Can a silent partner be paid interest and remuneration?

Partner to be paid Interest & Remuneration must be a working partner. The partners of a partnership firm whose accounts are to be credited with the salary, remuneration, commission, bonus or by whatever name called, by the firm, must be working partners and not the silent partners.

How much interest can be paid to a partner in a partnership?

7. Any interest to any partner exceeding 12% disallowed Section 40 (b) of Income Tax Act places some restrictions and conditions on the deductions of expenses available to an assessee assessable as a partnership firm in relation to the remuneration and interest payable to the partners of such firm.

Can a partnership be disallowed under Section 40 ( B )?

If such a clause is contained in the partnership deed then remuneration to partners may be disallowed as per section 40 (b) in view of the above circular. However In Commissioner of Income Tax Versus M/s.

When is interest not taken into account under Section 40 ( B )?

Explanation 2 to section 40 (b) further provides that where an individual is a partner in a firm otherwise than as partner in a representative capacity, interest paid by the firm to such individual shall not be taken into account for the purposes of this clause, if such interest is received by him on behalf, or for the benefit, of any other person.

What happens when you have a working interest in a partnership?

Holding a working interest in a partnership creates complications, due to certain deductions being calculated individually per partner. Basis allocations can be complicated, and require careful recordkeeping for all partners. The depletion allowance is a tax deduction that is calculated in one of two ways.

How does a working interest in a well work?

How a Working Interest Works. All investors within the arrangement select a well operator, who then also fills a role as a working interest. The well operator, after all operating expenses have been covered, divides any additional funds between those holding a working interest, creating a source of income.

Can a non working partner be paid interest on capital?

Current or New partnership deed cannot authorize the payment of interest for any earlier period. Payment of Interest on capital can be made to working or non-working partner. However, Remuneration is paid only to working partners.

What are the different types of working interest?

There are two types of working interest: operated and non-operated. Operated working interest has a designated operator that makes all operational decisions. The operator selects wells, determines drilling, and handles all the day to day operations.