When business is conducted with more than one person’s ownership, or a body of persons, it is called a partnership.
In India we have two types of partnership firms
Since the Partnership Act has been in existence before Independence (1932), it is one of the most popular ways of doing business in India
For the purposes of taxation, the partnership firm and the partners are treated as separate legal entities.
Further, certain deductibles are also allowed
Typically Partnership Firms need to fill ITR 5 to file their income tax returns. Do note, the ITR 5 is to file the returns of the Partnership firm and not the partners.
The partnership does not need to submit and supporting documents when filing an ITR 5. Needless to say records need to be maintained as furnished if requested by the department at some point in the future.
While filing returns the Firm can undertake Electronic Verification Code for verification purposes. However, in the case of an Audit requirement, verification needs to be undertaken using the class 3 digital signature.
If a partnership firm’s income through business is less than Rs. 2 crores or income through profession is less than Rs. 50 lakhs, it can even opt for an ITR 4 for tax filing purposes under the presumptive taxation scheme.
Net Income Level | Tax Rate |
Net Income less than Rs. 1 crore | 30% on net income |
Net Income more than Rs. 1 crore | 30% on net income + 12% surcharge |
Health and education cess | 4% on income tax and surcharge (if any) |
Additionally, if the normal tax liability is less than 18.5% of book profits, a partnership firm needs to pay an Alternate Minimum Tax of 18.5% plus surcharge and health and education cess as applicable.
A partnership firm may be required to get audited under the following circumstances:
Particulars | Timeline |
If Audit is not required | 31st July |
If Audit is required | 30th September |
When business is conducted with more than one person’s ownership, or a body of persons, it is called a partnership.
In India we have two types of partnership firms
Since the Partnership Act has been in existence before Independence (1932), it is one of the most popular ways of doing business in India
For the purposes of taxation, the partnership firm and the partners are treated as separate legal entities.
Further, certain deductibles are also allowed
Typically Partnership Firms need to fill ITR 5 to file their income tax returns. Do note, the ITR 5 is to file the returns of the Partnership firm and not the partners.
The partnership does not need to submit and supporting documents when filing an ITR 5. Needless to say records need to be maintained as furnished if requested by the department at some point in the future.
While filing returns the Firm can undertake Electronic Verification Code for verification purposes. However, in the case of an Audit requirement, verification needs to be undertaken using the class 3 digital signature.
If a partnership firm’s income through business is less than Rs. 2 crores or income through profession is less than Rs. 50 lakhs, it can even opt for an ITR 4 for tax filing purposes under the presumptive taxation scheme.
Net Income Level | Tax Rate |
Net Income less than Rs. 1 crore | 30% on net income |
Net Income more than Rs. 1 crore | 30% on net income + 12% surcharge |
Health and education cess | 4% on income tax and surcharge (if any) |
Additionally, if the normal tax liability is less than 18.5% of book profits, a partnership firm needs to pay an Alternate Minimum Tax of 18.5% plus surcharge and health and education cess as applicable.
A partnership firm may be required to get audited under the following circumstances:
Particulars | Timeline |
If Audit is not required | 31st July |
If Audit is required | 30th September |