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Home›India›Partnership Firm Tax Calculator

Partnership Firm Tax Calculator India — FY 2025-26

Calculate partnership firm tax at flat 30% with surcharge and cess. Check Section 40(b) remuneration limits (enhanced from AY 2025-26). See partner's individual tax with exempt profit share under Section 10(2A). Compute new Section 194T TDS on payments to partners. Updated for Finance Act 2024 changes.

Calculate partnership firm tax with Section 40(b) remuneration limits
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Net profit as per P&L before deducting remuneration under 40(b)
Only working partners can receive remuneration
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Total salary/remuneration paid to all working partners
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Interest paid on partners' capital (max 12% p.a. deductible)
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How to Use This Calculator

Firm-Level Tax tab

Enter the firm's book profit (net profit before partner remuneration deduction), number of working partners, total remuneration paid, and total interest on capital. The calculator computes the Section 40(b) allowable remuneration limit, deducts allowable amounts, and calculates tax at 30% plus surcharge (if applicable) and 4% cess. It also checks if your remuneration is within the 40(b) limit.

Partner's Tax tab

Enter an individual partner's remuneration from the firm, interest on capital, share of profit, and other income outside the firm. The calculator shows how profit share is exempt under Section 10(2A) while remuneration and interest are taxable. It computes total tax payable under the selected tax regime (new or old).

Section 194T TDS tab

Enter the total annual payment to a partner and the payment type. The calculator computes TDS at 10% (if above the &rupee;20,000 threshold), net payment, quarterly TDS deposit amounts, and the applicable return form. This is the new Section 194T effective from 1 April 2025.

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The Formula

Section 40(b) Remuneration Limit (AY 2025-26 onwards):
On first &rupee;6,00,000 of book profit: &rupee;3,00,000 or 90% — whichever is higher
On balance of book profit: 60%
If book profit is negative or zero: &rupee;3,00,000

Book Profit:
Book Profit = Net Profit as per P&L + Remuneration to partners (added back)
(Section 40(b) book profit is computed BEFORE deducting partner remuneration)

Firm Tax:
Tax = Taxable Income × 30%
Surcharge = Tax × 12% (if income > &rupee;1 Crore)
Cess = (Tax + Surcharge) × 4%
Total = Tax + Surcharge + Cess

Section 194T TDS (from FY 2025-26):
TDS = 10% of payment to partner
Threshold: aggregate payment > &rupee;20,000 per FY
Covers: salary, remuneration, commission, bonus, interest on capital

Partner's Tax:
Taxable = Remuneration + Interest + Other Income
Exempt = Share of Profit (Section 10(2A))
Tax = As per individual slab rates (new or old regime)

Worked Example

Mehta & Associates — CA firm with 3 partners

A CA partnership firm with 3 working partners. Book profit (before partner remuneration) is &rupee;25,00,000. The firm pays total remuneration of &rupee;18,00,000 (&rupee;6L per partner) and total interest on capital of &rupee;2,40,000.

Step 1: Section 40(b) limit check

Book profit&rupee;25,00,000
First &rupee;6L: max(&rupee;3L, 90% of &rupee;6L)&rupee;5,40,000
Balance (&rupee;25L − &rupee;6L = &rupee;19L): 60%&rupee;11,40,000
Total 40(b) limit&rupee;16,80,000
Remuneration paid&rupee;18,00,000 (exceeds limit by &rupee;1,20,000)

Step 2: Firm tax calculation

Book profit&rupee;25,00,000
Less: allowable remuneration&rupee;16,80,000 (capped at 40(b) limit)
Less: interest on capital&rupee;2,40,000
Taxable income&rupee;5,80,000
Tax at 30%&rupee;1,74,000
Cess at 4%&rupee;6,960
Total tax&rupee;1,80,960

Step 3: Partner's individual tax (one partner)

Remuneration from firm&rupee;6,00,000 (taxable as PGBP)
Interest on capital&rupee;80,000 (taxable as PGBP)
Share of profit&rupee;3,00,000 (EXEMPT u/s 10(2A))
Total taxable income&rupee;6,80,000 (remuneration + interest only)

Step 4: Section 194T TDS (per partner)

Total payment (remuneration + interest)&rupee;6,80,000
Above &rupee;20,000 threshold?Yes
TDS at 10%&rupee;68,000
Net payment to partner&rupee;6,12,000

Verdict: The firm's effective tax rate is ~31.2% on &rupee;5.8L taxable income. The excess remuneration of &rupee;1.2L is disallowed under Section 40(b). Each partner receives &rupee;3L as tax-free profit share. The firm must deduct TDS of 10% (&rupee;68,000 per partner) under the new Section 194T and deposit it quarterly.

