FORM DPT-3 FOR FY 2025–26 The Ultimate Practical Filing Guide

 By CA Surekha Ahuja

Column-by-Column Reporting - CC, OD & Term Loans - Reconciliation Framework - Compliance Risks - All FAQs Resolved

Filing Deadline Alert

Due Date: 30 June 2026

Particulars	Exposure
Base Penalty for Late Filing	₹5,000
Continuing Default	₹500 per day
Serious Deposit Violations under Section 73	Penalty up to ₹1 Crore or 2× Deposit Amount (subject to statutory limits) and other consequences under the Companies Act

Important: DPT-3 for FY 2025–26 should be filed on or before 30 June 2026. Delayed filing may attract additional fees and continuing default consequences under the Companies Act, 2013.

Introduction & Legal Framework

Form DPT-3 is prescribed under Rule 16 and Rule 16A of the Companies (Acceptance of Deposits) Rules, 2014, read with Sections 73 to 76 of the Companies Act, 2013.

The form is used for reporting:

• Deposits accepted by a company; and/or
• Outstanding receipts of money not treated as deposits under Rule 2(1)(c).

Every company other than a Government company should evaluate its reporting obligation under Rule 16 and Rule 16A as on 31 March. In practice, companies having outstanding deposits and/or receipts of money falling within the reporting framework of the Deposit Rules generally require DPT-3 compliance.

For most private limited companies, DPT-3 primarily involves reporting:

• Director loans
• Bank borrowings
• Cash Credit (CC) facilities
• Overdraft (OD) facilities
• Working capital borrowings
• Inter-corporate borrowings
• Share application money
• Customer advances
• Other exempted receipts

Why DPT-3 Matters

Most DPT-3 errors arise not because of complex law but because of:

• Incorrect purpose selection
• Omission of bank borrowings
• Wrong classification of director loans
• Incorrect reporting of share application money
• Misclassification of customer advances
• Failure to reconcile figures with audited financial statements

A properly prepared DPT-3 should therefore be supported by legal analysis, reconciliation with books of account and verification of exemption conditions under Rule 2(1)(c).

Step 1 – Purpose Selection: The Most Critical Decision

Before entering any figures, select the correct purpose.

For most companies, this is the single most important decision in the entire filing process.

Practical Rule

For the vast majority of private limited companies, the appropriate selection is:

"Particulars of transactions not considered as deposit."

Purpose Option	Select When	Columns to Fill	Auditor Certificate
Onetime Return	Historical outstanding amounts from 01.04.2014 to 31.03.2019 not considered deposits	Column 14	Required
Particulars NOT considered as Deposit	Only exempted receipts such as director loans, bank loans, inter-corporate borrowings etc.	Column 15	Generally Not Required
Return of Deposit + Particulars NOT Deposit	Both deposits and exempted receipts exist	Columns 10, 12, 13, 15	Required
Return of Deposit	Company has reportable deposits	Columns 8(d), 9, 10, 11, 12, 13	Required

Step 2 – Column-by-Column Reference Guide

Basic Information (Columns 1–7)

Column	Field	What to Enter	Important Note
1(a)	CIN	Valid CIN	Mandatory
2	Company Details	Verify pre-filled details	Update email if required
3	Purpose	Select one option only	Determines active fields
4	Company Type	Public / Private	Verify carefully
5	Government Company	Yes / No	Refer Section 2(45)
6	Objects	Verify main objects	Check pre-filled data
7(b)	Date of Last Closing	31 March of relevant FY	Annual reporting date

Financial Information (Columns 8–15)

Column	Particulars	Requirement
8	Net Worth	Based on latest audited financial statements
8(d)	Maximum Deposit Limit	Relevant mainly for eligible public companies
9	Number of Depositors	Applicable where deposits exist
10	Particulars of Deposits	Applicable for deposit reporting
11	Matured but Unclaimed Deposits	Mandatory where applicable
12	Liquid Assets	Applicable where deposits exist
13	Charge Details	Applicable where charge exists
14	Outstanding Amount Not Considered Deposits	One-time return only
15	Particulars Not Considered Deposits	Most important column for private companies

Practical Formula Note – Net Worth

Net Worth = Paid-up Share Capital + Free Reserves + Securities Premium − Accumulated Losses − Deferred/Miscellaneous Expenditure − Unprovided Depreciation

Common Error: Including revaluation reserves in net worth.

