Partnership firms in India can be divided into two categories namely, registered partnership or unregistered partnership. Registered partnership firms are those firms having a registration certificate from the Registrar of Firms.
Under Income Tax Act, a partnership firm is defined as “Persons who have entered into a partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.
The partnership firm is looked upon as a separate entity. It is immaterial that a 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 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.
- 1. Rate of Income-tax applicable to Partnership Firm / LLP
- 2. Rate of Interest to Partners of Partnership Firm / LLP
- 3. Remuneration to Partners/Designated Partners
- 4. Conditions for assessment as a firm
- 5. Partners’ assessments
- 6. Losses of the firm
- 7. Allowability of remuneration and interest vis-a-vis presumptive taxation
- 8. Due dates for filing return of firm
- 9. Due dates for filing of returns of partners
Alternate Minimum Tax
Similar to a private limited company or LLP, partnership firms are also required to pay alternate minimum tax at the rate of 18.5% of “adjusted total income”. Alternative minimum tax would be increased by the applicable surcharge, education cess, and secondary and higher education cess.
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.
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.
If you are a Partnership Firm In India, Then you need to File an Income Tax Return, you need to take the help of a tax consultant that will perform the Filing Formalities For You.