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M/s Anbalagan & Muthukumarasamy
Chartered Accountants
Who has to file an Income Tax return?
All partnership firms are required to file income tax returns each year, irrespective of income or loss.
If there was no business activity, then a NIL income tax return must be filed before the due date for a partnership firm.
Similarly, all LLPs are required to file income tax returns each year, irrespective of income or loss.
If there was no business activity, then a NIL income tax return must be filed before the due date.
All companies registered in India are required to file income tax returns each year, irrespective of income, profit or loss.
Hence, even dormant companies with no transactions are required to file an income tax return each year.
What is Partnership?
Partnership firms in India can be split into two groups namely, registered partnership and unregistered partnership.
Registered partnership firms are those firms which have secured a registration certificate from the Registrar of Firms under the Indian Partnership Act.
All other partnerships that do not have a registration certificate would be categorized as an unregistered partnership firm.
Section 2(23)(i) of the Income-tax Act, 1961 takes the meaning of the “firm ” from Indian Partnership Act, 1932. Section 4 of the Indian Partnership Act, 1932 defines firm as under:
“Persons who have entered into 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”.
The firm shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008. Section 2(23)(i) of the Limited Liability Partnership Act, 2008 defines “limited liability partnership” as a partnership formed and registered under the Act.
Partnership Taxation:
Under the Income Tax, a Partnership firm is considered as a separate entity and hence a partnership firm is taxed under the income tax slab for partnership firm and the partners are taxed under the income tax slab for individuals.
In case of partnership Firm, the share of profit is exempted from income tax in the hands of partners.
Any salary, commission, remuneration, and bonus to a partner are allowed as deductions subject to certain conditions and limits.
Remuneration or interest paid to the partners must be in accordance with the terms of the partnership deed and the interest paid to partners should be in the conformity with the terms of the partnership deed and should not exceed 12% per annum.
Also, remuneration paid to partners should not exceed the following permissible limit:
On first Rs. 3 Lakhs of book profit or in the case of loss – Rs. 1,50,000 or 90% of book profit, whichever is more. On the balance of the book profit – 60% of book profit.
Income Tax Audit
The Income Tax Department has made provisions for tax audit under Section 44AB of the Income Tax Act 1961 for partnerships carrying on business and total sales exceed Rs.1 crore in the previous year and for partnerships carrying on a profession and gross receipts in profession exceed Rs.50 lakhs in any previous year.
What are the due dates for filing of returns?
The due date for filing income tax return for most of the partnership firms is July 31 after the end of the relevant financial year.
The the due date for businesses requiring audits like LLP or partnership firm, is 30th September after the end of the relevant financial year.
Any loss incurred during the year cannot be carried forward if the return is filed after the due date of filing income tax return.
Income Tax Rate:
When looking at how to file business tax returns, we need to take a look at income tax rates for firms.
The applicable tax rate for partnership firms and limited liability partnerships is a flat rate of 30 percent.
If income is more than Rs 1 crore then there is an additional surcharge of 12 percent. Health and education cess at the rate of 3 percent are charged on the amount of tax computed, including surcharge.
We provide various Auditing u0026amp; Assurance Services to Partnershipfirms.
Our Services include:
Tax Audit under Income Tax GST Audits Internal Audits Stock Audits Fraud Investigation and Forensic Audits Special Purpose Audits u0026amp; Certifications Foreign Exchange Remittance Certifications such as Form 15CB / 15CA. GST Registration GST Return Filing TDS Return Filing
Here is a checklist of docmoments we need from you when e-Filing your Income Tax returns:
1. Your ekyc. Identity u0026amp; address proof with photo.
2. Deed of Partnership and a copy of the Certificate of Registration under the Partnership Act.
3. Details of immovable u0026amp; movable properties in the name of the firm.
4. Details of all loans including vehicle loans, business loans, private loans, credit cards and the loan account statements for the relevant financial year.
5. Details of Fixed deposits in the name of the firm and the bank ledger copies for the relevant financial year.
6. Details of Shares u0026amp; Securities in the name of the firm and dmat statement for the relevant financial year.
7. Details of all bank accounts in the name of the firm and the bank statements or passbooks updated until March 31st of the relevant financial year.
8. Interest certificates and TDS certificates from banks, Post offices and companies.
9. Last year return copies and financial statements.
10. Summary Statement of all your investments, fixed and current assets.
10. Summary statement of all your liabilities including long term, short term, secured and unsecured liabilities.11. GST particulars and copies of the GST returns for the relevant financial year.
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