Practical Formula Note – Maximum Deposit Limit

Maximum Deposit Limit = Net Worth × 35%

Applicable primarily to eligible public companies.

Step 3 – Column 15: Complete Exempted Deposit Breakdown

Column 15 is the most important disclosure section for private companies.

Sub-Column	Nature of Transaction	Reportable	Example
15(a)	Government / Statutory Authority Loans	Yes	SIDBI, State Government
15(b)	Foreign Government / Institution Borrowings	Yes	ECB, Foreign Institution
15(c)	Banking Facilities and Borrowings (including CC, OD, Working Capital and Term Loans)	Yes	CC, OD, Working Capital, Term Loan
15(d)	Public Financial Institution Loans	Yes	IFCI, NABARD
15(f)	Inter-Corporate Borrowings	Yes	Loan from another company
15(g)	Share Application Money	Subject to conditions	Pending allotment
15(h)	Director Loans	Yes	Director funding
15(k)	Employee Security Deposit	Subject to conditions	Employee deposit
15(m)	Business Advances	Subject to conditions	Customer advance
Relevant Clauses	Debentures, Convertible Notes, AIF Funding etc.	As applicable	Based on facts

DPT-3 Reporting vs Non-Reporting Matrix

Particulars	Reportable	Column
Bank CC	Yes	15(c)
Bank OD	Yes	15(c)
Bank Term Loan	Yes	15(c)
Working Capital Facility	Yes	15(c)
Director Loan	Yes	15(h)
Inter-Corporate Loan	Yes	15(f)
Share Application Money (within prescribed period)	Yes	15(g)
Customer Advance (within exemption period)	Yes	15(m)
Public Deposits	Yes	10
Trade Creditors	No	NA
MSME Creditors	No	NA
GST Payable	No	NA
TDS Payable	No	NA
PF / ESI Payable	No	NA
Salary Payable	No	NA
Directors' Remuneration Payable	No	NA
Audit Fee Provision	No	NA
Professional Fee Provision	No	NA
Outstanding Expense Provisions	No	NA
MTM Loss	No	NA
Government Grants	Generally No	NA

Critical Exclusions

The following should generally not be disclosed under DPT-3:

• Trade creditors
• MSME creditors
• Directors' remuneration payable
• Salary payable
• Audit fee provisions
• Professional fee provisions
• Outstanding expense provisions
• Interest accrued but not due
• Fully repaid loans
• MTM losses
• Statutory dues

Step 4 – CC, OD & Term Loan Treatment

Bank borrowings are among the most frequently misreported items in DPT-3.

Decision Matrix

Borrowing Type	Reportable	Column
Cash Credit (CC)	Yes	15(c)
Overdraft (OD)	Yes	15(c)
Working Capital Loan	Yes	15(c)
Bank Term Loan	Yes	15(c)
Director Loan	Yes	15(h)
Inter-Corporate Loan	Yes	15(f)

Amount to be Reported

Component	Include
Principal Outstanding	Yes
Interest Accrued and Due	Yes
Interest Accrued but Not Due	No
Fully Repaid Amounts	No

Reporting Formula

Amount Reportable = Principal Outstanding as on 31 March + Interest Accrued and Due

Common Error: Reporting sanctioned limits instead of actual outstanding balances.

CC / OD Practical Note

CC and OD facilities are generally repayable on demand. Accordingly, the outstanding balance as on 31 March is ordinarily considered for reporting.

Director Loan Reporting

Verification Formula

Amount Reportable under Column 15(h) = Outstanding Director Loan as on 31 March + Interest Accrued and Due

Common Error: Reporting original loan amount instead of year-end outstanding balance.

