Income Tax Return for Partnership Business
Deliverables - Timeline
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Deliverables
ITR 5 Copy
Income Tax Acknowledgment
ITR 5 Computation
Copy of challan if any payment is made
Timeline
2 Days
(from receipt of all documents)
What is ITR 5?
For the purpose of filing tax returns for a partnership firm, one must use the Form ITR-5. The form ITR-5 is used to file tax returns for the partnership firm itself and not for the partners of the firm. One must not confuse form ITR-5 and ITR-3.ITR-5 is for firms, LLPs (Limited Liability Partnership), AOPs (Association of Persons), BOIs (Body of Individuals), Artificial Juridical Person (AJP), Estate of deceased, Estate of insolvent, Business trust and investment fund.
Taxation of Partnership Firms
Under the Income Tax Act, 1961, a partnership firm is liable to pay the following tax percentages:
1. 30% income tax
2. 12% surcharges where taxable income is above one crore rupees
3. Up to 12% on interest of capital is allowed
4. Health and Education Cess 4% of tax including surcharges
It is to be noted that a partnership firm has a different legal identity from that of its partners, unlike proprietorships. It is also important to know that for the purposes of paying income tax for a partnership firm it is immaterial whether the firm is registered or not. Just like LLPs and private limited companies, a partnership firm is also required to pay alternate minimum tax which cannot be less than 18.5% of the adjusted total income.
Deductions Allowed
When computing the liability of income tax on partnership firm, deductions are permitted for the following:
1. Remunerations or interest paid to partners that do not conform to the terms of the partnership agreement.
2. Salaries, bonuses, remunerations, and commissions are paid to non-working partners of the firm
3. If remuneration paid to partners complies with the partnership deed but relates to transactions that pre-date the partnership deed.
Deadline For Filing An Income Tax Return for a Proprietorship
The deadline for filing an income tax for a partnership firm is dependent upon whether the firm is required to be audited or not. The deadlines for filing income tax return are as follows:
1. Where the firm is not required to be audited – the income tax returns must be filed by 31st July.
2. Where the firm is required to be audited – the firm has to file its income tax returns by 31st October.
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FAQs
Partnership firms are subject to MAT at 18.5% of adjusted total income, ensuring that tax payable is not less than 18.5% of profits.
