Provisions of section 10(2A) of the Income Tax Act exempts share of profit received by a partner in the total income of the partnership firm/LLP. The main objective of granting the exemption,under section 10(2A) to the share of profit received by the partner, is the avoidance of double taxation.
The present article meticulously explains the exemption available under section 10(2A) of the Income Tax Act.
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Before understanding the exemption available under section 10(2A) of the Income Tax Act, let us first understand what the term ‘Firm’ means under the Income Tax. The term ‘Firm’ is defined under section 2(23)(i) of the Income Tax Act. As per the said definition, ‘Firm’ includes the following –
1. The firm, as defined in the Indian Partnership Act, 1932; and
2. Limited Liability Partnership, as defined in the Limited Liability Partnership Act, 2008.
Section 10(2A) of the Income Tax Act provides the following exemption –
It is important to mention here that the exemption is available only towards the share of profit received by the partner of the firm or Limited Liability Partnership. In other words, it doesn’t cover the amount of interest on capital and remuneration received by the partner of the firm or Limited Liability Partnership.
Suppose M/s. ABC is a partnership firm which consists of three equal partners Mr. A, Mr. B and Mr. C. During the year, the total income of the firm is INR 3 Lakhs and remuneration paid to each partner is INR 10,000 per month. Accordingly, profit credited to each partners account is INR 1 Lakhs. Tax treatment under Income Tax would be –
Table – Articles on Section 10 Exemptions
What if i receive share of profit from a firm incorporated outside India?
i received share of profit for partnership firm . in which form to file in ITax and where it show
The amount of profit earned by partners in firm is exempted.
1. Whether there is any cap?
2. The same is considered in which case i.e. if the entire profit is made taxable by firm or otherwise?