Income Tax Return For Partnership Firms

Today at MyOnlineCA we are talking about Income Tax Return for Partnership Firms. Partnership firms in India can be split into two group namely, registered partnership or unregistered partnership. Registered partnership firms are those firms who have secured a registration certificate from the Registrar of Firms. All other partnerships that do not have a registration certificate would be categorized as an unregistered partnership firm.Income Tax Return For Partnership

Under Income Tax Act, a partnership firm is detailed as Persons who have entered into a partnership with each other are called independently partners and together with a firm, and the name under which their business activity is accomplished on is called the firm name. In this article, we look at the procedure for filing the tax return for partnership firm along with tax rate and the deadline for tax filing.

Partnership Taxation

Partnership firm is looked upon as a separate entity. It is immaterial that partnership is registered or not registered. So partnership firm is taxes under the income tax slab for partnership firm and partners are taxed under the income tax slab for individuals.

Income Tax Rates on Partnership Firm for A.Y. 2018-19

Long-term Capital Gain 20%
Short-term Capital Gain u/s 111A 15%
Other Income 30%
  • Surcharge of  12%  where taxable income including capital gains exceeds Rs.1 crore is subjected to marginal relief If the firm has  a net income of exceeding Rs.1 crore, the amount payable as income tax and surcharge should 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.
  • Education Cess & Secondary & Higher Education Cess will be 3 % on the amount of income-tax and surcharge
  • as per section 115 JC of the income tax act, The Alternate minimum tax payable by the Partnership firm cannot be less than 18.5%  of adjusted total income.

Recommend : Income Tax Return for Proprietorship Firm

Points related to Partnership Income Tax Rates/Slab

  • the partner in the partnership firm is individually taxed as the individuals.  deduction TDS on the partner’s salary and interest paid to the partners by the firm is not required.
  • In case of partnership Firm, the share of profit is exempted from income tax
  • When the total income of the firm, any salary, commission, remuneration, and bonus to a partner are estimated, In that case, there shall be deductions subject to certain limits.
  • The provision relating to Alternate Minimum Tax introduced for Limited Liability Partnership. Now, Also covers all the partnership firm. The deduction under section 80HH to 80RRB is called for only by paying minimum tax @ 18.5% on adjusted total income of partnership firms or LLPs.

Income Tax Calculation for Partnership Firm

While calculating the income tax applicable for a partnership firm, It is to be noted that Under an Income tax, the following type of expenses paid by the partnership firm to the partners is not considered  as deductions:

  • Salary, bonus, commission or remuneration paid to non-working partners.
  • Remuneration or interest paid to the partners which are not in accordance with the terms of the partnership deed.
  • Remuneration or interest paid to the partners are in accordance with the terms of the partnership deed but they belong to the period prior to the date of formation of the partnership deed.

Apart from the above conditions, The interest paid to partners should be in the conformity with the terms of the partnership deed and should not exceed 12% per annum. Also, remuneration paid to partners should be according to the terms of the partnership deed and should not exceeds the following permissible limit:

  • On first Rs. 3 Lakhs of book profit or in the case of loss – Rs. 1,50,000 or 90% of book profit, whichever is more.
  • On the balance of the book profit – 60% of book profit.

Partnership Firm Tax Return Filing

Partnership firms are required to file income tax return in form ITR3. Like all other income tax forms, ITR 3 is an attachment less form and there is no requirement for submitting any documents or statements along with a partnership firm tax return. nevertheless, the taxpayer must save all documents belonging to the business and present the same before tax authorities when requested.

Procedure for Filing Partnership Firm Tax Return

The Return Form can be Filed In two ways mentioned Below:

  • Electronically: The return can be filed electronically by using either the digital signature or electronic verification code.
  • Manually: You can file the return in physically by submitting the acknowledgment of return filed electronically. The acknowledgment has to be signed and posted to CPC Bengaluru.

To file returns Online You need to first go to Income tax Website or you can e-file through your bank website also. When you are on income tax website you need to make a user account on the website and you need to download ITR-3 Form and prepare ITR As per Instruction given by the Income-tax Department and then submit it on the website by using user account and password.

Partnership Firm Tax Return Due Date

The income tax return scheduled date for most partnership firms is July 31 of the assessment year. Partnership firms should get its accounts audited under the income tax Act must file the income tax return before the September 30th.

Audit Requirement for Partnership Firms

Partnership Firms Are required to get their accounts audited if they meet any criteria listed below:

  • Carrying on business and total sales exceed Rs.1 crore in the previous year.
  • Carrying on a profession and gross receipts in profession exceed Rs.50 lakhs in any previous year.

Conclusion

If you are a Partnership Firm In India, Then you need to File an Income Tax Return, you need to take help of tax consultant that will perform the Filing Formalities For You.