Partnership Firm Tax Return Filing

What is a Partnership firm?

When multiple people conduct business as a single company, that form of entity is known as a partnership firm. There are two types of partnership firms in India: registered partnership firms and unregistered partnership firms.

Small businesses should register as a partnership because the process of incorporation is simple and there are few legal requirements.

The Partnership Act was passed in India in 1932, making partnerships one of the country's first corporate entity forms. Even after it has been established, a partnership firm can register. As of now, there are no consequences for a partnership firm that has not registered.

However, under Section 69 of the Partnership Act, which primarily addresses the impact of non-registration of Partnership firms, unregistered Partnership firms are denied a number of privileges.

A partnership firm is defined by the income tax as "Persons who have formed a partnership with one another are referred to as "partners" individually and "a firm" collectively. The name under which their business is operated is referred to as the "firm name." As a result, an unregistered Partnership firm is one that does not possess a registration certificate from the registrar.

The tax rate for a Partnership firm

What is the tax rate for a partnership firm?

A partnership firm must submit a partnership firm income tax return in accordance with the Income Tax Act of 1961. Partnership businesses are required to pay income tax at a rate of 30% of their entire revenue. Additionally, if the total income of a partnership firm exceeds Rs. 1 crore, a 12% income tax surcharge is due.

The secondary higher education cess and the education cess must be paid by a partnership firm in addition to the income tax and surcharge.

The amount of income tax and the appropriate surcharge are subject to a 2% education cess. The amount of the income tax and the appropriate surcharge are subject to a 1% secondary and higher education cess.

Alternative minimum tax

Partnership firms must pay alternative minimum tax at the rate of 18.5% of "adjusted total income" exactly as a private limited company or LLP. The appropriate surcharge, education cess, and secondary and higher education cess would be added to the alternative minimum tax.

The income tax calculation for Partnership firms

What are the allowed deductibles?

An individual must examine the available deductible income when determining the amount of income tax that is due.

• The partnership agreement does not include compensation or interest payments made to the firm's partners.
• Payment of wages, commissions, bonuses, and other compensation to the firm's non-working partners.
• If partners are receiving compensation in accordance with the partnership agreement, yet the transactions in question took place before the agreement was signed.

How to File Tax Returns for a Partnership Firm?

Form ITR-5 is the appropriate form to use for filing a partnership income tax return. Instead of the tax returns for the partners, this form ITR-5 is used for partnership firm income tax returns.

The partnership firm tax returns do not need to be submitted with any supporting paperwork, as is the case with all other income tax forms, including ITR 5. The taxpayers must, however, keep track of their business documents and present them to the tax authorities upon request.

The income tax department's internet portal accepts ITR-5 online filings. Only when requested, the documents need to be turned in. The partners must have class 2 digital signatures to verify the filing procedure when submitting partnership business tax returns.

Procedure for filing Income tax returns of a partnership firm.

A partnership firm's income tax return may be submitted manually or online using the income tax website. The partner of the firm will need a class 2 digital signature if the income tax return is filed electronically. Additionally, partnership firms that must undergo an audit are required to file their income tax returns online.

The assessee must print two copies of Form ITR-V if filing manually. ITR-Vs must be sent in duplicate, each one with the assessee's signature, to Post Bag No. 1, Electronic City Office, Bengaluru-560100 (Karnataka). The assessee should save the second copy for their records.

Audit Requirement for Partnership Firms

Partnership firms that meet any of the following criteria will need to have their accounts audited.:

• Running a firm with annual gross revenues of more than Rs. 1 crore.
• Having a vocation and having annual gross earnings of more than Rs. 50 lakhs.
• In addition, there may be additional circumstances that might require an audit of a partnership business.

A report in Form No. 3CEB must be submitted in accordance with Section 92E if a partnership firm engaged in overseas transactions or certain types of domestic transactions. The 30th of November is the filing deadline for partnership firms that must submit Form 3CEB.

Partnership Firm Tax Return Due Date

Whether or not the company must undergo an audit determines the filing deadline for the partnership tax return. The deadline for filing income tax returns is July 31st if the company is not required to undergo an audit. If an audit is not required, the firm must file its income tax returns by September 30th.

However, compared to businesses, the expense of compliance is lower. Partnerships are not required to have meetings or keep a register, unlike corporations. Therefore, it should be understood that non-compliance can be more expensive than complying.

Assessment of Partners

step:1 After the company pays the tax, the partners' share of the company's profits will not be subject to tax.

step:2 The amount that is disallowed in the firm's hands for exceeding the limits outlined in S. 40(b) and, beginning with the A.Y. 2004-05, the amount that is disallowed in the event of any failure as mentioned in S. 144 or non-compliance with S. 184 will be taxed as "Business or Professional Income."

step:3 The partner's share of the firm's income (including that of a minor admitted for the firm's benefit) is not taken into account when calculating his overall income; instead, it is free from tax under Section 10(2A) of the Act because it is part of the firm's total income.