Partner Remuneration Calculator
The section 40(b) ceiling, and the excess added back.
Enter the firm's profit before interest and remuneration. We will compute allowable interest, book profit and the remuneration ceiling.
Order of computation matters
Book profit for section 40(b) is arrived at after allowing interest on capital but before partner remuneration. Computing the ceiling on the wrong base gives the wrong answer, usually a generous one.
The deed has to say so
Remuneration and interest are allowable only if the partnership deed authorises them and quantifies the manner of computation. A deed that is silent, or that merely permits "such remuneration as may be decided", does not support the deduction.
Working partners only
A sleeping partner cannot be paid remuneration that the firm deducts. Interest on capital is available to any partner.
Both sides of the same rupee
Remuneration and interest allowed to the firm are taxable as business income in the partner's hands. The disallowed excess is not taxed again on the partner, which is the symmetry section 28(v) preserves.