Question And Answer
Subject: 45[4] etc
Querist: BS
Answered by:
Tags: , ,
Date: May 17, 2022
Query asked by BS

Even after amendments , if a retiring partners takes only capital balance in his account , what will be impact on taxation of firm/partner of reconstitution caused by retirement ?

Will it amount to relinquishment of rights in FMV of properties to new partners at Zero value ?

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There is a formula provided under section 45(4) of the Income-tax Act, 1961 (Act) for computation of capital gains. According to it, any excess received over and above the capital balance would amount to Capital Gains.

The Firm is liable to tax on the excess paid to the partners over and above the capital balance and the firm claims deduction of the same under section 48(iii) of the Act.

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