Inter-Corporate Borrowings

Verification Formula

Amount Reportable under Column 15(f) = Outstanding ICD as on 31 March + Interest Accrued and Due

Share Application Money

Position	Treatment
Within prescribed period	Column 15(g)
Beyond prescribed period	Review deposit implications

Practical Verification Note

Every old share application money balance should be separately reviewed before claiming exemption.

Customer Advances

Position	Treatment
Within exemption conditions	Eligible for exemption
Beyond exemption conditions	Re-evaluate classification

Practical Verification Note

Review ageing of every advance outstanding as on 31 March before claiming exemption.

Step 5 – Opening Balance Mismatch Framework

Scenario	Practical Resolution
Opening DPT-3 differs from previous year's closing	Prepare reconciliation and obtain confirmation
Director loan mismatch	Verify ledger balances
ICD mismatch	Verify confirmations
Share application money mismatch	Verify allotment records
CC / OD mismatch	Match with books and bank statements
HUF / LLP loan	Review exemption eligibility separately

Verification Principle

Current Year Opening Balance should ordinarily reconcile with the Previous Year's Closing Balance, subject to documented adjustments and reconciliation.

Step 6 – Balance Sheet Reconciliation Framework

Before filing DPT-3, perform a complete reconciliation with audited financial statements.

Particulars	Amount
Secured Borrowings	XXX
Unsecured Borrowings	XXX
Director Loans	XXX
Inter-Corporate Borrowings	XXX
Other Reportable Receipts	XXX
Less: Non-Reportable Liabilities	XXX
Amount Reportable in DPT-3	XXX

Reconciliation Formula

Amount Reportable in DPT-3 = Reportable Borrowings and Receipts − Non-Reportable Liabilities

Common Error: Assuming Balance Sheet liabilities automatically equal DPT-3 disclosures.

Step 7 – Auditor's Certificate

Filing Type	Auditor Certificate
Exempted Receipts Only	Generally Not Required
Deposit Return	Required
Combined Filing	Required
One-Time Return	Required

Best Practice

Even where not mandatory, obtain independent verification of balances before filing.

Step 8 – Key Compliance Risk Checkpoints

Risk Area	Preventive Action
Late Filing	File before 30 June
Incorrect Purpose Selection	Review before submission
Omission of Bank Borrowings	Verify all facilities
Wrong Director Loan Classification	Verify exemption conditions
Share Application Delays	Review timelines
Customer Advance Ageing	Review periodically
Unreconciled Figures	Match with audited books

Penalty Formula

Penalty = ₹5,000 + ₹500 per day of continuing default

Professional Documentation File

Maintain the following documents along with DPT-3 working papers:

Document	Purpose
Audited Financial Statements	Source of disclosures
Loan Confirmations	Verification of balances
Director Loan Declarations	Support for exemption claims
Share Application Records	Verification of timelines
Customer Advance Ageing Report	Verification of exemption conditions
Previous Year's DPT-3	Opening balance reconciliation
Internal Reconciliation Working Papers	Audit trail and documentation
Auditor Verification Note	Internal compliance support

Best Practice

Maintain a complete DPT-3 compliance file even where an auditor's certificate is not mandatory.

Private Company Filing Checklist – FY 2025–26

☐ Purpose selected correctly

☐ Date of closing entered as 31.03.2026

☐ Net worth verified from audited Balance Sheet

☐ All CC / OD facilities reviewed

☐ Working capital facilities reviewed

☐ Bank term loans reviewed

☐ Director loans verified

☐ Inter-corporate borrowings identified

☐ Share application money reviewed

☐ Customer advance ageing reviewed

☐ Opening balances reconciled

☐ DPT-3 matched with audited books

☐ Exclusions verified

☐ Auditor confirmation obtained

☐ DSC validity checked

☐ Filing completed before 30 June 2026

Frequently Asked Questions

Q1. Should a company with no loans or deposits file DPT-3?

Companies should evaluate their filing obligation based on facts and applicable requirements. Many professionals adopt a conservative NIL filing approach to avoid future MCA queries.

Q2. Are CC, OD and Working Capital facilities reportable?

Yes. Outstanding banking facilities generally require reporting under the applicable exempted category.

