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CA Vishnu Ram
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  1. CA Vishnu Ram Enlightened

    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.

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CA Vishnu Ram
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  1. Advocate Dr Amit Dua Explainer

    Section 40b determines the maximum amount of remuneration and interest on capital payable to a partner under Income Tax Act. The amount over the specified limit is not allowed as a deduction to a partnership firm. Remuneration To Partners Remuneration includes salary, bonus, commission .RemunerationRead more

    Section 40b determines the maximum amount of remuneration and interest on capital payable to a partner under Income Tax Act. The amount over the specified limit is not allowed as a deduction to a partnership firm.

    Remuneration To Partners

    Remuneration includes salary, bonus, commission .Remuneration in partnership firm is allowed as a deduction if following conditions are satisfied

    1. Remuneration is allowed only to working partners.
    2. Remuneration must be authorised by partnership deed and according to the terms of partnership deed. Also the amount of salary or manner of its computation is to be mentioned in the deed. If there is not any such provision in deed then no deduction is allowed. Normally people mentions in deed that salary is allowed to partners as per maximum limit defined under this section. This clause satisfies the condition for quantum of deduction.
    3. It should be related to the period of the partnership deed. If there is another partnership deed for another period then such deed’s provisions will be considered for that period.
    4. It is not allowed if tax is paid on presumptive basis under section 44AD or section 44ADA.
    5. Remuneration should be within the permissible limits as mentioned below. Please note that this limit is for total salary to all partners and not per partner.
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CA Vishnu Ram
Enlightened
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  1. Advocate Dr Amit Dua Explainer

    Section 40b determines the maximum amount of remuneration and interest on capital payable to a partner under Income Tax Act. The amount over the specified limit is not allowed as a deduction to a partnership firm. Remuneration To Partners Remuneration includes salary, bonus, commission .RemunerationRead more

    Section 40b determines the maximum amount of remuneration and interest on capital payable to a partner under Income Tax Act. The amount over the specified limit is not allowed as a deduction to a partnership firm.

    Remuneration To Partners

    Remuneration includes salary, bonus, commission .Remuneration in partnership firm is allowed as a deduction if following conditions are satisfied

    1. Remuneration is allowed only to working partners.
    2. Remuneration must be authorised by partnership deed and according to the terms of partnership deed. Also the amount of salary or manner of its computation is to be mentioned in the deed. If there is not any such provision in deed then no deduction is allowed. Normally people mentions in deed that salary is allowed to partners as per maximum limit defined under this section. This clause satisfies the condition for quantum of deduction.
    3. It should be related to the period of the partnership deed. If there is another partnership deed for another period then such deed’s provisions will be considered for that period.
    4. It is not allowed if tax is paid on presumptive basis under section 44AD or section 44ADA.
    5. Remuneration should be within the permissible limits as mentioned below. Please note that this limit is for total salary to all partners and not per partner.
    Book Profit Amount deductible as remuneration under section 40(b)
    If book profit is negative Rs. 1,50,000
    If book profit is positive-   On first Rs. 3 lakh of book profit On the balance of book profit Rs. 1,50,000 or 90% of book profit whichever is more   60% of book profit

    Calculation of book profit

    Profit as per Profit & Loss a/c –                                                                                      xxx
    Add- Remuneration to partners if debited to Profit and loss a/c
    Add- Brought forward business loss, deduction under section 80C
    to 80U if debited to profit and loss a/c
    Less – Income under house property, capital gain, other
    sources if credited to profit and loss a/c
    Book Profits                                                                                                                    xxx

    Example-

    Book profit = Rs. 9 Lakhs
    Maximum allowed salary = 3,00,000*90% + 6,00,000*60% = Rs. 6.3 lakhs

    Remuneration which is allowed as expenses in the hands of partnership firm will be taxable in the hands of receiving partner as “Income from Business or Profession”.

    If such remuneration is not allowed as expense in hands of partnership firm then it will not be taxable in the hands of partners.

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CA Vishnu Ram
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  1. CA Vishnu Ram Enlightened

    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.

