Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Taxed as a firm
When doctors practise together as a partnership or LLP, the firm is a separate taxpayer taxed at a flat 30% (plus surcharge/cess) on its profit. Before that, it can deduct remuneration and interest paid to the partner-doctors within the Section 40(b) limits — shifting income to the partners.
No double tax on profit share
The partners’ share of the firm’s profit is exempt in their hands — no second tax on distribution. The remuneration and interest they receive is taxable for them as business income. By paying reasonable partner remuneration (deductible at the firm) and leaving the rest as exempt profit share, the overall tax can be optimised. Confirm the current 40(b) limits.
A worked example
Example: three doctors in a clinic LLP earn ₹90 lakh profit before partner pay. The LLP pays ₹36 lakh of permissible remuneration (deductible), taxing the remaining ₹54 lakh at 30%; the doctors pay tax on their remuneration at their slabs, but their profit share is exempt. Note healthcare income is also GST-exempt. Our team can structure the partner-pay split efficiently.