Partnership Tax Return Filing

Many important financial and legal obligations come with running a partnership firm in India. Following all applicable tax and regulatory standards is essential to the successful operation and expansion of your company. These responsibilities include filing TDS, GST, EPF, and income tax returns as well as occasionally participating in a tax audit.

One of the primary responsibilities of Partnership Firms in India is the filing of tax returns. At TaxHint, we understand the value of abiding by Indian tax regulations and the possible benefits that come with it. Our all-inclusive services are painstakingly designed to help business owners navigate the complex regulatory landscape. TaxHint provides professional assistance to streamline these compliance responsibilities, removing obstacles for business owners and expediting the process.

Together, we can make sure partnership firms comply with income tax laws and find ways to maximise your tax advantages so your company can grow and comply with tax laws.

Partnership Firm

A partnership firm is a business entity formed by two or more individuals working together under a single enterprise. There are two main categories of partnership firms:

• Registered Partnership Firm: A registered partnership firm is one that has undergone formal registration with the RoC and has received a registration certificate as evidence of its legal existence.
• Unregistered Partnership Firm: Any partnership that lacks a registration certificate from the Registrar of Firms is referred to as an unregistered partnership.

A partnership is essentially an arrangement between two or more people who have decided to split the gains and losses from a business they jointly manage. In a partnership, the parties are referred to as a firm and as partners in their individual capacities. The tax rate on the partnership firm and how it impacts profit distribution are important details for partners to know. For the benefit of all partners, partners are accountable for optimising firm advantage, conducting business fairly, and keeping complete and accurate records.

Income Tax Return filing for Partnership Firm

In India, all partnership firms are required to file income tax returns on a yearly basis, whether or not the firm made money during the fiscal year. It is essential to comprehend the 30% partnership firm tax rate in order to make wise financial selections for the company. You still have to file a NIL income tax return by the deadline even if there was no business activity and the partnership firm's income is zero (NIL).

Partnership Firm Tax slabs / LLP for AY 2023-24

Under the provisions of the Income Tax Act 1961, a partnership firm in India is subject to the following tax percentages

• Partnership firm tax rate: Partnership firms are liable to pay income tax at a rate of 30% on their taxable income.
• Surcharges: If the taxable income of the partnership firm exceeds one crore rupees, a surcharge of 12% is applicable in addition to the income tax.
• Interest on Capital: Partnership firms can claim a deduction of up to 12% on the interest paid on capital.
• Health and Education Cess: A 4% Health and Education Cess is levied on the total tax amount, including surcharges.
• Marginal Relief : In case Net Income exceeds 1 crore, the amount payable as income tax and Surcharge shall not exceed the total amount payable as income tax on Total Income of Rs.1 crore by more than the amount of income that exceeds Rs.1 crore.

Minimum Alternate Tax for Partnership Firms

Partnership firms are liable to minimum alternative tax, much as corporate income tax. There is an applicable minimum alternate tax of 18.5% on adjusted total income. Therefore, a partnership firm's profits are required to pay income tax at a rate of at least 18.5% (which is further raised by the income tax surcharge, education cess, and secondary and higher education cess).

Deductions Allowed

When computing the liability of income tax on partnership firm, deductions are permitted for the following:

• Remunerations or interest paid to partners that do not conform to the terms of the partnership agreement.
• Salaries, bonuses, remunerations, and commissions are paid to non-working partners of the firm.
• If remuneration paid to partners complies with the partnership deed but relates to transactions that pre-date the partnership deed.

ITR Forms for a Partnership Firm

Form ITR-4 or Form ITR-5 can be used by partnership firms to file their income tax returns.

ITR-4
Partnership enterprises with total incomes up to Rs. 50 lakh and revenue from business and profession—which is calculated on an assumed basis—must file Form ITR-4.

ITR-5
Partnership firms that are required to have an audit of their account must file an ITR-5.

Deadline for Partnership Firm Tax Filing

The deadline for filing ITR for a partnership firm depends on whether an audit is required:

• If the firm is not subject to an audit, returns must be filed by 31st July.
• If an audit is necessary, the firm must file its returns by 31st October.

Filing of GST Returns

All individuals who are registered with GST are obliged to submit their GST Returns, and partnership firms must register with GST if their combined yearly revenue surpasses Rs. 20 lacs. GST-registered partnership firms are often required to submit GSTR-1, GSTR-3B, and GSTR-9 filings. GSTR-4 must be filed if the company has chosen to use a composition scheme.

TDS Return

The TDS Return is to be filed where the partnership firm has a valid TAN, and the type of return to be filed depends upon the purpose of deduction. The types of TDS Return are:

• Form 24Q – TDS on Salary
• Form 27Q – TDS where the deductee is a non-resident, foreign company
• Form 26QB – TDS on payment for transfer of immovable property
• Form 26Q – TDS in any other case

EPF Return filing

The partnership firm is required to get EPF registration if it employs more than ten persons, and accordingly, filing of EPF return becomes mandatory.

Accounting and bookkeeping

If the partnership firm's sales, turnover, or gross receipts from the business exceed Rs. 25,00,000 or if the business's income exceeds Rs. 2,50,000 in any of the three years prior, books of account must be kept.

Tax Audit

If a partnership firm's sales, turnover, or gross revenues for the fiscal year reach Rs. 1 crore, the firm must undergo a tax audit. In other cases, though, it might need to have an audit of its account.