more
Penalty codes 11C and N11C serve different purposes under the Income Tax Act:
11C is used for general penalties imposed by the Income Tax Department under various sections, such as under-reporting of income (Section 270A) or concealment of income (Section 271(1)(c)). If you have received a penalty demand notice, you should use Code 11C when making the payment.
N11C is specifically for late filing fees under Section 234F. If you file your Income Tax Return (ITR) after the due date, you will need to pay a penalty of ₹1,000 (if total income < ₹5 lakh) or ₹5,000 (if total income > ₹5 lakh). For this, use Code N11C while making the payment through the Income Tax e-filing portal.
✅ Conclusion: If you’re paying a late filing fee for delayed ITR submission, use N11C. For other penalties issued by the tax department, use 11C. Always verify the payment details before proceeding.
Whether you need to deduct TDS on the reimbursement of expenditure to your consultant depends on the nature of the bill and the agreement with the consultant. Here’s how to determine it: 1️⃣ If the Reimbursement is Part of the Professional Fee: If the consultant has raised a single invoice coveringRead more
Whether you need to deduct TDS on the reimbursement of expenditure to your consultant depends on the nature of the bill and the agreement with the consultant. Here’s how to determine it:
1️⃣ If the Reimbursement is Part of the Professional Fee:
If the consultant has raised a single invoice covering both professional fees and expenses, then TDS must be deducted on the total amount as per Section 194J (for professional services @10%) or 194C (for contracts @1%/2%), depending on the nature of service.
2️⃣ If the Reimbursement is Separate & on Actuals:
If the consultant has provided original bills on the name of your entity (e.g., travel, hotel, or material expenses) and is merely getting reimbursed, then TDS is not applicable since these are not part of the consultant’s income.
If the bills are in the consultant’s name, then deduct the TDS u/s 194R with 10% if reimbursement is more than 20000.
3️⃣ Best Practices:
✅ Ask the consultant to bill separately for professional fees and reimbursement. ✅ Maintain proper documentation (supporting invoices) to justify the non-deduction of TDS in case of scrutiny. ✅ If unsure, consult a tax expert to ensure compliance.
The number of bank accounts an individual should open depends on their financial goals, income sources, and spending habits. Here’s a practical approach: 1️⃣ Primary Savings Account (Must-Have) Used for salary credits, savings, and daily transactions. Choose a bank with good digital banking servicesRead more
The number of bank accounts an individual should open depends on their financial goals, income sources, and spending habits. Here’s a practical approach:
1️⃣ Primary Savings Account (Must-Have)
Used for salary credits, savings, and daily transactions.
Choose a bank with good digital banking services and low fees.
Helps separate funds for specific purposes (e.g., travel, emergency fund, investments).
Can be in a different bank to avoid overspending.
3️⃣ Investment accounts (For Wealth Growth)
Linked to mutual funds, stock market, or fixed deposits.
Recommended if you actively invest.
4️⃣ Business or Freelance Accounts (If Self-Employed)
Keeps personal and business expenses separate.
Required for tax filing and accounting.
5️⃣ Joint Account (If Needed)
Useful for couples, aging parents, or dependents.
Ensures easy fund access for shared expenses.
💡 Best Practice: ✅ 2-3 accounts are sufficient for most individuals. ✅ Avoid multiple accounts unless necessary (to prevent maintenance fees and complexity).
Whether, approval from Audit Committee is required for any transaction with related party in respect of transactions which are covered under section 188?
Approval Requirement from Audit Committee for Related Party Transactions under Section 188 Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs) and specifies when prior approval is required. Additionally, the Companies (Meetings of Board and its Powers) Rules, 2014 and SERead more
Approval Requirement from Audit Committee for Related Party Transactions under Section 188
Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs) and specifies when prior approval is required. Additionally, the Companies (Meetings of Board and its Powers) Rules, 2014 and SEBI (LODR) Regulations, 2015 impose further compliance requirements.
