Share & grow the world's knowledge!
We want to connect the people who have knowledge to the people who need it, to bring together people with different perspectives so they can understand each other better, and to empower everyone to share their knowledge.
When salary to a partner is not allowed as deduction under the Income Tax Act?
Section 40(b) specifies that the remuneration to a partner may be allowed as a deduction if: It is provided for in the partnership deed or fixed as per a prior arrangement. It is calculated on a predetermined basis irrespective of the profits or turnover of the firm. The payment is made in advance oRead more
Section 40(b) specifies that the remuneration to a partner may be allowed as a deduction if:
It is provided for in the partnership deed or fixed as per a prior arrangement.
It is calculated on a predetermined basis irrespective of the profits or turnover of the firm.
The payment is made in advance or sanctioned for the relevant assessment year.
When Is Salary to a Partner Not Allowed?
The salary (or any form of remuneration) to a partner will be disallowed as a deduction under the following circumstances:
-
-
-
-
See lessNot Provided for in the Partnership Deed:
If the partnership deed does not expressly authorize or specify the payment of salary to the partner, any such payment made by the firm is not in line with the agreed terms and, therefore, will not be treated as an allowable deduction.
Excessive or Arbitrary Payment:
Even if a salary is mentioned in the partnership deed, if the firm pays an amount that exceeds the rate or limits fixed by the deed (or as per the conditions prescribed under Section 40(b)), the excess portion of the salary will be disallowed. The Act expects the remuneration to be predetermined and not subject to arbitrary increases.
Non-Compliance with the Prescribed Formula:
The Act mandates that the salary should be computed on a fixed formula (or rate) as stipulated in the deed, without being linked to the fluctuating profits of the firm. If the payment deviates from this method – for example, if it is linked directly to profits, thereby possibly distorting the firm’s taxable income – the deduction may be disallowed to the extent of the deviation.
What is the definition of startup as per income tax act?
While the Income Tax Act, 1961 does not contain an explicit standalone definition of a "startup," the term is used in various tax incentives and regulatory provisions. For practical purposes—including the availment of certain tax benefits—the government relies on the criteria laid down under the StaRead more
While the Income Tax Act, 1961 does not contain an explicit standalone definition of a “startup,” the term is used in various tax incentives and regulatory provisions. For practical purposes—including the availment of certain tax benefits—the government relies on the criteria laid down under the Startup India Action Plan (issued by the Department for Promotion of Industry and Internal Trade, DPIIT).
Adopted Criteria (as per Startup India):
An enterprise is generally recognized as a startup if it meets these conditions:
Incorporation/Registration: It must be incorporated or registered in India on or after April 1, 2016.
Age of the Entity: It should be less than 10 years old from the date of incorporation or registration.
Turnover Limit: Its annual turnover must not exceed ₹100 crores in any financial year.
Innovation and Scalability: It should be engaged in innovative activities, development or improvement of products, processes, or services, or demonstrate a scalable business model with the potential for significant employment generation or wealth creation.
For tax purposes, when a business applies for startup-related benefits under various notifications (for example, schemes providing profit-linked incentives or tax exemptions), the tax authorities look to the recognition granted under the Startup India guidelines.
See lessWhat is e Invoicing system in GST, how to generate e-invoice?
1. What Is the e-Invoicing System in GST? e‑Invoicing is a system introduced under the GST regime that requires certain taxpayers to electronically authenticate their B2B invoices through a designated Invoice Registration Portal (IRP) before they are issued. Although the core GST Acts (such as the CRead more
1. What Is the e-Invoicing System in GST?
e‑Invoicing is a system introduced under the GST regime that requires certain taxpayers to electronically authenticate their B2B invoices through a designated Invoice Registration Portal (IRP) before they are issued. Although the core GST Acts (such as the CGST Act, 2017) do not explicitly mention “e‑invoicing,” the mechanism is established through subsequent notifications and rules issued by the Government of India. This mechanism is designed to:
Enhance invoice standardization and uniformity
Ensure real‑time, accurate capture of invoice data on the GST Network (GSTN)
Help in seamless integration with GST returns and e‑way bill systems
Strengthen tax compliance and curb tax evasion
Statutory Context:
Under Section 31 of the CGST Act, 2017, registered taxpayers are required to maintain proper records, including issuing prescribed tax invoices. The e‑invoicing system is a modern evolution of this requirement, ensuring that the data contained in invoices is validated and reported digitally. (While the Act itself does not use the term “e‑invoicing,” its record‑keeping obligations pave the way for the introduction of digital invoice registration by the government through subsequent notifications.)
