Taxation Of Firm and LLP Flashcards
What is the tax rate on the income of a firm/LLP?
30% + 12% surcharge if NTI > 1 crore + 4% HEC
NTI stands for Net Taxable Income.
What is the tax treatment of a partner’s share in the total income of a firm/LLP?
Exempt in the hands of partners u/s 10(2A)
u/s refers to under section of the Income Tax Act.
What are the rates for Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG)?
LTCG = 20%/12.5%, STCG u/s 111A = 15%/20%, LTCG u/s 112A = 10%/12.5% in excess of 1,25,000
LTCG and STCG are tax categories for different holding periods of asset sales.
What are the conditions under which interest and remuneration paid to partners is allowed as a deduction?
- Paid to only working partners
- Authorized by partnership deed
- Relates to period after the partnership deed
- Interest max @ 12% p.a. simple interest
- Remuneration allowed on Book profit basis
The partnership deed is a legal document outlining the terms of the partnership.
What is the significance of Section 40(b) in relation to partners?
It specifies the conditions for the deduction of interest and remuneration paid by the firm/LLP
Section 40(b) details the limits and conditions for partner payments.
What happens to losses incurred by a firm?
Losses shall be carried forward by the firm and shall not be allocated to partners
This means partners cannot use firm losses to offset their personal income.
What is the definition of Book Profit?
Net Profit under PGBP -
- unabsorbed depreciation
-current year depreciation
+ remuneration (if debited to P&L A/c)
PGBP stands for Profit and Gain of Business or Profession.
What is the maximum interest allowed on a partner’s capital and loan?
Max @ 12% p.a. simple interest
This limit applies to interest on both capital and loans provided by partners.
What is the calculation for Book Profit on the first ₹ 6,00,000?
Book Profit × 90% or ₹3,00,000, whichever is higher
This determines the maximum remuneration allowed based on Book Profit.
Is Section 44AD/44ADA applicable to LLP?
No, it is not applicable to LLP
Section 44AD and 44ADA pertain to presumptive taxation for certain categories of taxpayers.
What is the treatment of remuneration on balance Book Profit?
Book Profit x 60%
This calculation determines additional remuneration based on remaining Book Profit after initial calculations.
