GENERAL KNOWLEDGE

Detailed explanation-1: -Section 40b of the Income Tax Act, 1961 specifies the maximum limit of interest on capital and remuneration payable to partners in a partnership firm. The Income Tax Department doesn’t allow any amount above the prescribed limit as a deduction.

Detailed explanation-2: -Section 40b determines the maximum amount of remuneration and interest on capital payable to a partner under Income Tax Act. The amount over the specified limit is not allowed as a deduction to a partnership firm.

Detailed explanation-3: -As per section 40(b) only that salary, remuneration, bonus, commission etc payable to working partners or any payment of interest payable to any partner will be allowed as deduction only if it is authorized by the partnership deed.