The operation of a Partnership firm in India entails a multitude of significant legal and financial obligations. Ensuring compliance with a multitude of tax and regulatory obligations is critical for the efficient operation and expansion of one’s enterprise. The responsibilities mentioned include the submission of income tax returns, TDS returns, GST returns, EPF returns, and potentially being subjected to a tax audit.
In India, the fundamental obligation of partnership firms is to file tax returns. Kanoons acknowledges the significance of adhering to Indian tax regulations and the possible benefits that may result from doing so. Our comprehensive selection of services has been carefully designed to aid business owners in navigating the complicated realm of compliance. Kanoons provides expert guidance to streamline these compliance responsibilities, thereby alleviating burdens and simplifying the process for business proprietors.
Through a collaborative alliance with us, you can guarantee adherence to tax regulations regarding partnership firms’ income tax and investigate prospects for maximizing tax advantages, thereby fostering the growth and prosperity of your organization.
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A Partnership Firm is an organizational structure wherein two or more individuals collaborate in pursuit of a common enterprise. Two primary classifications of partnership firms exist:
A registered Partnership firm is characterized by its formal registration with the RoC and the issuance of a registration certificate, which serves as verification of its lawful existence.
Unregistered Partnership Firm: Any Partnership without a registration certificate from the Registrar of Firms is an unregistered Partnership.
A Partnership can be defined as a contractual arrangement wherein two or more individuals, with their assent, divide the financial gains or losses that result from the operation of a business together. The participants affiliated with a Partnership structure are designated as partners on an individual level and as a cohesive unit under the name “firm.” It is imperative for partners to possess knowledge regarding the partnership firm tax rate and its impact on profit distribution. For the benefit of all partners, partners are accountable for maximizing firm advantage, conducting business fairly, and maintaining accurate records in complete transparency.
Income Tax Return filing for Partnership Firm
Each Partnership firm in India must submit an annual Income Tax Return (ITR), regardless of whether the firm made profits or losses during the fiscal year. A comprehensive grasp of the partnership firm tax rate (30%) is essential for the organization to make well-informed financial decisions. Notwithstanding the absence of business activity and the partnership firm generating zero (NIL) income, it remains obligatory to submit a NIL income tax return by the designated due date.
Partnership Firm Tax slabs / LLP for AY 2023-24
In India, the following tax percentages apply to partnership firms in accordance with the Income Tax Act of 1961:
The tax rate applicable to partnership firms is 30% on their taxable income, which they are required to pay in income tax.
Surcharges: An additional 12% surcharge is levied on the Partnership firm’s taxable income exceeding one crore rupees, in addition to the income tax.
Partnership entities are eligible to deduct a maximum of 12% of the interest they pay on capital.
Health and Education Cess: A 4% Health and Education Cess is applied to the total tax amount, which includes surcharges.
Marginal Relief: Should the Net Income surpass 1 crore, the combined amount owed for Income Tax and surcharge shall not surpass the total amount owed for income tax on the total income of Rs. 1 crore by a greater amount than the percentage of income that surpasses Rs. 1 crore.
Minimum Alternate Tax for Partnership Firms
Partnership firms, akin to corporations, are obligated to pay the minimal alternate tax. Applicable is a minimum alternative tax rate of 18.5% of adjusted total income. As a result, a Partnership firm’s profits are subject to an income tax liability of at least 18.5% (plus the education cess, income tax surcharge, and secondary and higher education cess).
Deductions Allowed
In calculating the income tax liability of a Partnership firm, the following deductions are permissible:
Interest or compensation disbursed to partners who fail to adhere to the stipulations outlined in the Partnership agreement.
In addition to commissions, bonuses, salaries, and remunerations are paid to non-working associates of the firm.
If Partner compensation is in accordance with the partnership deed, however, it pertains to transactions that occurred before the partnership deed.
ITR Forms for a Partnership Firm
Partnership enterprises are required to submit their Income Tax Return (ITR) using either Form ITR-4 or ITR-5.
ITR-4
Partnership firms that have a combined income of not more than 50 lakh rupees and derive income from both business and profession, with the latter being calculated on a presumptive basis, are required to file Form ITR-4.
ITR-5
Partnership firms that are required to undergo an audit of their accounts must submit ITR-5 forms.
Deadline for Partnership Firm Tax Filing
The ITR filing deadline for a partnership firm is contingent on the necessity of an audit:
Returns are due by July 31, when the firm is not undergoing an audit.
By October 31st, if an audit is required, the firm must submit its returns.
Filing of GST Returns
All GST-registered individuals are obligated to submit GST Returns, and partnership firms with an annual turnover exceeding Rs. 20 lacs are subject to GST regulations. Partnership enterprises that are GST-registered are typically required to submit GSTR-1, GSTR-3B, and GSTR-9 returns. When a firm elects to utilize a composition scheme, it becomes necessary to file Form GSTR-4.
TDS Return
The partnership must file the TDS Return if it possesses a valid TAN; the specific form of return that must be submitted is determined by the intended purpose of the deduction. Varieties of TDS Return include:
Form 24Q: Salary TDS
Form 27Q-TDS in the case of a foreign, non-resident corporation as the deductee
TDS on payment for transfer of immovable property (Form 26QB)
Form 26Q-TDS in all other circumstances
EPF Return filing
EPF registration becomes mandatory for Partnership firms with a workforce exceeding ten individuals; consequently, the submission of an EPF return becomes obligatory.
Accounting and bookkeeping
In the event that the partnership firm’s sales, turnover, or gross receipts from the business exceed Rs. 25,00,000 or Rs. 2,50,000 in income during any of the three preceding years, the maintenance of books of account becomes mandatory.
