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Remuneration to Partners in Partnership Firm
Remuneration to Partners in Partnership Firm
April 13, 2020
Annual Filing for LLP With No Transactions
April 13, 2020

How to Calculate Book Profit of partnership firm

How to Calculate Book Profit Partnership Firm

For calculation of partners remuneration partnership need to calculate Book form of firm. As a firm partner you must be having question on What is books profit ? How to calculate book profit ? What is relevance of book profit for income tax calculation. Book profit is amount calculated as per Income Tax Act to arrive at amount of maximum allowable deduction of remuneration of partner. In this article we discussion about steps to calculate book profit of Partnership firm to calculate partners remuneration. 


Steps to Calculation Of Book Profit for Remuneration 

  1. Take Net Profit as per Profit and Loss / Income & Expenditure Account
  2. Add back salary given to partners if debited in Profit and loss account
  3. Make adjustment for expenses allowed/disallowed as per section 28- 44D.
  4. If expenses /Income of other head like house property or income from other source,capital gain has been debited /credit then reverse back the such amount from profit & loss account.
  5. As the depreciation b/f is covered under section 32(2) ,so adjustment should be made for b/f depreciation to calculate the book profit but adjustment can be done only up to maximum of profit of current year before depreciation minus b/f loss of the previous years


Calculation book profit for Partner’s Remuneration u/s 40(b)

Book profit calculation is simply profit amount before debiting remuneration amount of partner. For Income tax partner remuneration calculation purpose book profit and actual firm profit is different.

S.No. Particulars  Amount
1 Profit as per Profit & Loss a/c XXX
2 Add :Remuneration to partners if debited to Profit and loss a/c XXX
3 Add : Salary to partners if debited to Profit and loss a/c XXX
4 Add : Bonus  to partners if debited to Profit and loss a/c XXX
5 Add : Commission  to partners if debited to Profit and loss a/c XXX
6 Add : Brought forward business loss, deduction under section 80C
to 80U if debited to profit and loss a/c
XXX
7 Less : Income under capital gain, other sources ,house property,  if credited to profit and loss a/c XXX

Example : Book Profit Partnership Calculation 

S.No. Particulars  Amount
1 Profit as per Profit & Loss a/c of firm                                                       7,00,000
2 Add :Remuneration to partners if debited to Profit and loss a/c                                                      2,00,000
3 Add : Salary to partners if debited to Profit and loss a/c 0
3 Add : Bonus  to partners if debited to Profit and loss a/c 0
4 Add : Commission  to partners if debited to Profit and loss a/c 0
3 Add : Brought forward business loss, deduction under section 80C
to 80U if debited to profit and loss a/c
0
4 Less : Income under capital gain, other sources ,house property,  if credited to profit and loss a/c 0


Amount deductible under Income Tax Act

Book Profit (Rs) Maximum Deductible Amount (Rs)
Loss 150,000
Up to 3 Lakh 90% of Book Profit or Rs 150,000;
whichever is more
More than 3 Lakh 60% of Book Profit


Partners remuneration calculator online 

 

 



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1 Comment

  1. Harshita says:
    July 9, 2022 at 7:13 pm

    If we have b/f business loss A. Y 21-22and b/d unabsorbed depreciation for A. Y 18-19,21-22, what is it’s treatment in calculation of partners remuneration

    Reply

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A. N. Bhutada & Co. is trusted and versatile Chartered Accountant In Pune India. The firm have been providing various services under one roof in the field of Company Registration, Accounts outsourcing, Auditing, GST Audit, Filing in India.

Recent Posts

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