1. Applicability of Section 188
Section 188 applies when a company enters into a transaction with a related party, including:
✅ Sale, purchase, or supply of goods/materials
✅ Selling or disposing of property
✅ Leasing of property
✅ Availing or rendering services
✅ Appointment of related party to office or place of profit
✅ Underwriting of securities
If these transactions exceed the prescribed threshold limits, approval from the Board of Directors and in some cases, shareholders is required.
2. Threshold Limits for Shareholder Approval under Section 188
As per Rule 15(3) of the Companies (Meetings of Board and its Powers) Rules, 2014, shareholder approval via a special resolution is required if the transaction value exceeds the following limits:
Note: The limits are based on the last audited financial statements of the company.
3. Role of the Audit Committee in Related Party Transactions (RPTs)
4. Exemptions Where Audit Committee Approval May Not Be Required
Audit Committee approval is not required in the following cases:
❌ Transactions between holding and wholly-owned subsidiary (subject to disclosure requirements).
❌ Transactions entered in the ordinary course of business and at arm’s length price.
However, even in these cases, proper documentation and disclosure are essential.
5. Shareholder Approval for Certain Transactions
In addition to Audit Committee and Board approvals, shareholder approval via special resolution is required if the transaction value exceeds the thresholds mentioned above.
Final Answer
✅ Yes, Audit Committee approval is mandatory for all Related Party Transactions, including those under Section 188, unless they are exempted (ordinary course & arm’s length).
See less✅ If the transaction exceeds prescribed limits, Board and shareholder approval is also required.
✅ Listed companies must comply with SEBI (LODR) Regulations, 2015, which impose additional RPT approval requirements.
What are the mandatory conditions for partnership firm in India?
Mandatory Conditions for a Partnership Firm in India A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership. 1. Minimum Two Partners (Section 4) A partnership mustRead more
Mandatory Conditions for a Partnership Firm in India
A Partnership Firm in India is governed by the Indian Partnership Act, 1932. While registration is not mandatory, certain legal and operational conditions must be met for a valid partnership.
1. Minimum Two Partners (Section 4)
2. Valid Partnership Agreement (Partnership Deed)
3. Profit Motive
4. Shared Responsibility & Liability (Section 25)
5. Mutual Agency (Section 18 & 19)
6. Registration (Optional but Recommended) – Section 58
❌ Cannot file legal suits against third parties
❌ Cannot claim set-off in court
7. PAN & Bank Account
8. Taxation & Compliance
Final Answer
For a valid Partnership Firm in India, these conditions must be met:
See less✅ Minimum two partners
✅ Partnership Deed defining terms
✅ Profit-sharing agreement
✅ Unlimited liability & mutual agency
✅ Optional but recommended registration
✅ Compliance with tax laws (PAN, ITR, GST, TAN, etc.)
Can we adjust expenses with income of similar nature?
Yes, expenses can be adjusted against income of a similar nature under certain conditions, but this depends on accounting standards, tax laws, and specific business circumstances. Let’s analyze this from an accounting and Ind AS/AS perspective. 1. Accounting Treatment as per Ind AS & AS (A) IndRead more
Yes, expenses can be adjusted against income of a similar nature under certain conditions, but this depends on accounting standards, tax laws, and specific business circumstances. Let’s analyze this from an accounting and Ind AS/AS perspective.
1. Accounting Treatment as per Ind AS & AS
(A) Ind AS Perspective
📌 Ind AS 1 (Presentation of Financial Statements):
📌 Ind AS 18 (Revenue Recognition) & Ind AS 115 (Revenue from Contracts with Customers):
📌 Ind AS 37 (Provisions, Contingent Liabilities, and Contingent Assets):
(B) AS Perspective (Indian GAAP – Accounting Standards)
📌 AS 9 (Revenue Recognition):
📌 AS 5 (Net Profit or Loss for the Period, Prior Period Items, and Changes in Accounting Policies):
2. When is Offsetting Allowed?
✅ Examples Where Adjustment is Allowed:
❌ Examples Where Adjustment is NOT Allowed:
3. Taxation Perspective
📌 Under Income Tax Act, 1961, netting off is not generally allowed except:
Final Answer:
- Ind AS & AS generally prohibit offsetting unless specifically permitted.
