About This Tool
The Partner Remuneration Calculator computes the maximum permissible remuneration payable to working partners of a firm or LLP under Section 40(b)(v) of the Income Tax Act (corresponding to Section 198 of the IT Act 2025). Remuneration paid in excess of the Section 40(b) limit is disallowed as a deduction from firm profits. The limits (w.e.f. AY 2025-26 per Finance (No. 2) Act 2024) are: on the first ₹6 lakh of book profit — ₹3,00,000 or 90% whichever is higher; on balance — 60%.
Frequently Asked Questions
What is 'book profit' for Section 40(b)?
Book profit = Net profit as per P&L + Partner remuneration + Excess interest + Other inadmissible items − Deductions. It is defined in Explanation 3 to Section 40(b) of the IT Act.
What are the Section 40(b) limits for FY 2026-27?
On the first ₹6,00,000 of book profit: ₹3,00,000 or 90% whichever is higher. On balance book profit: 60%. On loss or nil book profit: ₹3,00,000 flat (for all working partners combined).
Is interest to partners also restricted?
Yes. Interest paid to partners is restricted to 12% simple interest per annum under Section 40(b)(iv). Interest in excess of 12% is disallowed.
Must remuneration be authorised in the partnership deed?
Yes — mandatory. Remuneration not authorised by the partnership deed (or exceeding the deed amount) is fully disallowed irrespective of the Section 40(b) ceiling.