Consider the following : The book profit of a firm of Chartered Accountants, which satisfies all the…
Under section 35(e)(iii) of the Income-tax Act, 2025 (formerly s.40(b)(v) of the Income-tax Act, 1961), the aggregate remuneration to working partners authorised by the…
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Consider the following : The book profit of a firm of Chartered Accountants, which satisfies all the conditions of section 325 and section 35(e) of the Income-tax Act, 2025, for the tax year beginning on 1 April 2026, is ₹ 72,190. The actual remuneration paid to the working partners for the year is ₹ 1,56,000. The amount of remuneration permissible under section 35(e) is :
Answer and explanation
Correct answer A
Under section 35(e)(iii) of the Income-tax Act, 2025 (formerly s.40(b)(v) of the Income-tax Act, 1961), the aggregate remuneration to working partners authorised by the partnership deed is allowed up to: on the first ₹ 6,00,000 of the book profit or in case of a loss, ₹ 3,00,000 or 90% of the book profit, whichever is higher; and on the balance of the book profit, 60%. Here 90% of ₹ 72,190 is ₹ 64,971, so the ceiling is the higher figure of ₹ 3,00,000. The actual remuneration of ₹ 1,56,000 is within that ceiling and is allowed in full. ₹ 1,50,000 reflects an outdated ceiling, and ₹ 72,190 and ₹ 64,971 are merely the book profit and 90% of it. Section 325 (formerly s.184) lays down the conditions for assessment as a firm.
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UGC NET Commerce