About:
A partnership firm is a body of more than one person who comes together to conduct business under one entity.
There are two types of partnership firms-
- Unregistered partnership firm
- Registered partnership firm
Those firms get certified from the Registrar of Firms, called Registered Firm.
Partnership firms are required to file income tax returns in form ITR-5 for each financial year.
Due Dates
The due date for the Income-tax return for most of the Partnership firms is July 31 of the Assessment year.
Firms that required getting their accounts audited under the Income Tax Act, 1961 must file the ITR before September 30th.
- Audit requirements for firms having total sales exceed Rs.1 crore in the previous year.
- On carrying Profession whose gross receipts exceed Rs.50 lakhs in any previous year
Moreover, there are other conditions applicable that could make an audit mandatory for a partnership firm.
Tax Rate for Partnership
Partnership firms are liable to pay tax at @ 30% of the total income. In addition to the income tax, a partnership firm is liable to pay the surcharge on the amount of income tax at the @12%, when total income exceeds Rs.1 crores. Partnership firms must pay, in addition to income tax and surcharge, education cess, and secondary higher education cess. Cess is calculated, on the amount of income tax and the applicable surcharge, at the rate of 2%,
Alternate Minimum Tax
Like private limited company or LLP, partnership firms are also required to pay alternative minimum tax @18.5% of adjusted total income. Alternative minimum tax would be increased by the applicable surcharge, education cess, and secondary and higher education cess.
Income Tax Calculation
While calculating the income tax applicable for a partnership firm, it is important to note that the following types of expenses paid by the partnership firm to the partners are not allowed as deductions:
- Salary, commission, bonus, or remuneration paid to non-working partners.
- If remuneration or interest paid to the partners is in accordance with the terms of the partnership deed but they relate to any period before the date of the partnership deed.
- Remuneration or interest paid to the partners which are not in accordance with the terms of the partnership deed.
Additionally, the interest paid to partners must be in accordance with the terms of the partnership deed and should not exceed 12% per annum. Remuneration and interest paid to partners should be in accordance with the terms of the partnership deed.
Procedure for Filing Income Tax Return
- Income tax returns can be filed online through the income tax website.
- On filing the income tax return online, a class 2 digital signature will be required for the Partner of the firm, and verification of the filing process. Also, online filing of income tax returns is mandatory for partnership firms that are required to be audited.
- Thereafter, the assessee must print out two copies of Form ITR-V. One copy of ITR-V shall be signed by the assessee, and needs to be sent by an ordinary post to Post Bag No. 1, Electronic City Office, Bengaluru–560100 (Karnataka). The other copy should be retained by the assessee for his/her record.
