A partnership firm that has been allowed presumptive taxation- Will it be allowed to pay salaries and interest on capital to the extent permissible under Income Tax Act, 1961? And will any excess paid (For example; Interest on Capital paid at 15% i.e. 3% more than the limit of 12%) be taxable in the hands of the partner? (The usual treatment is that appropriation would be disallowed and included in income of firm)?
Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. There is no taxability of excess interest paid.