| Question And Answer | |
|---|---|
| Subject: | Lumpsum Consideration on retirement from firm who is having debit balance U/Sec. 45(4) of income Tax Act |
| Category: | Income-Tax |
| Querist: | manali B |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Lump sum consideration, Retirement of partner |
| Date: | September 16, 2022 |
X is a partner in a firm along with other partners. Firm has some assets, properties etc. X has a debit balance in the firm of 10 lakhs .
He leaves the firm With lump sum consideration 50 lakhs .
Any tax implications for firm or partner??
The status of debit balance in the firm ??
The firm will attract Capital Gains under section 45(4) of the Income-tax Act, 1961. As per the formula, the Capital gains will be Rs. 60 lakhs. [ Capital Gains = 50 lakhs – ( – 10 lakhs)]
The nature of capital gains i.e., short term or long term will be determined as per Rule 8AA/8AB of the Income-tax Rules, 1962.
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