- Business-related expenses can only be adjusted against income of a similar nature (e.g., direct expenses against trading income).
- Tax laws have specific rules for set-offs, so compliance with Income Tax Act, 1961 is necessary.
See lessShould GST need to be paid while making payment of advance against a Performa invoice?
Yes, GST applicability on advance payments depends on whether the transaction involves goods or services as per the GST law: 1. Advance Payment for Goods 📌 As per Notification No. 66/2017 – Central Tax, GST is NOT required to be paid on advances received for the supply of goods (except in cases coveRead more
Yes, GST applicability on advance payments depends on whether the transaction involves goods or services as per the GST law:
1. Advance Payment for Goods
📌 As per Notification No. 66/2017 – Central Tax, GST is NOT required to be paid on advances received for the supply of goods (except in cases covered under the reverse charge mechanism).
📌 The supplier should issue a Proforma Invoice followed by a Tax Invoice at the time of supply.
2. Advance Payment for Services
📌 As per Section 13(2) of the CGST Act, 2017, GST must be paid at the earlier of:
📌 The supplier must issue a receipt voucher for the advance amount received.
3. ITC (Input Tax Credit) on Advance Payment
📌 The recipient (buyer) can claim ITC once the Tax Invoice is received and the supplier has reported the GST payment.
✅ Final Answer:
- For Goods ➝ GST not required on advance payments.
- For Services ➝ GST must be paid at the time of advance receipt.
- Ensure proper documentation like receipt vouchers & tax invoices for compliance.
See lessWhat are the conditions of section 184 for claiming deduction of remuneration and interest by a firm?
Under Section 184 of the Income Tax Act, a partnership firm can claim deduction for remuneration and interest paid to partners, but it must fulfill the following conditions: Conditions for Claiming Deduction under Section 184 1️⃣ The Firm Must Be a Valid Partnership Firm The firm must be a genuine pRead more
Under Section 184 of the Income Tax Act, a partnership firm can claim deduction for remuneration and interest paid to partners, but it must fulfill the following conditions:
Conditions for Claiming Deduction under Section 184
1️⃣ The Firm Must Be a Valid Partnership Firm
2️⃣ Partnership Deed Must Be in Writing
3️⃣ Remuneration & Interest Must Be Authorized in the Partnership Deed
4️⃣ Interest and Remuneration Should Be Within the Prescribed Limits
5️⃣ The Firm Must File a Valid Income Tax Return
6️⃣ Changes in the Partnership Deed Must Be Reported
✅ Conclusion:
See lessTo claim deductions for remuneration and interest paid to partners, ensure that:
✔️ A valid partnership deed exists and is filed with the Income Tax Department.
✔️ Interest and remuneration are within the prescribed limits of Section 40(b).
✔️ The firm is assessed as a partnership firm and files its return on time.
What are the conditions of section 40b for getting deduction of remuneration in a firm?
Under Section 40(b) of the Income Tax Act, a partnership firm can claim a deduction for remuneration paid to partners, but it must satisfy the following conditions: 1️⃣ Remuneration Must Be Paid to "Working Partners" Only Only working partners (actively engaged in business) are eligible for remuneraRead more
Under Section 40(b) of the Income Tax Act, a partnership firm can claim a deduction for remuneration paid to partners, but it must satisfy the following conditions:
1️⃣ Remuneration Must Be Paid to “Working Partners” Only
2️⃣ Must Be Authorized by the Partnership Deed
3️⃣ Payment Should Be Within the Prescribed Limits
✅ Book profit ≤ ₹3 lakh → 90% of book profit or ₹1.5 lakh (whichever is higher)
✅ Book profit > ₹3 lakh → 60% of book profit
4️⃣ Remuneration Must Be Paid to an Individual Partner
5️⃣ The Partnership Deed Must Be in Effect
6️⃣ Firm Must Be Assessed as a Partnership Firm
✅ Conclusion:
See lessTo claim a deduction for partner remuneration, ensure it is paid to a working partner, authorized in the deed, within Section 40(b) limits, and in a firm recognized as a partnership under the Income Tax Act.
