Which ITR to file for Partnership Firm?

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Maharshi Shah

ITR Filing
ITR for Partnership
ITR Form
Last updated on July 24th, 2021

As per the Income Tax Act, a partnership firm is ‘’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.’’ Just like individuals, HUFs and companies, partnership firms are also liable to pay income tax. This article will help you understand various aspects related to filing ITR for a Partnership Firm

Tax Rates for Partnership Firm

Partnership firms are liable to pay income tax at the rate of 30% on the total annual income. Apart from this, if the total income exceeds INR 1 crore, then the firm is also liable to pay a surcharge at the rate of 12%. The partnership firm must also pay education and secondary education cess in addition to income tax and surcharge.  The education and secondary education cess is 2% and 1% respectively.

A partnership firm, registered or unregistered is also suppose to pay alternate minimum tax which cannot be less than 18.5% of the adjusted total income.

Audit Requirement for Partnership Firm

A partnership firm will require an audit if they fall under the following category:

Income Tax Calculation for Partnership Firm

When calculating the total taxable income, the firm must also take into account certain deductions that they can claim while filing their return:

ITR Form for a Partnership Firm

Partnership firms for filing income tax returns have to file form ITR 5. Firms can file the return via Income Tax Department’s e-filing portal. One does not need to attach any supporting documents while filing ITR but if requested by the ITD, then they have to be submitted. It is not compulsory for a partnership firm to file an income tax return online if it does not require a tax audit. Moreover while filing the return, the partners must have a class 2 digital signature for the verification process.

It is important to not that ITR 5 is for filing the return for the partnership firm only and not for the partners, they have to file ITR 3.

Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore
Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore

Tax Due Dates for Partnership Firm

The due dates for filing return for a proprietorship firm depend on tax audit applicability:

FAQs

Is a digital signature mandatory for ITR filing of partnership?

Yes, in case of online filing of ITR, the digital signature of the partners is mandatory.

Is it compulsory for a partnership firm to file ITR online?

If a tax audit is not necessary then it is not compulsory to file ITR online.

Got Questions? Ask Away!

  1. Hey @TeamQuicko

    Thanks for the blog! Just one quick question - Why do we have to report a quarterly breakdown of Dividend Income under IFOS?

    Thank you!

  2. I had received dividend recently but I had noticed that TDS had been deducted. any idea as to why has it happened and is there a way I can claim this TDS?

  3. Hey @HarshitShah

    After the introduction of Budget 2020, dividend income is now taxable in the hands of the shareholder; and is also subject to TDS at 10% in excess of INR 5000 u/s 194 & 194K. Foreign Dividend is taxable at slab rates. TDS is not applicable to such dividends. The taxpayer should report such income under the head IFOS in the ITR filed on the Income Tax Website.

    Hope this helps!

  4. Hi @Maulik_Padh,

    You need to pay Income tax on the net taxable income, i.e. after subtracting deductions, expenses, etc.
    If the net taxable income is negative i.e. if there is loss, you can carry it forward when filing the ITR

    Here are some of the articles which might help

  5. Hi @ameyj

    The amount of TDS deducted shall reflect in your Form 26AS only and it will also reflect the name of the deductor.
    Using the name of the deductor you can find out on which share you have received the dividend and you can also cross-check the same in your bank statement.

    Yes, you are right, TDS is to be deducted when the dividend paid exceeds 5000 INR in a financial year. However, the 5,000 INR limit pertains to all the dividends an individual gets in a year, or the total dividend per shareholder that a company pays out in a year, is left to interpretation, and hence registrars and share transfer agents (RTA) are not taking any chances and are deducting TDS even on small amounts.

    Hope this helps :slightly_smiling_face:

  6. Hi @ameyj

    You can submit a grievance on Income Tax Portal mentioning the issue and also attach the 26AS.
    The other option is to leave it as it is and clarify it when the tax department sends the notice.

  7. Hi @TeamQuicko

    Consider that I have 10 shares each of 10 different Indian companies. Each of the 10 companies are declaring a dividend of INR 100 before the FY ends. Now I will be recieving 1000 as dividend from each company, thereby a total of 10,000.

    The 5,000 dividend limit, is it applicable to each company / total dividend recieved by me in a year. If it is applicable to each company, then I would not attract TDS of 10% for dividend.

    Also pl clarify, how would the company B know that I have got shares of Company A,C,D,E so on…

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