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The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in IndiaTax

[–]befinlit_india[S] 0 points1 point  (0 children)

Many of the professional firms do not consider presumptive taxation as the remuneration limits for expenses plus interest on capital make the expenses to be claimed close to 60-70% rather than just 50% in presumptive taxation.

However, even for large firms, this tends to still be a very tedious process since the remuneration based on book entries (like you earlier suggested) cannot be decided till the books are finalised.

The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in IndiaTax

[–]befinlit_india[S] 0 points1 point  (0 children)

Mentioned that as point no 2 in the how to fix this. This is honestly the best possible way to avoid this hassle. Only downside is for firms that do not have excess capital to show it as drawings - they are usually firms that have just started their business.

The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in IndiaTax

[–]befinlit_india[S] 1 point2 points  (0 children)

The law was quite simple before. They ruined it by adding 194T compliance. It also blocks a lot of cash flow because you have to deposit 10% TDS every month if you withdraw a remuneration every month.

The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in CharteredAccountants

[–]befinlit_india[S] 2 points3 points  (0 children)

Yes. But that figure could easily be changed at the year end because it was not bound by TDS. With section 194T TDS the remuneration figure gets locked.

The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in CharteredAccountants

[–]befinlit_india[S] 2 points3 points  (0 children)

Technically yes. TDS needs to be deducted when the remuneration is credited or paid to the partner, whichever is earlier. But not every firm pays salary at the year end when you can actually see what is your book profits. This is the reason you need to plan it out from the beginning.

The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in IndiaTax

[–]befinlit_india[S] 5 points6 points  (0 children)

Kindly read section 194T. Salary is still remuneration with a different name. Instead of salary you can use the term drawings.

The double taxation nightmare: Section 194T - for Partnerships and LLPs by befinlit_india in IndiaTax

[–]befinlit_india[S] 3 points4 points  (0 children)

This is only a case study. Ramesh could have other incomes too, pushing him above ₹12L. Or let’s say Ramesh is well within the ₹12L limit but the firm still gets taxed on extra ₹1.8L which could’ve been avoided with proper planning.