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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 underRemuneration to Partners in LLP

remunerationm to partners in llp

Sl. NoConditionRemuneration
1On First 3 lakh of Book profit or loss.Rs.1,50,000 or 90%  whichever is more
2On BalanceAt 60%

Example:

  1. 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
  2. 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/-
  3. Remuneration to Partners in LLPIf 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.
  4. 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 point No 1 of above table.
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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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setindiabiz

Team SETINDIABIZ, is a vibrant, updated and experienced people with professional qualifications such as CA, CS, CMA & Advocates. With our presence all over India, we are in a better situation to serve entrepreneurs in securing 100% compliance, all the time.

11 Comments

  1. Neeraj

    Sir, I think there is some mistake in example third given by you….. It should be 90% of first 3,00,000 and 60% of remaining 9 Lacs

    Reply
    • Sanjeev Kumar

      Thank you Neeraj, It was an error, now corrected

      Reply
  2. vish

    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

    Reply
  3. Khalamdar

    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

    Reply
    • Sanjeev Kumar

      Dear Mr. Kalamdar, We shall need more information to advise you on your transaction, Kindly send complete details to help@setindiabiz.com

      Reply
  4. pooja jain

    is there any cap on maximum remuneration in LLP.

    Reply
  5. Mikhail

    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.

    Reply
  6. CA Satish Mehta

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

    Reply
  7. Ananth

    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) ??

    Reply
    • ca naveen Kumar amin

      no, since it is not considered as salary. Further u have to file ITR 3 as a partner in LLP

      Reply
  8. AA

    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)?

    Reply

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