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On the first Rs 6,00,000 of book profit (or in case of a loss), the maximum remuneration deductible to working partners under section 40(b)(v) is:
ARs 3,00,000 or 90 per cent of book profit, whichever is higher
BRs 3,00,000 or 90 per cent of book profit, whichever is lower
CRs 1,50,000 or 60 per cent of book profit, whichever is higher
DA flat 60 per cent of book profit for all levels of profit
Answer & Solution
Correct answer: A. Rs 3,00,000 or 90 per cent of book profit, whichever is higher
1. Section 40(b)(v) sets slab-wise ceilings on working-partner remuneration linked to book profit.
2. On the first Rs 6,00,000 of book profit, or where there is a loss: the limit is Rs 3,00,000 or 90% of book profit, whichever is HIGHER.
3. On the balance of book profit: 60% of that balance.
4. Option B inverts higher into lower — the guaranteed floor of Rs 3,00,000 exists precisely for low-profit and loss years.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 84_
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