Partner Remuneration (40b) Calculator
Compute the maximum remuneration a firm or LLP can pay its working partners and claim as a deduction — under the revised Section 40(b) slabs.
Section 40(b) slab-wise breakdown
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Disclaimer: Indicative estimate of the statutory ceiling under Section 40(b). The remuneration actually deductible is the lower of this limit and the amount authorised by the partnership deed and paid to working partners. Limits per Finance (No.2) Act 2024, effective AY 2025-26.
Section 40(b) — the revised limits from AY 2025-26
The Finance (No.2) Act 2024 raised the ceiling on partner remuneration deductible by a firm or LLP. Effective AY 2025-26, the first slab of book profit was widened from ₹3 lakh to ₹6 lakh and the minimum floor was raised to ₹3 lakh, so more of the remuneration paid to working partners is now allowed as a business deduction.
Maximum remuneration slabs
The deductible ceiling is built up in two tiers of book profit. The floor of ₹3 lakh protects small or loss-making firms.
| On the first ₹6,00,000 of book profit, or in case of a loss | ₹3,00,000 or 90% of book profit — whichever is higher |
| On the balance of book profit (above ₹6,00,000) | 60% of the balance |
How the ceiling is computed
Take book profit → apply 90% (or the ₹3L floor) to the first ₹6 lakh → add 60% of anything above ₹6 lakh. Here are three worked examples:
Conditions to claim the deduction
Authorised by the partnership deed
Remuneration is deductible only if the partnership deed provides for it — either a fixed amount or a method of quantification. Payment for a period before the deed authorised it is not allowed.
Paid to working partners only
Only remuneration to a working partner — a partner actively engaged in the conduct of the firm's business — qualifies. Salary, bonus or commission to a sleeping (non-working) partner is fully disallowed.
Within the Section 40(b) ceiling
Any remuneration exceeding the statutory limit above is added back and taxed in the firm's hands. Only the amount within the ceiling is a deductible business expense.
Interest to partners — 12% cap
Interest on a partner's capital or loan is separately deductible up to 12% p.a. simple interest, if authorised by the deed. Interest is deducted before arriving at book profit for the remuneration calculation.
How much partner remuneration is deductible?
Under section 40(b), on the first ₹6,00,000 of book profit — or in the case of a loss — the higher of ₹3,00,000 or 90% of the book profit; and 60% of the balance book profit above ₹6,00,000. Anything paid beyond that is disallowed to the firm.
What conditions must be met for the deduction?
The partnership deed must authorise the remuneration and specify the amount or the manner of computing it, the payment must be to a working partner, and it cannot relate to a period before the date of the deed.
How is book profit computed?
Net profit as per the profit and loss account, computed under the head profits and gains of business, before deducting partner remuneration but after adding back any remuneration already debited. Interest to partners within the 12% limit is deducted first.
Is interest to partners subject to a limit?
Yes. Interest on partners' capital is deductible up to 12% per annum simple interest, and only if authorised by the deed.
Is TDS deducted on partner remuneration?
Yes. Section 194T requires a firm to deduct 10% TDS on salary, remuneration, commission, bonus or interest paid to a partner where the aggregate exceeds ₹20,000 in a financial year.
Disclaimer: This tool gives indicative results for general guidance only and is not professional advice. Please verify with a qualified CA before acting on the numbers.