What is the limit of remuneration of partner as per Income Tax act?
The remuneration (salary, bonus, commission, etc.) paid to partners in a partnership firm is allowed as a deduction under Section 40(b) of the Income Tax Act, but only within prescribed limits based on the book profit of the firm. Maximum Allowable Remuneration (as per Section 40(b)) ✅ If Book ProfiRead more
The remuneration (salary, bonus, commission, etc.) paid to partners in a partnership firm is allowed as a deduction under Section 40(b) of the Income Tax Act, but only within prescribed limits based on the book profit of the firm.
Maximum Allowable Remuneration (as per Section 40(b))
✅ If Book Profit is ₹3 lakh or less → 90% of book profit or ₹1.5 lakh (whichever is higher)
✅ If Book Profit is above ₹3 lakh → 60% of book profit
🔹 Important Conditions:
📌 Example Calculation:
✅ Conclusion:
See lessPartner remuneration is deductible only if it follows Section 40(b) rules. If it exceeds limits, the extra amount is disallowed for tax purposes.
What is the penalty code no. 11C and N11C under Income Tax Act? Which code is used for payment of penalty on late filing of ITR?
Penalty codes 11C and N11C serve different purposes under the Income Tax Act: 11C is used for general penalties imposed by the Income Tax Department under various sections, such as under-reporting of income (Section 270A) or concealment of income (Section 271(1)(c)). If you have received a penalty dRead more
Penalty codes 11C and N11C serve different purposes under the Income Tax Act:
11C is used for general penalties imposed by the Income Tax Department under various sections, such as under-reporting of income (Section 270A) or concealment of income (Section 271(1)(c)). If you have received a penalty demand notice, you should use Code 11C when making the payment.
N11C is specifically for late filing fees under Section 234F. If you file your Income Tax Return (ITR) after the due date, you will need to pay a penalty of ₹1,000 (if total income < ₹5 lakh) or ₹5,000 (if total income > ₹5 lakh). For this, use Code N11C while making the payment through the Income Tax e-filing portal.
✅ Conclusion: If you’re paying a late filing fee for delayed ITR submission, use N11C. For other penalties issued by the tax department, use 11C. Always verify the payment details before proceeding.
See lessI have got a bill of for reimbursement of expenditure from my consultant, do I need to deduct TDS on the same?
Whether you need to deduct TDS on the reimbursement of expenditure to your consultant depends on the nature of the bill and the agreement with the consultant. Here’s how to determine it: 1️⃣ If the Reimbursement is Part of the Professional Fee: If the consultant has raised a single invoice coveringRead more
Whether you need to deduct TDS on the reimbursement of expenditure to your consultant depends on the nature of the bill and the agreement with the consultant. Here’s how to determine it:
1️⃣ If the Reimbursement is Part of the Professional Fee:
2️⃣ If the Reimbursement is Separate & on Actuals:
3️⃣ Best Practices:
✅ Ask the consultant to bill separately for professional fees and reimbursement.
See less✅ Maintain proper documentation (supporting invoices) to justify the non-deduction of TDS in case of scrutiny.
✅ If unsure, consult a tax expert to ensure compliance.
How much bank account should I open as an individual?
The number of bank accounts an individual should open depends on their financial goals, income sources, and spending habits. Here’s a practical approach: 1️⃣ Primary Savings Account (Must-Have) Used for salary credits, savings, and daily transactions. Choose a bank with good digital banking servicesRead more
The number of bank accounts an individual should open depends on their financial goals, income sources, and spending habits. Here’s a practical approach:
1️⃣ Primary Savings Account (Must-Have)
2️⃣ Secondary Savings Accounts (For Budgeting & Goals)
3️⃣ Investment accounts (For Wealth Growth)
4️⃣ Business or Freelance Accounts (If Self-Employed)
5️⃣ Joint Account (If Needed)
💡 Best Practice:
See less✅ 2-3 accounts are sufficient for most individuals.
✅ Avoid multiple accounts unless necessary (to prevent maintenance fees and complexity).