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Question ID : 44783

Remuneration to partners

Can a firm pay salary to its partners under employment contract? Will that come under the scope of 40(b) of the Income Tax Act, 1961?

Posted by Abi Muthuraj on Jan 23, 2025

Filed Under DIRECT TAXES

Answer ID : 85611

salary payments to partners under an employment contract would not come under the purview of Section 40(b) and would not be considered allowable expenses

Posted by CA. SURAJ KUMAR CHOUDHARY on Jan 23, 2025
Answer ID : 85612

There cannot be such an agreement between firm and a partner. There cannot be a master servant relation

Posted by SIVADAS CHETTOOR on Jan 23, 2025
Answer ID : 85641

A Firm cannot pay Salary to its Partner under Employment Contract. Partnership Deed provides mutual understanding between Partners and terms of running Partnership Business. If at all, any Partner is well versed with business of Firm, his Remuneration or Profit will be enhanced in the Deed of Partnership Deed. Still, if you do it the amount of Salary or remuneration you pay outside Section 40(b) will be double taxed. One as disallowance in the hands of Firm and other in the hands of Partner.

Posted by Rupakula Rajasekhar on Feb 01, 2025