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Limited Liability Partnership Tax Filing

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What are the annual compliances for a Limited Liability Partnership?

In comparison to private limited companies, LLPs have a lower compliance burden. However, they do need to file annual returns under the Income Tax Act as well as the LLP Act.

The key point here is that while compliances are low, non-compliance can lead to penalties as high as Rs. 5 lakhs.

Which ITR is applicable to LLPs?

Limited Liability Partnerships need to file ITR 5 online using a digital signature of one of the partners. However an LLP filing returns u/s 139(4A), 139(4B), 139(4C), 139(4D) will need use another form.

Audit Requirements for an LLP

While it is mandatory for LLPs to maintain books of accounts,  a statutory audit as per Rule 24(8) of the Limited Liability Partnership Act, 2009  does not require an audit for LLP unless the turnover in any financial year does not exceed Rs. 40 lakhs or the contribution of partners does not exceed Rs. 25 lakhs.

As far as a tax audit is concerned, if an LLP whose source of income is through business has an annual turnover of more than Rs. 1 crore in any financial year, it requires a tax audit under Section 44AB of the Income Tax Act. If an LLP earns income through profession the limit for a tax audit is Rs. 50 lakhs.

This limit for tax audit has been increased to Rs. 5 crores from assessment year FY 21-22 provided the LLP’s cash receipts are less than 5% of the gross receipts and if cash payments are less than 5% of aggregate payments for a particular financial year.

Slab Rates for LLPs

LLPs are taxed at a flat 30% of their taxable income. Further, if their taxable income is over Rs. 1 crore there is a surcharge of 12%. A Health and Education Cess of 4% is levied on the income tax amount and the surcharge amount (if any).

An LLP is also subject to an Alternate Minimum Tax (AMT) of 18.5% i.e. if the tax liability falls below 18.5% of book profits, the LLP will need to pay a minimum tax rate of 18.5%. Further, a surcharge (if applicable) and health and education cess will be applied over and above the 18.5% rate.

What are the MCA compliances for LLPs?

There are two returns that are mandatory for LLPs to submit to the Ministry of Corporate Affairs every year.

Form 11 is an annual return form and Form 8 is a form declaring solvency for a LLP.

Documents and Details Required

For ITR Filing

    • Financial Statements which include Profit & Loss Statement, Balance Sheet
    • PAN Card Details
    • Address Details
    • Date of registration
    • Partner’s PAN, Aadhar Card and contact details

Form 11

      • LLP Identification Number
      • Business Classification of the LLP
      • Details of contributions or sums received by all partners of the LLP
      • Details of Partners or Designated Partners of the LLP
      • Details of any penalties imposed on the LLP
      • Details of any compounding offenses
      • Details of any other Company or LLP in which the Partners or Designated Partners are Directors or Partners.
      • Digital Signature of a Partner

Form 8

    • Details of Financial Statements
    • Statement of Contingent liabilities, if they exist
    • Digital Signature Certificates of 2 Partners

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What are the annual compliances for a Limited Liability Partnership?

In comparison to private limited companies, LLPs have a lower compliance burden. However, they do need to file annual returns under the Income Tax Act as well as the LLP Act.

The key point here is that while compliances are low, non-compliance can lead to penalties as high as Rs. 5 lakhs.

Which ITR is applicable to LLPs?

Limited Liability Partnerships need to file ITR 5 online using a digital signature of one of the partners. However an LLP filing returns u/s 139(4A), 139(4B), 139(4C), 139(4D) will need use another form.

Audit Requirements for an LLP

While it is mandatory for LLPs to maintain books of accounts,  a statutory audit as per Rule 24(8) of the Limited Liability Partnership Act, 2009  does not require an audit for LLP unless the turnover in any financial year does not exceed Rs. 40 lakhs or the contribution of partners does not exceed Rs. 25 lakhs.

As far as a tax audit is concerned, if an LLP whose source of income is through business has an annual turnover of more than Rs. 1 crore in any financial year, it requires a tax audit under Section 44AB of the Income Tax Act. If an LLP earns income through profession the limit for a tax audit is Rs. 50 lakhs.

This limit for tax audit has been increased to Rs. 5 crores from assessment year FY 21-22 provided the LLP’s cash receipts are less than 5% of the gross receipts and if cash payments are less than 5% of aggregate payments for a particular financial year.

Slab Rates for LLPs

LLPs are taxed at a flat 30% of their taxable income. Further, if their taxable income is over Rs. 1 crore there is a surcharge of 12%. A Health and Education Cess of 4% is levied on the income tax amount and the surcharge amount (if any).

An LLP is also subject to an Alternate Minimum Tax (AMT) of 18.5% i.e. if the tax liability falls below 18.5% of book profits, the LLP will need to pay a minimum tax rate of 18.5%. Further, a surcharge (if applicable) and health and education cess will be applied over and above the 18.5% rate.

What are the MCA compliances for LLPs?

There are two returns that are mandatory for LLPs to submit to the Ministry of Corporate Affairs every year.

Form 11 is an annual return form and Form 8 is a form declaring solvency for a LLP.

Documents and Details Required

For ITR Filing

    • Financial Statements which include Profit & Loss Statement, Balance Sheet
    • PAN Card Details
    • Address Details
    • Date of registration
    • Partner’s PAN, Aadhar Card and contact details

Form 11

      • LLP Identification Number
      • Business Classification of the LLP
      • Details of contributions or sums received by all partners of the LLP
      • Details of Partners or Designated Partners of the LLP
      • Details of any penalties imposed on the LLP
      • Details of any compounding offenses
      • Details of any other Company or LLP in which the Partners or Designated Partners are Directors or Partners.
      • Digital Signature of a Partner

Form 8

    • Details of Financial Statements
    • Statement of Contingent liabilities, if they exist
    • Digital Signature Certificates of 2 Partners