Remuneration to Partners – Limits Revised u/s 40(b)
Budget 2024 has doubled the base limits for calculating allowable remuneration:
Old limits:
• Negative book profit → ₹1,50,000
• Positive book profit (up to ₹3L) → Higher of ₹1.5L or 90%
• Balance → 60%
New limits:
• Negative book profit → ₹3,00,000
• Positive book profit (up to ₹6L) → Higher of ₹3L or 90%
• Balance → 60%
Applies to Firms & LLPs from AY 2025-26.
Attention Partnership Firms!
Starting 1st April 2025, don’t risk disallowance of partner remuneration under Sec 40(b).
As per CBDT Circular No. 739, your partnership deed must
1. Specify exact amount per working partner, or
2. Clearly lay down a quantification method (e.g., % of book profit).
No vague clauses. No end-of-year discretion.
Update your deed now to claim full deduction!
#IncomeTax #TaxAudit #Section40b #eFileTax
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