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Partnership Compliance - Tax Return Filing

Partnership Firm

A partnership firm is a business entity formed by two or more individuals working together under a single enterprise. There are two main categories of partnership firms:
  • Registered Partnership Firm:
  • Unregistered Partnership Firm:
  • A registered partnership firm has undergone formal registration with the Registrar of Companies (RoC) and has received a registration certificate as evidence of its legal existence.
  • Any partnership lacking a registration certificate from the Registrar of Firms is referred to as an unregistered partnership.

Partnerships are agreements entered into by two or more persons who have mutually consented to share the profits or losses arising from a jointly conducted business. The individuals involved in a partnership arrangement are individually known as partners and collectively referred to as a firm. Partners need to be aware of the partnership firm tax rate and how it affects the distribution of profits. Partners are responsible for maximizing firm advantages, fair dealings, and maintaining accurate records with full transparency for all partners’ benefit.

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Partnership Compliance - Tax Return Filing

Income Tax Return Filing for Partnership Firm

Every partnership firm in India is obligated to file income tax returns annually, regardless of whether the firm has generated income or incurred losses during the financial year. Understanding the partnership firm tax rate (30%) is crucial for making informed financial decisions within the business. Even if there was no business activity and the partnership firm’s income is zero (NIL), filing an NIL income tax return within the stipulated due date is still mandatory.

Partnership Firm Tax Slabs for AY 2023-24

Under the provisions of the Income Tax Act 1961, a partnership firm in India is subject to the following tax rates:
  • Partnership firm tax rate:
  • Surcharges:
  • Interest on Capital:
  • Health and Education Cess:
  • Marginal Relief:
  • Partnership firms are liable to pay income tax at a rate of 30% on their taxable income.
  • If the taxable income of the partnership firm exceeds one crore rupees, a surcharge of 12% is applicable in addition to the income tax.
  • Partnership firms can claim a deduction of up to 12% on the interest paid on capital.
  • A 4% Health and Education Cess is levied on the total tax amount, including surcharges.
  • If net income exceeds 1 crore, the amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

Minimum Alternate Tax for Partnership Firms

Similar to the income tax applicable to a company, partnership firms are subject to Minimum Alternate Tax (MAT). A minimum alternate tax of 18.5% of adjusted total income is applicable. Hence, the income tax payable by a partnership firm’s profits cannot be less than 18.5% (increased by income tax surcharge, education cess, and secondary and higher education cess).

Deductions Allowed

When computing the liability of income tax on a partnership firm, deductions are permitted for the following:
  • Remunerations or interest paid to partners that do not conform to the terms of the partnership agreement.
  • Salaries, bonuses, remunerations, and commissions paid to non-working partners of the firm.
  • If remuneration paid to partners complies with the partnership deed but relates to transactions that pre-date the partnership deed.

ITR Forms for a Partnership Firm

Partnership Firms can file their ITR for income tax on partnership firms through Form ITR-4 or ITR-5.
  • ITR-4:
  • ITR-5:
  • Filed by those partnership firms with a total income of up to 50 lakh and income from business and profession computed on a presumptive basis.
  • Filed by those partnership firms required to get their accounts audited.

Deadline for Partnership Firm Tax Filing

The deadline for filing ITR for a partnership firm depends on whether an audit is required:
  • No Audit Required:
  • Audit Required:
  • Returns must be filed by 31st July.
  • Returns must be filed by 31st October.

Filing of GST Returns

Every GST-registered person is required to file GST Returns. Every partnership firm must register under GST if its aggregate annual turnover exceeds Rs. 20 lakhs. Usually, the GST-registered partnership firms have to file GSTR-1, GSTR-3B, and GSTR-9 returns. If the firm has opted for a composition scheme, then GSTR-4 is to be filed.

TDS Return Filing

The TDS Return must be filed where the partnership firm has a valid TAN. The type of return depends on the purpose of deduction. The types of TDS Return are:
  • Form 24Q –
  • Form 27Q –
  • Form 26QB –
  • Form 26Q –
  • TDS on Salary
  • TDS where the deductee is a non-resident, foreign company
  • TDS on payment for the transfer of immovable property
  • TDS in any other case

EPF Return Filing

The partnership firm must get EPF registration if it employs more than ten persons, making filing an EPF return mandatory.

Accounting and Bookkeeping

Books of account must be maintained if the partnership firm’s sale/turnover/gross receipts from the business exceed Rs. 25,00,000 or the income from the business is more than Rs. 2,50,000 in any of the three preceding years.

Tax Audit

A partnership firm must have a tax audit carried out if the sales, turnover, or gross receipts of business exceed Rs. 1 crore in the financial year. However, it may be required to get its account audited in certain other circumstances.

Streamline Partnership Firm Compliance with Munibgiri

Streamline your partnership firm’s compliance effortlessly with Munibgiri. We are your trusted partner in meeting all your compliance requirements, simplifying the process, and ensuring you meet deadlines while adhering to tax regulations.
Our comprehensive services cover various aspects:
  • Income Tax Return Filing:
  • TDS Return Filing:
  • GST Return Filing:
  • EPF Return Filing:
  • We make filing your income tax returns a breeze, ensuring accuracy and timeliness.
  • Our support extends to TDS return filing, helping you accurately report deductions and meet your obligations.
  • For GST-registered businesses, we offer a hassle-free solution for filing both GSTR-1 and GSTR-3B returns, ensuring you stay compliant with GST regulations.
  • We assist in EPF return filing, ensuring compliance with employee provident fund regulations.
With Munibgiri by your side, you can concentrate on growing your partnership firm while we care for your compliance needs. This ensures your business maintains a strong financial footing and legal standing. We understand the intricacies of income tax on partnership firms, including tax slabs, deductions, and filing deadlines. Our team will guide you through the process efficiently and accurately.
Ready to file your partnership firm’s income tax return with ease? Get started now to experience the convenience and peace of mind that comes with our expert assistance.