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CA Vishnu Ram
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    A trader is liable to deduct TCS (Tax Collected at Source) on the sale of goods under Section 206C(1H) of the Income Tax Act, subject to the following conditions: 1️⃣ Applicability of TCS on Sale of Goods (Sec 206C(1H)) ✔️ The seller must have a turnover exceeding ₹10 crore in the previous financialRead more

    A trader is liable to deduct TCS (Tax Collected at Source) on the sale of goods under Section 206C(1H) of the Income Tax Act, subject to the following conditions:

    1️⃣ Applicability of TCS on Sale of Goods (Sec 206C(1H))

    ✔️ The seller must have a turnover exceeding ₹10 crore in the previous financial year.
    ✔️ TCS applies when the buyer purchases goods worth more than ₹50 lakh in a financial year.
    ✔️ TCS is applicable only on the amount exceeding ₹50 lakh.

    2️⃣ TCS Rate on Sale of Goods

    ✔️ 0.1% of the amount exceeding ₹50 lakh (If PAN is available).
    ✔️ 1% if the buyer does not provide a PAN or Aadhaar.

    3️⃣ When to Collect & Deposit TCS?

    ✔️ TCS should be collected at the time of receipt of payment from the buyer.
    ✔️ It must be deposited with the government by the 7th of the next month.

    4️⃣ Exemptions from TCS on Sale of Goods

    ❌ TCS is NOT applicable if:

    • The buyer is the government, embassy, RBI, or public sector company.
    • The sale is already subject to TDS under any other provision.

    ✅ Example:
    If a trader has a turnover of ₹12 crore in the last financial year and sells goods worth ₹60 lakh to a customer, TCS will be applicable on ₹10 lakh (₹60 lakh – ₹50 lakh).

    TCS Calculation:
    👉 TCS @0.1% on ₹10 lakh = ₹1,000 (if PAN is available).

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CA Vishnu Ram
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    TCS (Tax Collected at Source) Rates for FY 2024-25 The TCS rates under Section 206C of the Income Tax Act vary based on the nature of the transaction. Below is a summary of the latest applicable rates: Nature of Transaction Section TCS Rate (with PAN/Aadhaar) TCS Rate (without PAN/Aadhaar) Sale of ARead more

    TCS (Tax Collected at Source) Rates for FY 2024-25

    The TCS rates under Section 206C of the Income Tax Act vary based on the nature of the transaction. Below is a summary of the latest applicable rates:

    Nature of Transaction Section TCS Rate (with PAN/Aadhaar) TCS Rate (without PAN/Aadhaar)
    Sale of Alcoholic Liquor, Tendu Leaves, Timber, Forest Produce 206C(1) 1% – 5% (varies) 5%
    Sale of Scrap 206C(1) 1% 5%
    Sale of Minerals (Coal, Lignite, Iron Ore) 206C(1) 1% 5%
    Sale of Motor Vehicle (above ₹10 lakh) 206C(1F) 1% 5%
    Sale of Goods (if turnover > ₹10 Cr & buyer purchases > ₹50 lakh in a year) 206C(1H) 0.1% (on excess amount) 1%
    Foreign Remittance under LRS (except for education/medical purposes) 206C(1G) 20% 20%
    Foreign Tour Package Purchase 206C(1G) 5% 10%
    Education Loan financed by a financial institution 206C(1G) 0.5% 5%
    Sale of Overseas Tour Program Package 206C(1G) 5% 10%
    TCS on E-commerce Operator (Payments to Seller) 206C(1H) 1% 5%

    Important Points:

    ✔ PAN/Aadhaar is mandatory for lower TCS rates.
    ✔ TCS must be collected at the time of receiving payment from the buyer.
    ✔ TCS must be deposited by the 7th of the next month.
    ✔ The buyer can claim TCS credit while filing their Income Tax Return.

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CA Vishnu Ram
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Procedure for Obtaining a Lower TDS Deduction Certificate under the Income Tax Act (Section 197) A taxpayer can apply for a Lower TDS Deduction Certificate under Section 197 of the Income Tax Act if they believe that their total income justifies a lower or nil rate of TDS deduction. The procedure isRead more

    Procedure for Obtaining a Lower TDS Deduction Certificate under the Income Tax Act (Section 197)

    A taxpayer can apply for a Lower TDS Deduction Certificate under Section 197 of the Income Tax Act if they believe that their total income justifies a lower or nil rate of TDS deduction. The procedure is as follows:

    Step-by-Step Process to Obtain Lower TDS Certificate

    Step 1: Eligibility Check

    ✔ The applicant should be earning income where TDS is applicable (e.g., salary, interest, professional fees, rent, etc.).
    ✔ The applicant must justify that the TDS deduction at normal rates would result in excess tax deduction leading to a refund situation.

