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Taxchopal Latest Questions

CA Manish Kumar Gupta
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    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.)

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    • 0
Ankit
Beginner
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, The purpose of section 44Ad is to give relief to small assessee from compliance of maintaining books of accounts and annual Audit. This section is not related to the filing of ITR. It just gives a method of calculation of the taxable income of a business. So in this case, if the taxable income oRead more

    Hi,

    The purpose of section 44Ad is to give relief to small assessee from compliance of maintaining books of accounts and annual Audit.

    This section is not related to the filing of ITR. It just gives a method of calculation of the taxable income of a business.

    So in this case, if the taxable income of a business is less than the maximum amount which is not chargeable to tax then filing of return is not mandatory.

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    • 5
Ramesh Sharma
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, Encashment of leave at the time of retirement is dealt with in Section 10(10AA) of the Income Tax Act. The exemption is available to the Government and other employees in below manner: A. Govt Employees(Central Govt and State Govt) : The amount of leave encashment received by govt employees on rRead more

    Hi,

    Encashment of leave at the time of retirement is dealt with in Section 10(10AA) of the Income Tax Act. The exemption is available to the Government and other employees in below manner:

    A. Govt Employees(Central Govt and State Govt) :

    The amount of leave encashment received by govt employees on retirement is fully exempt from tax. Means no tax liability on encashment of earned leave at the time of retirement.

    B. Other Employees:

    Least of the below is exempted other employees from the amount received towards Leave encashment at the time of retirement (whether on superannuation or otherwise):

    1. Leave encashment actually received
    2. 10 months “average salary”
    3. Cash equivalent of unveiled leave (Maximum 30 days leave X Completed Year of service).
    4. Maximum Amount as specified by the Govt i.e. Rs. 3,00,000

     

    Here we need to remember the following terms:

    1. “Salary” for the above purpose means “Basic + Dearness Allowance” including commission received if any based on a fixed percentage of turnover.
    2. “Average Salary” means the average salary drawn by the employee during the period of 10 months immediately preceding his retirement.
    3. Relief Sec 89: Employees in service can claim relief under section 89 of the Income Tax Act.

    Regards

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    • 3
CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    No, a divorced wife can not claim for family pension as she loses the status of a legally wedded wife. However, the legitimate child/children from a divorced wife shall be entitled to the share of family pension which the mother would have received at the time of death of her husband had she not beeRead more

    No, a divorced wife can not claim for family pension as she loses the status of a legally wedded wife. However, the legitimate child/children from a divorced wife shall be entitled to the share of family pension which the mother would have received at the time of death of her husband had she not been divorced.

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    • 0
Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    In India, monetary gifts received by an individual or a Hindu Undivided Family (HUF) are generally taxable under Section 56(2)(x) of the Income Tax Act, 1961. However, there are certain exceptions where such gifts are not taxable. Let’s go through these exemptions in detail. Exemptions from Tax on MRead more

    In India, monetary gifts received by an individual or a Hindu Undivided Family (HUF) are generally taxable under Section 56(2)(x) of the Income Tax Act, 1961. However, there are certain exceptions where such gifts are not taxable. Let’s go through these exemptions in detail.

    Exemptions from Tax on Monetary Gifts

    Monetary gifts received by an individual or HUF are not taxable in the following cases:

    1. Gifts from Specified Relatives (Fully Exempt)

    As per Section 56(2)(x) of the Income Tax Act, gifts received from specified relatives are completely exempt from tax, regardless of the amount. The list of relatives includes:

    • For an Individual:

      • Spouse

      • Brother or Sister (of the individual or spouse)

      • Brother or Sister of either of the parents

      • Any lineal ascendant or descendant (of the individual or spouse)

      • Spouse of the above-mentioned relatives

    • For an HUF:

      • Any member of the HUF (gifts received from members are not taxable)

    2. Gifts Received on Marriage (Fully Exempt)

    Under Section 56(2)(x), any amount received as a gift on the occasion of marriage is completely exempt from tax. There is no upper limit for this exemption.

    3. Gifts Under a Will or by Inheritance (Fully Exempt)

    Any money received:

    • Under a will

    • By way of inheritance

    • In contemplation of the death of the payer

    is not taxable under Section 56(2)(x).

    4. Gifts from a Registered Trust or Institution (Exempt under Certain Conditions)

    If an individual or HUF receives a gift from:

    • A registered charitable or religious trust (covered under Section 12A or 12AA of the Income Tax Act)

    • A trust created solely for the benefit of relatives of the donor

    Then such gifts are not taxable, subject to conditions.

    5. Gifts from Local Authorities

    Any amount received from a local authority (as defined under Section 10(20) of the Income Tax Act) is fully exempt.

    6. Gifts from Recognized Funds and Institutions

    Money received from:

    • Educational institutions

    • Medical institutions

    • Recognized funds such as the Employees’ Provident Fund (EPF), Public Provident Fund (PPF), and others

    is not considered taxable income.

    7. Gifts Received Due to Sudden Death of a Relative (Ex-Gratia Payment)

    If an individual receives an ex-gratia amount due to the death of a close relative, such an amount is not considered taxable income under the principles of personal bereavement.

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    • 0
Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Marked-to-market (MTM) losses arise when businesses or traders adjust the value of their assets, liabilities, or financial instruments to reflect fair market value at the end of the financial year. The Income Tax Act, 1961 has specific provisions regarding the deductibility of such losses. 1. ApplicRead more

    Marked-to-market (MTM) losses arise when businesses or traders adjust the value of their assets, liabilities, or financial instruments to reflect fair market value at the end of the financial year. The Income Tax Act, 1961 has specific provisions regarding the deductibility of such losses.

    1. Applicability of MTM Loss Deduction

    MTM losses are generally allowed as a deduction only if they satisfy the following conditions:

    • The loss is realized or recognized as per accounting standards.

    • It is a revenue loss and not a capital loss.

    • The loss is computed following the Income Computation and Disclosure Standards (ICDS) prescribed under the Act.

    2. Disallowance Under Section 40A(3) and Section 37(1)

    • If the MTM loss is notional (i.e., an unrealized loss), it may be disallowed under Section 37(1), as it is not an expense incurred for business.

    • Losses resulting from non-business transactions or capital assets (such as revaluation of land or investments) are not allowed.

    3. ICDS and MTM Loss Deduction

    • ICDS – I mandates that expected losses should be recognized only if permitted under the Act.

    • ICDS – VI (Foreign Exchange Gains/Losses) allows MTM losses on monetary items but not on capital account transactions.

    • ICDS – VIII (Securities) permits deduction of MTM losses only for securities held as stock-in-trade.

    4. Loss on Derivative Contracts

    • Section 43(5) considers derivative trading in recognized stock exchanges as a non-speculative business, allowing deduction for MTM losses.

    • However, speculative MTM losses in unregulated derivatives may not be deductible.

    5. Judicial Precedents

    Several courts have allowed MTM losses if they are business expenses, such as for banks, financial institutions, or traders. However, notional losses due to mere valuation adjustments are typically not allowed as deductions.

    Conclusion

    The deductibility of MTM losses depends on their nature, compliance with ICDS, and whether they are realized or unrealized. To claim deductions, businesses should ensure proper accounting treatment and classify the losses as business expenses rather than capital losses.

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    • 0
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