• Find out the firms income under the different heads of income, ignoring the prescribed exemptions. The heads of income are:-
  
  
  • Income from House Property
  
  
  • Profits and Gains of Business or Profession
  
  
  • Capital Gains
  
  
  • Income from other sources including interest on securities, winnings from lotteries, races, puzzles, etc. ('Salary' income head is not included)
    
    


• The payment of remuneration and interest to partners is deductible if conditions of section 184 and section 40(b) of the Income Tax Act are satisfied. Any salary, bonus, commission or remuneration which is due to or received by partners is allowed as a deduction from income of the partnership firm and the same is taxable in the hands of partners.


• Make adjustments on account of brought forward losses/ disallowances of interests, salary, etc paid by firm to its partners. The total income so obtained is the "gross total income".


• From the "gross total income", make the prescribed deductions and the balancing amount is the "net income" of the firm.

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