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
|1||On First 3 lakh of Book profit or loss.||Rs.1,50,000 or 90% whichever is more|
|2||On Balance||At 60%|
- 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 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.
- 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.
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