Q3. Should interest be included?

Interest accrued and due is generally included. Interest accrued but not due is generally excluded.

Q4. Does resignation of a director affect an existing director loan exemption?

Generally no. The position at the time of receipt is critical.

Q5. Is a loan from a director's HUF covered under the director loan exemption?

Generally no. The exemption applies to the director in an individual capacity.

Q6. How should customer advances outstanding beyond the exemption period be evaluated?

Such cases require separate examination as exemption conditions may cease to be satisfied.

Q7. Is share application money exempt indefinitely?

No. Applicable timelines must be monitored carefully.

Q8. What if the opening balance does not match last year's closing DPT-3?

Prepare a proper reconciliation and obtain confirmation before filing.

Q9. Is an auditor's certificate required where only bank loans exist?

Generally not, if only exempted receipts are being reported.

Q10. Are trade creditors and salary payable reportable?

No. These are generally outside the DPT-3 reporting framework.

Q11. How should corporate credit card dues be treated?

Review the underlying banking arrangement and accounting classification. Where they represent an outstanding banking facility, reporting under Column 15(c) may be appropriate.

Q12. Is a fully repaid loan reportable?

No. DPT-3 generally reports outstanding balances as on 31 March.

Q13. Are MTM losses reportable?

No. MTM losses are accounting adjustments and generally do not represent receipts of money.

Q14. How should loans from RBI-regulated NBFCs be evaluated?

Such loans should be examined under the relevant exemption category based on the nature of the lender and transaction.

Q15. Are Government grants and incentives reportable?

Generally no. These are ordinarily not treated as deposits or borrowings for DPT-3 purposes.

Five Numbers Every DPT-3 Filer Must Verify

Particulars	Verification Point
Net Worth	Column 8
CC / OD Outstanding	Column 15(c)
Director Loan Outstanding	Column 15(h)
Opening vs Previous Closing	Reconciliation
Advances Outstanding	Ageing Review

Conclusion

Form DPT-3 is no longer a routine ROC filing. It has evolved into a significant disclosure mechanism through which regulators assess a company's borrowing profile, exempted receipts, deposit compliance and overall financial reporting discipline.

Most filing disputes arise from incorrect purpose selection, omission of bank borrowings, misclassification of director loans, ageing issues relating to advances and share application money, and failure to reconcile disclosures with audited financial statements.

A robust DPT-3 filing should therefore be supported by detailed reconciliation, verification of exemption conditions, proper documentation of outstanding balances and timely filing before the statutory deadline.

A few hours spent on reconciliation and review today can prevent substantial compliance exposure and regulatory scrutiny tomorrow.

Legal References: Rule 2(1)(c), Rule 16 and Rule 16A of the Companies (Acceptance of Deposits) Rules, 2014; Sections 73 to 76 of the Companies Act, 2013; MCA Guidance; Professional Guidance and FAQs on DPT-3 Reporting.

Third-Party Imports & Bonded Warehousing

A Definitive Framework on System Alignment Across Customs, GST, FEMA & DGFT

By CA Surekha S Ahuja

Reframing the Question — From Legality to Defensibility

In advanced import structures, it is increasingly common that:

• the importer of record is one entity

• goods are stored under a bonded warehousing mechanism

• consideration is discharged by a different party

Such arrangements are legally permissible and commercially efficient.

Yet, in practice, they frequently encounter objections, delays, and audit exposure.

The reason is structural:

These transactions are not tested on legality alone—they are tested on defensibility across multiple independent regulatory systems.

The Governing Principle - One Transaction, Multiple Validations

An import transaction simultaneously operates across:

• Customs — control and custody of goods

• GST — tax incidence and credit

• FEMA — foreign exchange outflow

• DGFT — policy-linked utilisation

• Product regulations — admissibility into the market

Each authority examines the transaction independently, based on its own data and triggers.

The structure survives only when each system independently reaches the same factual conclusion.

Any inconsistency—however minor—creates a regulatory fault line.

Customs - Bonded Warehousing as a Continuous Control Mechanism

Bonded warehousing is often positioned as a duty deferment strategy.
In reality, it functions as a continuous regulatory control environment.

