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:
- Carrying out a business and if total sales exceed INR 1 crore in the previous year.
- Carrying on a profession and gross receipts in the profession exceed INR 50 lakhs in any previous year.
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:
- Remuneration or interest paid to the partners which are not in accordance with the terms of the partnership deed
- If remuneration paid to partners is in accordance with the terms of the partnership deed but such transactions were made or were in relation to anything that pre-dates the partnership deed.
- Salary, bonus, commission, or remuneration paid to non-working partners.
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.
Tax Due Dates for Partnership Firm
The due dates for filing return for a proprietorship firm depend on tax audit applicability:
- 31St July: For proprietorship firm where tax audit is not necessary
- 30th September: For proprietorship firm where tax audit is necessary
- 30th November: For proprietorship firm who have international transactions for business purpose
Yes, in case of online filing of ITR, the digital signature of the partners is mandatory.
If a tax audit is not necessary then it is not compulsory to file ITR online.