Partnership Firm Tax Rates at a Glance (FY 2025-26)

Firm tax rate structure
Component Rate Condition
Base tax rate 30% Flat, all income levels
Surcharge 12% If total income > &rupee;1 Crore
Health & Education Cess 4% On tax + surcharge
Effective rate (income ≤ &rupee;1Cr) 31.20% 30% × 1.04
Effective rate (income > &rupee;1Cr) 34.944% 30% × 1.12 × 1.04
Section 40(b) remuneration limits — old vs new
Book Profit Slab Old Limit (till AY 2024-25) New Limit (AY 2025-26+)
First &rupee;6,00,000 &rupee;1,50,000 or 90% &rupee;3,00,000 or 90%
Balance of book profit 50% 60%
If book profit negative/zero &rupee;1,50,000 &rupee;3,00,000

Limits doubled by Finance Act 2024. Only working partners eligible. Must be authorized by partnership deed.

Section 194T TDS — quick reference
Parameter Detail
Effective date 1 April 2025 (FY 2025-26)
TDS rate 10% (20% if no PAN)
Threshold Aggregate payments > &rupee;20,000/FY
Covered payments Salary, remuneration, commission, bonus, interest on capital
NOT covered Share of profit (exempt under 10(2A))
Deduction timing At credit or payment, whichever is earlier
Return form Form 26Q (quarterly)
Partner's income taxation summary
Income Type Tax Head Tax Treatment
Remuneration/salary PGBP Taxable at individual slab
Interest on capital PGBP Taxable at individual slab
Commission/bonus PGBP Taxable at individual slab
Share of profit Section 10(2A) EXEMPT

FAQ

No. Under Section 40(b), only working partners — those who are actively involved in the conduct of the firm's business — can receive remuneration (salary, bonus, commission) from the firm. A sleeping partner (one who contributes capital but does not participate in day-to-day management) can only receive interest on capital (up to 12% p.a.) and share of profit. Any remuneration paid to a sleeping partner is disallowed as a deduction for the firm.
Yes. Section 194T applies to all partnership firms and LLPs, irrespective of their size, turnover, or number of partners. Any LLP making payments of salary, remuneration, commission, bonus, or interest on capital to its designated partners or partners must deduct TDS at 10% if the aggregate payment to a partner exceeds &rupee;20,000 in a financial year. The LLP must obtain a TAN, deposit TDS quarterly, and file Form 26Q. This is effective from 1 April 2025.
Book profit for Section 40(b) is the net profit as per the Profit & Loss account, computed BEFORE deducting remuneration paid or payable to partners. It is also computed before deducting interest paid to partners if the interest exceeds 12% p.a. In other words, you start with the net profit, add back partner remuneration, and add back any excess interest (above 12%). This adjusted figure is the "book profit" used to calculate the 40(b) limit. Note: Book profit is different from taxable income — it is computed from the P&L, not from tax computations.
If the partnership deed does not specifically authorize remuneration to working partners, no remuneration is deductible under Section 40(b), regardless of whether it was actually paid. The deduction is allowed only if: (1) the partnership deed authorizes remuneration to working partners, (2) the deed specifies the amount or manner of calculating remuneration, and (3) the remuneration does not exceed the 40(b) limits. If the deed is silent on remuneration, any amount paid will be disallowed and added back to the firm's taxable income. Ensure your partnership deed is drafted properly to claim this deduction.
Yes. LLPs (and partnership firms) are subject to Alternate Minimum Tax (AMT) at 18.5% (plus surcharge and cess) if they claim certain deductions under Chapter VI-A (e.g., Section 80-IA, 80-IB, 80-IC) or Section 10AA. If the firm's normal tax liability is lower than the AMT liability, it must pay tax at the AMT rate. AMT credit can be carried forward for up to 15 years and set off against future tax liability when normal tax exceeds AMT. Most regular partnership firms and LLPs without special deductions are not affected by AMT.

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