• duty liability is deferred, not extinguished

• goods remain under customs supervision

• inventory is expected to be fully reconcilable at all times

Where exposure arises

• lapse of warehousing period without clearance

• mismatch between recorded and physical stock

• procedural gaps in movement or re-warehousing

Such deviations are examined with reference to principles reflected in
Customs Broker Licensing Regulations 2019

In bonded structures, records do not merely support compliance—they constitute compliance.

GST -Credit Follows the Tax Event, Not the Transaction Design

GST on imports is triggered by the customs event, not by ownership or commercial intention.

Input tax credit arises only upon payment of IGST at the time of ex-bond clearance, as clarified under
CBIC Circular 38 12 2018 GST

Common fault lines

• ITC claimed while goods remain in bond

• mismatch between Bill of Entry data and GST returns

GST is indifferent to how the transaction is structured.
It recognises only tax discharge validated within the system.

FEMA - Non-Negotiable Link Between Import & Remittance

Under
RBI Master Direction on Import of Goods and Services

every import must be backed by a remittance that is fully traceable and reconcilable.

The required chain

Bill of Entry → Authorised Dealer Bank → Remittance → Closure

Where structures fail

• Bill of Entry not submitted to the bank within timeline

• third-party remittance without documented linkage

• delay or mismatch in system reconciliation

FEMA does not prohibit flexibility in payment structures.
It prohibits breaks in the narrative of fund flow.

Product Regulations — The Independent Gatekeeper

Compliance under:

• Bureau of Indian Standards Act 2016

• FSSAI Food Import Regulations 2017

operates independently of tax and foreign exchange frameworks.

Goods may be:

• held for testing

• restricted

• or denied clearance

irrespective of tax compliance.

Product regulation determines not how the transaction is taxed—but whether it can be completed at all.

DGFT — Traceability of Purpose

Where imports are linked to export benefits, compliance shifts from structure to purpose.

The transaction must establish a continuous chain:

Import → Consumption → Production → Export → Realisation

Failure to establish this linkage results in:

• denial of benefits

• recovery of duties

DGFT does not examine the transaction in isolation.
It evaluates whether the intended economic outcome has been achieved and demonstrated.

Failure Matrix - Where Structurally Valid Transactions Collapse

Dimension	Trigger	Consequence
Customs	Stock mismatch / bond lapse	Duty demand, confiscation
GST	Premature ITC / mismatch	Reversal with interest
FEMA	BOE–remittance misalignment	Compliance flag, penalty exposure
DGFT	Break in utilisation chain	Export obligation failure
Product Laws	Certification gap	Non-clearance of goods

Execution Discipline — Converting Validity into Defensibility

A compliant structure is not achieved through documentation alone.
It requires sequenced execution.

Pre-Import

• define contractual roles, including remitter

• establish documentary linkage between importer and payer

• ensure product compliance before shipment

• align the structure with the Authorised Dealer Bank

At Import

• precise Bill of Entry filing (GSTIN, IEC accuracy)

• immediate initiation of bonded inventory controls

Post-Import

• timely submission of Bill of Entry to bank

• reconciliation within FEMA systems

• controlled ex-bond clearance

• ITC recognition strictly post IGST payment

Timing — The Decisive Differentiator

In high-scrutiny import environments:

• documentation created before the transaction establishes legitimacy

• documentation created after scrutiny is treated as explanation

Compliance is determined at the point of execution—not at the stage of defence.

Final Professional Position

Third-party import transactions with bonded warehousing are:

• legally valid

• commercially efficient

• widely adopted

But they are also:

highly sensitive to inconsistency across systems.

Closing Insight

Transactions do not fail because they are impermissible.

They fail when:

• goods movement

• financial flow

• regulatory reporting

do not align into a single, consistent narrative.

When alignment breaks, the issue is no longer compliance—it becomes credibility.