    Step 2: Online Application on TRACES Portal

    1. Login to TRACES (https://www.tdscpc.gov.in/) using the taxpayer’s PAN and password.
    2. Go to “Statements / Forms” > “Request for Form 13 (Lower/Nil Deduction Certificate)”.
    3. Fill in the details:
      • Personal details (PAN, Address, Contact Info, etc.)
      • Financial details (Income, Deductions, Tax Liability, etc.)
      • Nature of income for which lower TDS is requested
      • Justification for lower deduction (like previous year’s tax filings showing refund situations).
    4. Attach supporting documents:
      • Computation of estimated total income and tax liability
      • Copies of previous years’ ITRs
      • Financial statements (if applicable)
      • Relevant agreements, contracts, or invoices
    5. Submit the application online.

    Step 3: Processing by the Assessing Officer (AO)

    ✔ The Assessing Officer (AO) reviews the application and may request additional documents.
    ✔ If satisfied, the AO will issue a Lower/Nil TDS Deduction Certificate (Form 13).
    ✔ The certificate specifies the validity period and applicable TDS rate (which could be lower than the standard rate).

    Step 4: Submission to Deductor

    ✔ The taxpayer must provide the lower TDS certificate to the deductor (payer).
    ✔ The deductor will deduct TDS at the specified lower rate instead of the standard rate.

    Key Points to Remember:

    ✔ Validity: The certificate is valid for a financial year or a specific period mentioned in the approval.
    ✔ Deadline: Apply at the beginning of the financial year to avoid excess TDS deductions.
    ✔ Form 15G/15H: For individuals with income below the taxable limit, Form 15G (for non-senior citizens) or 15H (for senior citizens) can be submitted instead of Form 13.

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CA Vishnu Ram
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Use of Form 15CA and 15CB under the Income Tax Act Forms 15CA and 15CB are required for making remittances (payments) to non-residents to ensure compliance with TDS (Tax Deducted at Source) provisions under the Income Tax Act. These forms help track foreign remittances and prevent tax evasion. 🔹 WhaRead more

    Use of Form 15CA and 15CB under the Income Tax Act

    Forms 15CA and 15CB are required for making remittances (payments) to non-residents to ensure compliance with TDS (Tax Deducted at Source) provisions under the Income Tax Act. These forms help track foreign remittances and prevent tax evasion.

    🔹 What is Form 15CA?

    📌 Purpose: Form 15CA is a declaration by the remitter (payer) stating whether TDS is applicable on the foreign remittance. It helps the Income Tax Department track taxable foreign payments.
    📌 Who files it?: The remitter (payer) files Form 15CA electronically on the Income Tax e-Filing portal.
    📌 When is it required?:

    • If the remittance is taxable in India and TDS is deducted.
    • If the remittance amount exceeds ₹5 lakh, then Form 15CB is also required.

    🚀 Key Point: Form 15CA is MANDATORY in most cases, even if TDS is not applicable.

    🔹 What is Form 15CB?

    📌 Purpose: Form 15CB is a certificate issued by a Chartered Accountant (CA) confirming the taxability of a foreign remittance. The CA verifies:

    • Nature & purpose of the remittance
    • Taxability under the Income Tax Act & DTAA (Double Taxation Avoidance Agreement)
    • TDS rate and deduction compliance

    📌 Who issues it?: A Chartered Accountant (CA) issues Form 15CB before submitting Form 15CA (Part C).

    📌 When is it required?:

    • If the remittance exceeds ₹5 lakh in a financial year.
    • If the remittance is taxable in India under the Income Tax Act.
    • If a DTAA benefit is claimed.

    🚀 Key Point: Form 15CB is NOT required for transactions where:
    ✔️ Remittance is covered under Rule 37BB (specified list of exempted payments).
    ✔️ Payment is below ₹5 lakh in a financial year.

    🔹 When Do You Need Both Forms?

    Remittance Amount Taxable in India? Form 15CA Required? Form 15CB Required?
    Below ₹5 lakh No ❌ Not Required ❌ Not Required
    Below ₹5 lakh Yes ✅ Required (Part A) ❌ Not Required
    Above ₹5 lakh No ✅ Required (Part D) ❌ Not Required
    Above ₹5 lakh Yes ✅ Required (Part C) ✅ Required

    🔹 How to File Form 15CA & 15CB?

