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Remuneration to Partners in LLP – Limited Liability Partnership

LLP Can pay remuneration to its partners subject to the provisions of LLP Agreement, In other words if the LLP Agreement is silent then the same need revision to give effect to the same. Further Remuneration to Partners LLP need to be within the limits prescribed under the income tax act 1962. The limits on partners remuneration is as under Remuneration to Partners in LLP.
S.No Condition Remuneration
1.
On First 3 lakh of Book profit or loss.
Rs.1,50,000 or 90% whichever is more
2.
On Balance
At 60%
Example:
  • If the book profit of a LLP is Rs. 50,000 then the total remuneration which can be paid to all partners cumulatively shall be calculated as follows: – As the book profit is only 50,000 and 90% of it is Only 45,000 but as per the first point above we can make payment of Rs. 1,50,000/- as cumulative remuneration to all partners. Remuneration to Partners in LLP.
  • If the book profit of a LLP is Rs. 2,00,000 then the total remuneration which can be paid to all partners cumulatively shall be calculated as follows: – As the book profit is only 2,00,000 hence 90% of it can be paid as remuneration i.e; Rs. 1,80,000/-
  • Remuneration to Partners in LLP If the book profit of a LLP is Rs. 12,00,000 then the total remuneration which can be paid to all partners cumulatively shall be calculated as follows: – (for the first 300,000/- the 90% of the same at as Rs. 2,70,000) plus 60% of the balance amount (60% of 9,00,000/-) Rs. 5,40,000/-. Thus for a LLP having the book profit of Rs. 12 lacs the maximum remuneration which can be paid to the partners is Rs. 8,10,000/- Only.
  • In case the LLP is having Zero Profit or Loss in a particular year then the partners remuneration can be paid only up to Rs. 1,50,000 as per
The Remuneration to Partners LLP paid to the partners is treated as an expense in the books of LLP and (TDS) Tax is not required to be deducted by a firm from remuneration payable to the partners, because For deduction of tax from salary under Section 192 of the Income Tax Act, 1961, employer-employee relationship must exist. Secondly, Section 15 of the Income Tax Act, 1961 states that, any salary, bonus, commission or remuneration, by whatever name called, due to or, received by a partner of a firm from the firm shall not be regarded as “Salary”. The remuneration paid to partners of a firm is taxable in the hands of receiving partner as business income under Section 28 of the Income Tax Act, 1961. Remuneration to Partners in LLP

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15 thoughts on “Remuneration to Partners in LLP – Limited Liability Partnership”

  1. Hi Quick Question , does the remuneration of the partners that you have shown in the example get treated as post tax for the company or pre-tax consideration

    vish

  2. Sir
    I got a profit of 32k after TDS of 30 percent in LLP
    During my filing of return where should I show this amount and is it necessary

    1. First of all TDS not to be deducted at the time of paying or sharing profit from LLP/partnership firm to its partners because it is exempted from income tax act 10(2A) since LLP has already paid tax on that profit.

      Now you should show it under profit from business/profession

  3. What is the best way I , as a director of an LLP, can draw a sum greater than my salary for a specific personal purpose. How is it explained in the books. For example if i draw a salary of 35k and I require 2lakhs this month. How do a make that available to me legally? What are the ways in which it can be done with the least amount of tax liability.

  4. If your drawings are more than allowable remuneration , then you can treat the same as drawings by you from the firm

  5. On “salary”/”remuneration” from an LLP, would a partner in the LLP be eligible for a standard deduction of 40,000/50,000 (for FY19-20) ??

  6. Sir, if an LLP partner withdraws remuneration of more than Rs. 20 lac in a financial year, would he/she need to register himself for GST (due to business income being more than threshold limit of Rs. 20 lacs)?

  7. Sir, remuneration paid to partner in llp , how it ia shown in the book of accounts….What should be transaction description. Can I take more remuneration in particular year and how then it’s adjusted

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