New Partner in Manufacturing Firm: Can We Deduct PF from Their Salary?

I am working with a Manufacturing Company, which is a partnership firm. Recently, a new partner has joined, and we are now paying him a salary. Previously, we did not provide any salary to the other partner. I have a query: Can we deduct the PF share from the new partner's salary?

Thank you.

If you are paying him a salary, then you should deduct the PF share of both the employee (EE) and the employer (ER) in their respective shares.

Dear All,

I am working with a Manufacturing Co., which is a partnership firm. Recently, a new partner has been added to the partnership deed, and now we are paying him a salary. Previously, we did not provide any salary to the other partners. I have a query – can we deduct the PF share from the salary of the new partner?

PF can be deducted from an employee's salary. If a partner is an employer, how can this deduction be done? How can a person be both an employee and an employer at the same time? Please correct me if I am wrong.

Salary to Partners and PF Deductions

Under the Accounts and Income Tax Act, salary to partners is considered a part of profit. At best, it's regarded as drawings in anticipation of profits and merely a measure of how much profit will go to each partner. Therefore, I don't think you need to deduct PF on a partner's salary. It doesn't seem to match the definition of an employee under the PF Act.

Partner's Salary and PF Deduction

A partner is not considered an employee; therefore, their salary is taxable under "Income from Business/Profession." Even under the PF Act, a partner of a firm is both an employer and an employee, so there is no need to deduct PF from the partner's salary.

However, the same person can be considered both an employer and an employee in the context of PF. For example, a manager or salaried director will be treated as an employer, and at the same time, PF can be deducted from their salary as they are employees.

Partners vs. Employees: Understanding EPF & MP Act Coverage

A partner of the firm cannot be construed as an employee. However, the partners of an establishment receiving salaries will not be included as employees for coverage under the EPF & MP Act.

Case Law References
- Prakash D. Shah & Others v. Union of India, 2003 (Bombay HC)
- Om Roller Flour Mills v. Union of India, 2002 (Calcutta HC)