“Third-Party Imports & Bonded Warehousing: A Definitive Framework on System Alignment Across Customs, GST, FEMA & DGFT”

31 March Closing vs Life’s Final Audit

An Accounting Reflection from the Words of Young Sri Guru Nanak Dev Ji

March is the most defining month for accountants. Ledgers are reconciled, provisions are reviewed, disclosures are verified and finally the books of accounts are closed for the financial year.

Every professional understands the discipline of year-end closing:

• Every transaction must be recorded.

• Every liability must be recognised.

• Every asset must be verified.

• Nothing material should remain unaccounted.

Because once the Balance Sheet is finalised on 31 March, it reflects the true financial position of the enterprise.

Yet while financial years close on a fixed date, life never announces its closing date.

In today’s world of wars, global tensions and sudden uncertainties, this truth appears even more relevant.

Centuries ago, when Guru Nanak was still a young child, his teacher asked him to write on a wooden tablet (पट्टी) as part of learning. Instead of ordinary letters, Sri Guru Nanak Dev Ji uttered words of timeless wisdom, later preserved in the Guru Granth Sahib:

पट्टी लिखी धरमसाल होई।
ज्ञान कलम लिख लेखा होई॥

In simple yet profound terms, the message was this:

Let Dharma be the school,
let Wisdom be the pen,
and let life itself become the ledger where the true account is written.

For those in the accounting profession, this metaphor is remarkably powerful. It reminds us that beyond financial records, every human life quietly maintains its own ledger of actions.

The Real Balance Sheet of Life

Just as accounting divides entries between Assets and Liabilities, life too builds a silent balance sheet.

Assets of Life	Liabilities of Life
Truth	Ego
Integrity	Greed
Compassion	Anger
Service	Attachment
Humility	Self-interest

Over time, these entries determine the true balance of a life lived.

Sri Guru Nanak Dev Ji reminds us further:

लेखा लिखि न चलई साथि।
किआ लेखा किआ गुणि गाथ॥

The worldly accounts we maintain — wealth, titles and possessions — do not accompany us. What ultimately remains is only the record of our deeds and virtues.

A Reflection at Year-End

As accountants prepare the final financial statements for the year, the process itself offers a deeper reminder.

Financial accounts are audited every year.

But life too faces a final audit — without notice.

Financial years close on 31 March.
The closing of life’s ledger may come any day.

Perhaps the most timeless accounting principle was spoken centuries ago by a young Sri Guru Nanak Dev Ji:

ज्ञान कलम लिख लेखा होई॥

Let wisdom be the pen that writes the account of life

Guidance Note Partner Remuneration & Interest Deductibility-Transition from the I Tax Act, 1961 to the I Tax Act, 2025

By CA Surekha S Ahuja 

Drafting Safeguards | Litigation Prevention | Strategic Tax Optimisation

Executive Overview

With effect from 1 April 2026, the Income-tax Act, 2025 replaces the Income-tax Act, 1961.

While the legislative structure has been simplified and sections renumbered, the substantive framework governing deductibility of partner remuneration and interest remains materially unchanged.

However, partnership taxation is uniquely document-driven.

A valid deduction under statute becomes disallowable if the partnership deed fails to authorise it properly.

The transition year (FY 2025–26) and deeds executed around March 2026 require heightened drafting precision.

This note provides:

• Legal continuity analysis
• Drafting standards
• Amendment advisories
• Transitional computation guidance
• Risk mapping
• Strategic tax planning considerations

Statutory Position – Continuity of Principle

A. Under the Income-tax Act, 1961 (Applicable up to 31 March 2026)

Section 40(b) permits deduction of:

• Interest on capital/loans to partners (maximum 12% simple interest per annum)

• Remuneration to working partners within prescribed limits

• Only if authorised by the partnership deed

• Only for period after execution of deed

• Subject to book profit-based ceiling

Remuneration ceiling:

• On loss or first ₹3,00,000 → ₹1,50,000 or 90% (whichever higher)

• On balance → 60%

This is a restrictive provision overriding general deduction rules.

B. Under the Income-tax Act, 2025 (From 1 April 2026)

The new Act re-enacts the same deductibility policy under the business deduction framework (renumbered provision).

