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.
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
|1||Section 10(1)– Exemption to Agricultural Income|
|2||Section 10(2) Exemption to amount received by co-parcener from HUF|
|3||Section 10(2A) Exemption towards share of income from firm/LLP|
|4||Exemptions towards interest to non-residents | Section 10(4) & 10(4B)|
|5||Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company|
|6||Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India|
|7||Exemption- Section 10(8A) & section 10(8B) of Income Tax Act|
|8||Exemption towards commuted value of pension Section 10(10A)|
|9||Exemption towards retrenchment compensation received by workman Section 10(10B)|
|10||Section 10(10BC) Exemption towards compensation received on account of any disaster|
|11||Section 10(10C) Exemption of amount received on voluntary retirement|
|12||Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)|
|13||Section 10(10D) Exemption towards amount received under a Life Insurance Policy|
|14||Exemption for amount received from Statutory & Recognized PF|
|15||Exemption for payment from approved superannuation fund Section 10(13)|
|16||Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)|
|17||Section 10(15) Exemption- Interest on Bonds, Debentures, Securities|
|18||Scholarship exemption | Section 10(16) | Income Tax Act 1961|
|19||Exemption towards income for administration of Charitable or Religious Institution|
|20||Section 10(32) Exemption | Income of minor clubbed with parent|
|21||Exemption for dividend income received from Indian Company | Section 10(34)|
|22||Section 10(34A) Exemption towards income received by a shareholder on buy back of shares|
|23||Section 10(35) Exemption towards income received from units|
|24||Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land|