Section 40(b) LLP Partner Remuneration Calculator

Statutory Remuneration Limit · Book Profits Math · Working Partner Salary

Calculate maximum allowable partner salary tax deduction under Section 40(b) to optimize tax liabilities for LLPs & Partnership Firms.

✓ Sec 40(b) Slabs ✓ LLP Tax Optimization

💼 LLP Book Profit & Partner Salary Details

Max Allowable Remuneration (Sec 40(b))

₹—

Firm Net Taxable Profit: ₹—

Sec 40(b) Statutory Breakdown

Slab 1 (First ₹3L @ 90% / ₹1.5L)—
Slab 2 (Balance Profit @ 60%)—
Tax Deductible Salary—
Per Working Partner Max Share —

Section 40(b) LLP Partner Remuneration Guide

Section 40(b) Statutory Limits Formula

1. First ₹6,00,000 of Book Profit (or Loss): Higher of ₹3,00,000 or 90% of Book Profit.

2. Balance Book Profit above ₹6,00,000: 60% of the remaining Book Profit amount.

Remuneration vs Profit Distribution Strategy

Partnership Firms & LLPs pay a flat 30% tax on net profit. Maximizing partner remuneration under Sec 40(b) transfers income from the firm (30% tax) to partners (who can utilize lower individual tax slabs).

💡 Pro Hack: 12% Interest on Capital

In addition to remuneration, Section 40(b) allows LLPs to pay up to 12% simple interest on capital contributed by partners as a tax-deductible expense.

⚡ Minimum ₹3 Lakh Deduction

Even if your LLP incurs a business loss during the year, Section 40(b) allows a minimum partner remuneration deduction of ₹3,00,000.

🛡️ LLP Agreement Clause Mandate

To claim Sec 40(b) deductions, the LLP Deed MUST contain an explicit clause authorizing remuneration and interest payments to working partners.

Section 40(b) Statutory Remuneration Slabs Table

Book Profit Tier Statutory Percentage / Limit Maximum Allowable Deduction
Loss / Negative Book ProfitFlat ₹3,00,000 limit₹3,00,000
First ₹6,00,000 Book ProfitHigher of ₹3L or 90% of ProfitUp to ₹5,40,000
Book Profit above ₹6,00,00060% of excess over ₹6L₹5.4L + 60% of excess

⚠️ 3 Common Section 40(b) Mistakes

  • • Paying Remuneration to Sleeping Partners: Remuneration paid to non-working partners is 100% disallowed under Section 40(b).
  • • No Authorization in Partnership Deed: Paying remuneration without a specific quantification clause in the deed leads to tax disallowance.
  • • Exceeding 12% Interest Cap: Paying more than 12% p.a. interest on capital makes the excess interest non-deductible for the firm.

Frequently Asked Questions

What is Section 40(b) of the Income Tax Act?
Section 40(b) prescribes the maximum limit of remuneration (salary, bonus, commission) paid to working partners of an LLP or Partnership Firm that can be claimed as a tax-deductible expense by the firm.
What are the Section 40(b) statutory remuneration slabs?
1. On the first ₹6,00,000 of Book Profit (or in case of Loss): Higher of ₹3,00,000 or 90% of Book Profit.
2. On the balance Book Profit above ₹6,00,000: 60% of the balance Book Profit.
What is 'Book Profit' for Section 40(b) calculation?
Book Profit is the net profit of the firm computed in accordance with Sections 28 to 44D, BEFORE deducting partner remuneration.
Is partner remuneration taxable in the hands of the partners?
Yes. Remuneration allowed as a deduction to the firm under Sec 40(b) is taxable in the hands of individual working partners under the head 'Profits and Gains of Business or Profession' (PGBP).
Is profit share received by LLP partners taxable?
No! Share of profit received by partners from an LLP/Partnership Firm is 100% tax-exempt in the hands of the partners under Section 10(2A) because the firm pays 30% tax on net profits.
Can non-working sleeping partners receive remuneration under Sec 40(b)?
No. Section 40(b) strictly mandates that remuneration can be paid ONLY to active 'working partners' authorized by the Partnership Deed.
What is the maximum interest rate on partner capital allowed under Sec 40(b)?
Section 40(b) permits a maximum simple interest of 12% per annum on capital contributed by partners, provided it is authorized by the LLP agreement.
What happens if an LLP pays remuneration exceeding Sec 40(b) limits?
The excess remuneration paid above Section 40(b) limits is disallowed as a firm expense. The firm pays 30% tax on the excess, and the excess portion becomes non-taxable in the partner's hands.

Related Business & Tax Calculators

GST LUT Export Tax

Zero-rated export savings

Presumptive Tax Matrix

Sec 44AD vs 44ADA

Freelance Rate Calculator

Hourly & project quotes

Income Tax Calculator

Old vs New regime