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