ZenIT || Process to Calculate the Book Profit for Allowable Remuneration (Notional Setoff of UD)
Process to calculate “Book Profit” for allowable remuneration to partners under Section 40(b) of the Income-tax Act:-
For a partnership firm, allowable remuneration to working partners is computed based on Book Profit as defined in the Explanation 3 to Section 40(b).
1. Why is there a difference between Balance Book Profit and Book Profit for allowable remuneration?
2. What is the “After Notional Setoff of Unabsorbed Depreciation”?
Solution:-
When Business Losses and Unabsorbed Losses are available.
Before distributing the Remuneration to the partners, the Firm First balances a portion of the book profit to adjust the business losses, which are available in the Schedule brought forward Losses.
1. Total of the B/F Business Losses For The AY 2023-24 and 2024-25 is Rs 3,22,882+25,760 =3,48,642. The Amount Is Applied as Book Profit For the Allowable Remuneration.2. Total of the Unabsorbed Depreciation amount For The AY 2023-2024 and AY 2024-2025 is Rs 26,66,767+24,72,453 =51,39,220. The Amount is applied as an "after-notional setoff of Unabsorbed Depreciation".
The remaining income is available to offset business losses first, as there is a limitation of 8 years for carrying forward these losses. On the other hand, there is no limit to carrying forward the unabsorbed Depreciation, so these will be adjusted last when income is available in the coming years.
Hope This Helps.
Related Articles
ExpressITR || Allowable / Disallowable Remuneration Calculation till AY 2024-2025
Allowable / Disallowable Remuneration Calculation The maximum permissible remuneration under Section 40(b) is allowed for any working partner, provided: It is authorized by the partnership deed. It complies with the terms of the deed and pertains to ...ZenIT || Disallowed Partners Interest and Remuneration Process as per Section 40 in Part OI Point no 8A h
The process to enter disallowed partner’s interest and remuneration as per section 40 in Part OI Point no 8A h. “Amount of interest salary, bonus, commission or remuneration paid to any partner or member” According to section 40(b)(v), any payment of ...Express ITR || Information related to other Partnership Firm in which you are Partner (Remuneration)
How to Enter Information Related to Other Partnership Firms in Which You Are a Partner (Remuneration): Step 1: Log in to the system, select the client profile, and click on the "Prepare" button to start the process. Step 2: Navigate to the "Business ...Remuneration Maximum Permissible Limit
Remuneration Maximum Permissible Limit Payment of remuneration to any partner who is a working partner, which is authorized by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such ...Express ITR || Partners Details In the Firm/LLP (Remuneration u/s 40b)
How to Enter Information Related to Partners in the Firm/LLP (Remuneration u/s 40(b)): Step 1: Log in to the software and click on the "Prepare" button on the main dashboard. Step 2: In the menu, navigate to and click on the "Business and Profession" ...