2. How to Generate an e‑Invoice?
The e‑invoicing process involves several steps, which ensure that the invoice is digitally authenticated and assigned a unique identifier. Here’s the process:
-
-
-
-
-
-
-
-
-
-
-
-
-
See lessInvoice Creation:
Generate the Invoice:
Prepare your B2B invoice using your accounting or billing software. The invoice must contain all the mandatory fields as prescribed (such as GSTIN, invoice number, date, details of goods/services, tax amounts, etc.).
Data Formatting:
Convert to JSON:
Your accounting software must export the invoice data in the JSON format conforming to the e‑invoice schema (commonly referred to as schema INV‑01). This schema defines the structure required for the Invoice Registration Portal (IRP) to understand your invoice data.
Submission to the IRP:
Upload the JSON File:
Log on to the authorized IRP (the list of which is available on the official e‑invoice portal) and upload the JSON file. This can be done via API integration or through the web interface provided by the IRP.
Validation and Generation of IRN:
IRP Processing:
The IRP validates the submitted data against the required schema and, upon successful validation, generates a unique Invoice Reference Number (IRN). It also digitally signs the invoice and generates a QR code.
Digital Signature & QR Code:
The digital signature ensures the authenticity of the invoice, and the QR code serves as a quick method for verification during audits or cash flow processes.
Receipt of e‑Invoice:
IRP Returns the e‑Invoice:
Once validated and signed, the IRP returns the e‑invoice (in a JSON format) back to your system, now containing the IRN and QR code.
Integration and Filing:
Share with Buyer & GSTN:
The digitally signed e‑invoice is provided to your buyer and is automatically transmitted to the GST Network. This facilitates smooth input tax credit claims and becomes part of your GST return filing process.
How may Ind AS have been issued till date?
As of the latest notifications, a total of 41 Indian Accounting Standards (Ind AS) have been issued. These standards are designed to converge with International Financial Reporting Standards (IFRS) and cover a wide range of topics: Ind AS No. Title of Standard Ind AS 1 Presentation of Financial StatRead more
As of the latest notifications, a total of 41 Indian Accounting Standards (Ind AS) have been issued. These standards are designed to converge with International Financial Reporting Standards (IFRS) and cover a wide range of topics:
What is the difference between Ind As and AS?
Below are the key differences between Ind AS and AS: Particulars Ind AS (Indian Accounting Standards) AS (Accounting Standards) Applicability Mandatory for specified companies (as per Companies (Ind AS) Rules) Applicable to other companies not required to follow Ind AS Objective Converged with IFRSRead more
Below are the key differences between Ind AS and AS:
Whether the CSR Expenditure incurred by Foreign Holding Company eligible to be taken as CSR expenditure by its Indian Subsidiary Company ?
Under Section 135 of the Companies Act, 2013 and the prescribed Schedule VII, an eligible Indian company must incur its own CSR expenditure on activities specified therein. The CSR obligation is applicable exclusively to companies incorporated in India based on their own financial metrics and resourRead more
Under Section 135 of the Companies Act, 2013 and the prescribed Schedule VII, an eligible Indian company must incur its own CSR expenditure on activities specified therein. The CSR obligation is applicable exclusively to companies incorporated in India based on their own financial metrics and resources.
Thus, even if a foreign holding company— which, as a non‐Indian company, is not subject to the same CSR mandate— incurs expenditure on CSR activities in its jurisdiction, such expenditure cannot be clubbed with or transferred to meet the CSR requirement of its Indian subsidiary.
In other words, the Indian subsidiary must spend CSR funds from its own resources in accordance with the CSR framework under Section 135 and Schedule VII, and the expenditure incurred by the foreign holding company is not eligible to be taken as CSR expenditure by its Indian subsidiary.
See lessCan the CSR expenditure be spent on the activities beyond Schedule VII ?
Under Section 135 of the Companies Act, 2013, companies meeting certain financial thresholds are mandated to allocate a portion of their profits towards Corporate Social Responsibility (CSR) activities. These activities must align with the areas specified in Schedule VII of the Act. The Ministry ofRead more
Under Section 135 of the Companies Act, 2013, companies meeting certain financial thresholds are mandated to allocate a portion of their profits towards Corporate Social Responsibility (CSR) activities. These activities must align with the areas specified in Schedule VII of the Act. The Ministry of Corporate Affairs (MCA) has emphasized that CSR expenditures should be directed towards activities enumerated in Schedule VII. However, the MCA also advises that the items listed in Schedule VII should be interpreted liberally to capture the essence of the subjects enumerated.
In summary, while CSR funds should be utilized for activities specified in Schedule VII, the schedule’s broad scope allows for a liberal interpretation to encompass a wide range of related activities.
See less