There is:

• No change in 12% interest ceiling

• No change in remuneration percentage limits

• No dilution of deed authorisation requirement

• Continuation of “working partner” condition

• Express inclusion of LLP within “firm” definition

Therefore:

The legislative intent reflects continuity, not reform, in partnership deduction principles.

The Real Risk – Drafting, Not Law

The statute continues.
The vulnerability lies in deed wording.

Risk Classification

Deed Language	Risk Level	Advisory Position
“As per Section 40(b) as amended from time to time”	Low	Generally safe
“As per Section 40(b) of Income-tax Act, 1961”	Moderate	Amendment advisable
Fixed remuneration without statutory linkage	High	Potential disallowance
No reference to book profit	High	Computation dispute risk

Tax authorities interpret deduction provisions strictly.
Reliance on implied statutory continuity may invite avoidable litigation.

The Transition Year – Technical Application

Where deed execution straddles repeal date:

• Income up to 31 March 2026 → governed by 1961 Act

• Income from 1 April 2026 → governed by 2025 Act

Computation should be:

• Period-wise documented

• Statute-linked

• Audit defensible

Failure to document bifurcation may result in technical queries.

The Gold Standard Drafting Clause

Recommended Clause – Future-Proof and Transition-Safe

The partners shall be entitled to interest on capital and loans at a rate not exceeding the maximum permissible under the Income-tax law applicable for the relevant previous year, including Section 40(b) of the Income-tax Act, 1961 for periods prior to its repeal and the corresponding provisions of the Income-tax Act, 2025 or any statutory modification, re-enactment or replacement thereof, as amended from time to time.

Remuneration to working partners shall be computed strictly within limits prescribed under the applicable Income-tax law and shall relate only to the period subsequent to execution of this deed. Book profit shall have the meaning assigned under the applicable Income-tax statute.

This clause:

• Covers both Acts seamlessly

• Captures successor legislation

• Links payments to statutory ceiling

• Prevents literal restrictive interpretation

• Avoids need for repeated amendment

When Amendment Is Necessary

Amendment is recommended if:

• Deed rigidly refers only to 1961 Act

• No “as amended” or successor wording

• Remuneration clause vague

• Working partner not defined

• Interest rate cap not mentioned

Execution requirements:

• Supplementary deed

• Proper stamping under State Stamp Act

• Registration where applicable

• Prospective effect

Preferably complete before 31 March 2026.

Tax Planning Dimension

A. Profit Allocation Strategy

Firms are taxed at 30% plus surcharge.

Remuneration to partners shifts taxation to individual hands.

Optimisation requires:

• Use of statutory ceiling fully where beneficial

• Avoiding excess payment beyond allowable limits

• Aligning remuneration with partner tax profiles

B. Interest Structuring

• Clear distinction between capital and loan

• Maintain ledger discipline

• Avoid retrospective classification

C. High Profit Firms

For firms with book profits above ₹10–15 lakh:

• Remuneration ceiling becomes substantial

• Even technical disallowance may create significant tax impact

• Preventive amendment is economically prudent

Common Disallowance Triggers

• Payment prior to deed execution

• Interest exceeding 12%

• Remuneration not linked to statutory formula

• No working partner evidence

• Retrospective deed modification

• Deed silent on profit basis

Professional Action Framework

Before 31 March 2026:

1. Review all partnership and LLP deeds

2. Categorise risk level

3. Amend where necessary

4. Update drafting templates

5. Maintain computation documentation

6. Educate clients proactively

After transition:

• Monitor CBDT clarification on renumbered provisions

• Align tax audit reporting references

• Maintain documentation trail

Strategic Conclusion

The shift from the Income-tax Act, 1961 to the Income-tax Act, 2025 does not alter partnership deductibility philosophy.

But partnership taxation remains deed-centric.

Substantive compliance without documentary alignment is insufficient.

Firms that proactively review and refine their deeds before the repeal date will:

• Preserve deductions

• Avoid litigation

• Optimise tax outflow

• Demonstrate governance discipline

In partnership taxation:

Documentation is deduction.
Drafting is defence.
Proactivity is tax strategy.