Tax Audit
If, during the fiscal year, the sales, turnover, or gross receipts of a partnership firm surpass Rs. 1 crore, a tax audit becomes mandatory. Other than that, however, it might be obligated to undergo an audit of its accounts under specific conditions.
Streamline Partnership Firm Compliance with Kanoons
Easily streamline the compliance of your partnership firm with Kanoons. We serve as your dependable collaborator in fulfilling your tax compliance obligations, streamlining the procedure, and guaranteeing that you adhere to deadlines.
Our comprehensive services encompass a wide range of facets:
Filing of Income Tax Returns: We ensure the accuracy and punctuality of your income tax returns while simplifying the filing process.
Submission of TDS Returns: Our assistance encompasses the submission of TDS returns, which ensures that deductions are reported accurately and that all obligations are met.
GST Return Filing: We provide a streamlined solution for GST-registered businesses to file their GSTR-1 and GSTR-3B returns, guaranteeing their adherence to GST regulations.
EPF Return Submission: We ensure adherence to employee provident fund regulations by providing assistance in the submission of EPF returns.
By having Kanoons on your side, you can focus on expanding your partnership firm while we handle the necessary compliance requirements. This guarantees that your organization has a robust financial foundation and legal position. We are well-versed in the complexities of partnership income tax, including tax brackets, deductions, and filing requirements. Our team will provide you with accurate and expedient guidance throughout the process.
Are you prepared to effortlessly submit the income tax return for your partnership firm? Commence immediately to benefit from the convenience and tranquility that our professional assistance provides.
*Account Opening: We just assist you in opening Current Account in one of our partner’s bank.
No Late Fee
It has been observed that numerous small businesses incur significant penalties every year for late filing of various statutory returns to the Government. These penalties are non-tax-deductible and can adversely affect the profitability of these enterprises. At Kanoons, our primary objective is to offer cost-effective services to our clients and assist them in avoiding any late fees. In line with our commitment, we have developed cutting-edge technology that enables businesses to stay ahead of compliance requirements and prevent any penalties. Explore our range of compliance services below to ensure smooth and hassle-free operations.
FAQ
Define partnership firm.
A partnership firm is an organizational structure comprised of at least two individuals working in concert to establish a singular enterprise.
What obligations do associates have within a firm?
For the benefit of all partners, partners are accountable for the efficient operation of the firm, the fairness of all transactions, and the maintenance of accurate and transparent records.
What are the tax brackets for partnership firms?
As per the tax slab structure of partnership firms, taxable income is subject to 30% income tax. Incomes exceeding one crore rupees may be subject to potential surcharges, and the total tax amount is subject to a 4% Health and Education Cess.
Which deductions do partnership firms qualify for?
Interest paid on capital of up to 12% and certain remunerations to partners, provided they comply with the partnership agreement, are deductible.
What is the ITR filing deadline for partnership firms?
The deadline is October 31st, if an audit is required, or July 31st, if none is required.
In what ways can Kanoons aid in the compliance of partnership firms?
By providing business proprietors with a streamlined process and comprehensive services such as income tax, TDS, GST, and EPF return filing, Kanoons guarantees adherence to regulations.
At what juncture must a partnership firm submit TDS returns?
Depending on the nature of the payment, a firm with a valid TAN and payments subject to TDS is required to file TDS returns using forms such as 24Q, 27Q, 26QB, and 26Q.
What bookkeeping obligations do partnership firms have?
In the event that a company’s sales/turnover surpass Rs. 25,00,000 or its income exceeds Rs. 2,50,000 within the preceding three years, it is obligated to uphold books of account.
Are partnership firms eligible to deduct compensation for non-working partners?
Not deductible are compensations such as salaries, incentives, or remunerations paid to non-working partners.
What occurs when the deadline for filing an income tax return is missed by a partnership firm?
Noncompliance could result in penalties, interest on overdue payments, and potential legal ramifications for the firm.
Which classifications comprise partnership firms?
Unregistered Partnership Firm (without a certificate of registration) and Registered Partnership Firm (with formal registration and a certificate) are the two varieties.
Does a partnership organization have an obligation to remit income tax returns?
Compliance with the income tax obligations pertaining to partnership firms is crucial in order to prevent legal complications and penalties.
Minimum Alternate Tax (MAT) pertains to partnership entities.
MAT is levied at a rate of 18.5% on adjusted total income for partnerships, ensuring that the minimum amount of tax owed does not fall below 18.5% of profits.
Which varieties of ITRs ought partnership firms to utilize?
Partnership firms have the option to register using either ITR-5 (if an audit is necessary) or ITR-4 (for presumptive income below 50 lakh).
What advantages does adherence to tax regulations provide for partnership organizations?
Ensuring compliance is crucial for the efficient operation of the firm, maximising tax advantages, and preserving a robust legal and financial position
Must partnership organizations submit GST returns?
Complying with the GST registration requirements and submitting returns including Forms GSTR-1, GSTR-3B, and GSTR-9 is necessary if the firm’s annual turnover surpasses Rs. 20 lacs.
Is registration with the EPF required for partnership firms?
Employing ten or more individuals, businesses are required to register for the EPF and subsequently file EPF returns.
What are the prerequisites for a tax audit to be conducted on partnership firms?
If sales, revenue, or aggregate receipts surpass Rs. 1 crore during the fiscal year, or under specific other conditions, a tax audit becomes obligatory.
How is the income tax surcharge for partnerships computed?
In excess of one crore rupees, a 12% surcharge is levied, in addition to the standard income tax rate.
Partnerships that are not registered are able to file income tax returns.
In India, it is mandatory for partnership firms, whether registered or unregistered, to submit income tax returns.
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