PARTNERSHIP FIRMS & LLPS
Partner remuneration
& firm tax.
Assessment year 2026–27Financial year 2025–26
Check your remuneration limit, compare firm tax and understand each partner’s estimated TDS.
For 1 April 2025–31 March 2026, under the Income-tax Act, 1961. Regular books-based cases; presumptive taxation and other special cases need review.
Partner remuneration & firm tax · FY 2025–26 / AY 2026–27
+91 9049312266 · hmahajan.143@gmail.com
Example calculation
Firm-level comparison before partner personal tax
Firm tax reduction: ₹2,43,360This is the firm’s estimated reduction. Partners’ own income tax is additional and is not calculated here.
- Remuneration paid / credited or planned
- ₹7,80,000
- Ceiling after deed / eligibility restriction
- ₹7,80,000
- Deed basis
- Statutory ceiling authorised
| Firm calculation | Before remuneration | After allowable remuneration |
|---|---|---|
| Book profit / business income | ₹10,00,000 | ₹2,20,000 |
| Other income considered | ₹0 | ₹0 |
| Net income before rounding | ₹10,00,000 | ₹2,20,000 |
| Taxable income considered | ₹10,00,000 | ₹2,20,000 |
| Income tax · 30% | ₹3,00,000 | ₹66,000 |
| Surcharge before relief | ₹0 | ₹0 |
| Less: marginal relief | ₹0 | ₹0 |
| Health & Education Cess · 4% | ₹12,000 | ₹2,640 |
| Total firm tax (rounded) | ₹3,12,000 | ₹68,640 |
| Effective rate on taxable income | 31.20% | 31.20% |
Before firm tax credits, advance tax, interest and fees. This is not a balance-payable or refund calculation. It assumes the section 40(b) book profit entered also represents adjusted ordinary business income before remuneration.
Review the deed.
Plan the remuneration.
Discuss deductibility, partner tax and TDS compliance with our office.
Ask M H ConsultancyPARTNER ALLOCATION
Remuneration & annual TDS.
Gross remuneration and interest for all listed partners. TDS is estimated on the full covered annual amount when it exceeds ₹20,000 per partner.
| Partner | Share | Gross remuneration | Interest | Covered total | Annual TDS estimate | Net covered payments |
|---|---|---|---|---|---|---|
| Partner 1 | 50.00% | ₹3,90,000 | ₹0 | ₹3,90,000 | ₹39,000 | ₹3,51,000 |
| Partner 2 | 50.00% | ₹3,90,000 | ₹0 | ₹3,90,000 | ₹39,000 | ₹3,51,000 |
| Total | 100% | ₹7,80,000 | ₹0 | ₹7,80,000 | ₹78,000 | ₹7,02,000 |
Section 194T applies from 1 April 2025. Deduction is triggered by payment or credit, whichever is earlier, including credit to a partner’s capital account. The ₹20,000 threshold covers sums paid, credited or likely to be paid or credited during the year. This annual illustration does not work out the deduction or deposit due on a particular date. Read section 194T.
SECTION 40(b)
How the limit works.
- Book profit up to ₹6 lakh
- Higher of ₹3 lakh or 90% of book profit. For a loss, the statutory ceiling is ₹3 lakh.
- Book profit above ₹6 lakh
- ₹5.40 lakh plus 60% of the amount exceeding ₹6 lakh.
- Apply the deed restriction
- The deduction cannot exceed eligible remuneration actually paid or payable, the deed-authorised amount or the statutory ceiling. Eligibility and the authorised period must also be satisfied.
The statutory maximum is a ceiling for the firm as a whole, shared by all working partners. It does not establish the best amount to pay. Consider the partners’ own tax and the deed terms alongside the firm’s tax reduction.
Official rules & practical scope
Sources checked on . The calculator does not determine tax residency, individual partner tax, partner-interest deductibility or TDS-default adjustments.
- Section 40(b) · remuneration limit and book profit
- Section 194T · partner payments, timing and threshold
- Partnership firm / LLP · AY 2026–27 tax rates
- Income Tax Department · LLP remuneration guidance
Partner remuneration is generally business income in the partner’s hands. This tool shows the firm’s tax effect and an annual TDS illustration; it does not compare the combined tax of the firm and its partners.