    1️⃣ Obtain Form 15CB from a CA (if required).
    2️⃣ Log in to the Income Tax e-Filing Portal https://www.incometax.gov.in/.
    3️⃣ Navigate to “File Income Tax Forms” > “Form 15CA”.
    4️⃣ Fill in details & submit the form.
    5️⃣ Provide acknowledgment to the bank for processing the remittance.

    🔹 Key Takeaways

    ✔ Form 15CA is filed by the remitter for foreign remittances.
    ✔ Form 15CB is required only if the remittance exceeds ₹5 lakh and is taxable in India.
    ✔ These forms help track foreign payments and ensure TDS compliance.
    ✔ Banks will not process foreign remittances without Form 15CA (and 15CB, if required).

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Ramesh Sharma
Enlightened
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  1. CA Vishnu Ram Enlightened

    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.

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Ramesh Sharma
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Who is Required to Pay TCS (Tax Collected at Source)? Tax Collected at Source (TCS) is a tax that a seller collects from the buyer at the time of selling specified goods or providing certain services. The seller is responsible for collecting TCS and depositing it with the government. 🔹 Who is RequirRead more

    Who is Required to Pay TCS (Tax Collected at Source)?

    Tax Collected at Source (TCS) is a tax that a seller collects from the buyer at the time of selling specified goods or providing certain services. The seller is responsible for collecting TCS and depositing it with the government.

    🔹 Who is Required to Collect TCS?

    As per Section 206C of the Income Tax Act, the following sellers are required to collect TCS when selling specified goods or services:

    ✔ Companies (Private Ltd. & Public Ltd.)
    ✔ Partnership firms
    ✔ Proprietorships (in specific cases)
    ✔ Cooperative societies
    ✔ Local authorities & State/Central Government agencies

    📌 Individuals & HUFs (Hindu Undivided Families) need to collect TCS only if their turnover exceeds ₹1 crore (for business) or ₹50 lakh (for professionals) in the previous financial year.

    🔹 When is TCS Collected?

    TCS is collected at the time of sale of certain specified goods or services.

    📌 List of Goods/Services Liable for TCS:

    Nature of Goods/Service TCS Rate Applicable Section Threshold Limit
    Sale of Alcoholic liquor for human consumption 1% 206C(1) No limit
    Sale of Tendu leaves 5% 206C(1) No limit
    Sale of Timber from a forest 2.5% 206C(1) No limit
    Sale of Forest Produce (other than timber/tendu leaves) 2.5% 206C(1) No limit
    Sale of Scrap 1% 206C(1) No limit
    Sale of Minerals (coal, lignite, iron ore) 1% 206C(1) No limit
    Sale of Motor Vehicles (if value exceeds ₹10 lakh per vehicle) 1% 206C(1F) ₹10 lakh per vehicle
    Foreign remittances under LRS (Liberalized Remittance Scheme) 5% 206C(1G) ₹7 lakh per year
    Sale of Goods (other than specified goods) 0.1% 206C(1H) ₹50 lakh per buyer per year
    Overseas Tour Packages 5% 206C(1G) No limit

    🚀 Key Point: TCS is collected from the buyer at the time of receipt of payment or sale invoice generation, whichever is earlier.

    🔹 When is TCS Not Required?

    ✔ If the buyer is the Government, an embassy, or a recognized international organization.
    ✔ If the buyer is liable to deduct TDS under any section of the Income Tax Act.
    ✔ If the sale value does not exceed the threshold limit specified above.

    🔹 How is TCS Deposited?

    📌 The seller must deposit the collected TCS to the government by the 7th of the following month.
    📌 TCS is reported in Quarterly TCS Returns (Form 27EQ).
    📌 Buyers can claim TCS credit when filing their Income Tax Return (ITR).

    🔹 Conclusion

    ✔ Sellers of specified goods/services are required to collect TCS from buyers.
    ✔ TCS rates vary based on the nature of the goods/services.
    ✔ Buyers can claim TCS as a credit while filing ITR.
    ✔ Proper compliance with TCS deposit & return filing deadlines is necessary to avoid penalties.

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