Partnership taxation runs on its own logic: the firm pays tax at a flat rate, and what partners receive is shaped by rules that reward getting the deed right.

The structure

  • The firm pays tax on its profits at the flat rate applicable to firms (plus surcharge and cess as applicable)
  • Profit share received by partners is exempt in their hands — already taxed at the firm level
  • Remuneration and interest paid to working partners are deductible to the firm within statutory limits, and taxable for the partners as business income

Why the deed is a tax document

Partner remuneration and interest are deductible only if authorised by the deed. A silent or outdated deed forfeits deductions the law otherwise allows — one of the most common (and most avoidable) leakages we see.

Planning the mix

The split between remuneration, interest and profit share changes total tax across the firm and partners. It deserves an annual review, not a one-time setting.

We draft-review deeds and optimise the mix — tax planning · firm ITR filing.