V B Prabhu Verlekar
Q. Are any changes made recently concerning taxation of partnership firms?
Vikas Vassant Sawkar, Panaji.
With effect from 01.04.2025, under newly introduced section 194T of the Income Tax Act, partnership firms will be required to deduct tax at source at 10 per cent on all payments made to the partners such as salary, remuneration, commission, bonus and interest at the time of credit of such sum to the capital or current account of the partners or at the time of payment thereof, whichever is earlier, if aggregate of such payments exceeds Rs 20,000, in a financial year. This provision does not apply to share of profit credited or paid to partners. Further, in the computation of remuneration to partners, the new limits for claiming expenditure are, on the first Rs 6,00,000 of the book-profit or in case of a loss – Rs 3,00,000 or at the rate of 90 per cent of the book-profit, whichever is more on the balance of the book-profit – at the rate of 60 per cent
Remuneration exceeding above limits shall not be allowed as expenditure.
Q. What can be seized by the tax authorities if survey of the business premises is carried out?
Ramnik S Zaveri, Sambhaji Nagar
A survey is conducted u/s 133A of I.T. Act at the business premises only. The IT department has the power to impound books of accounts and documents and other records, electronic or otherwise and retain them for a period of 15 days. This period can be extended with the prior approval of the higher authority. Documents include all electronic data stored on computers, servers etc. However, cash, gold, jewelry, stock in trade or other assets cannot be seized but this can be listed, verified and valued.
Q. The central government has reintroduced standard deduction of Rs 75,000 as deduction while computing income tax chargeable under head salaries. I would like to know whether such deduction is applicable to government pensioners while computing income tax.
Vishwanath Ghadi, Usgao.
The pension received by a taxpayer from his former employer is taxable under the head- salaries. Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 75,000, or the amount of pension, whichever is less, under Section 16 of the Act under the new regime. If you are opting for the old regime, the standard deduction is Rs 50,000. Please note that family pension paid on death of spouse is not eligible for standard deduction. However, a deduction of one-third of such income or Rs 25,000, whichever is less is allowed u/s 57 under the new regime. If you are opting for the old regime, the deduction u/s allowed is Rs 15,000.
Q. In the past years I had invested in NSS to get special additional deduction from taxable income. This accumulated amount along with interest has grown substantially. I want to withdraw this amount and invest in plot of land to get better returns. What are the tax consequences?
Ramesh J Nevgui, Mapusa.
It is good that you wish to withdraw amount from NSS. Withdrawals made before August 29, 2024 were fully charged to tax and TDS was deducted @ 20% u/s 194EE. Under Finance Act 2025, both principal and interest withdrawn by individuals from NSS accounts are completely exempt from income tax if withdrawn on or after 29 August, 2024. Also CBDT Notification No. 27/2025 dated April 4 2025 has clarified that no TDS should be deducted u/s 194EE.
Q. Under the advice of a tax preparer, I made false claims for medical insurance, charitable donations, in my tax returns filed for last few years. These tax returns are processed and I also got tax refunds. I have now anxiety and sleepless nights after reading recent press reports of investigation by tax authorities to unearth such false claims and penalize tax payers with AI tools. What can I do now to set the things right?
Name withheld on request.
You can and should withdraw your wrong claims to avoid potential scrutiny and penalties. If you have filed your tax return for financial year March 31 2025 already, you can file revised return u/s 139(5) along with tax and interest for short payment. In case of earlier years, you are already past deadline for a revised return. Hence you should file an updated return under section 139(8A). This can be done for past four years by paying additional tax of 25%, 50%, 60%, /70% of the tax plus interest. Not acting on this may lead to notices, proceedings and then penalties up to 200% and even prosecution u/s 276C.
Q. On Guru Poornima Day, my past students gave me a purse of Rs 5 lakh as Guru Dakshana at a function. I returned the same by contribution of Rs 25,001 for use of the school laboratory. How this will be treated for income tax?
Yeshwant R. Sahastrabudhe, Marcela.
Even though it was a gesture of respect, any voluntary monetary gift received by a professional such as teacher, doctor etc. is taxable under section 28 of the Income Tax Act as profits and gains from business or profession. This is not considered as a tax free gift. However, if you are voluntarily returning this amount before depositing in the bank or utilizing the money immediately, at the same event on the same occasion, it can be argued that this amount was never received as the income was passed by overriding title. As far as donation of Rs 25,001 given to school you can claim deduction up to 50 per cent of this amount provided the school is registered u/s 80G of Income Tax Act if you are opting for the old regime of taxation.
The writer is a well established, senior practising chartered accountant with wide experience in taxation and finance. He is also a strategist in turn round management of institutions.
