Compliance for Partnership Firms in India
Operating a Partnership Firm in India involves fulfilling a range of financial and legal responsibilities. Ensuring compliance for partnership firms with tax regulations is crucial to maintain the smooth functioning and growth of your business. This includes filing Income Tax Returns (ITR), TDS Returns, GST Returns, EPF Returns, and sometimes undergoing a Tax Audit.
Filing tax returns is a core responsibility for all partnership firms in India. At FilingIn, we understand the complexities of complying with Indian tax laws. Our expert services are designed to help business owners navigate through these obligations, ensuring compliance for partnership firms with ease and eliminating the hassle of complex procedures. By partnering with FilingIn, you ensure timely filing and optimization of your tax benefits, keeping your business in compliance while maximizing financial advantages.
What is a Partnership Firm?
A Partnership Firm is a business entity where two or more individuals come together to run a business under a common agreement, sharing profits or losses. There are two types of partnership firms:
Registered Partnership Firm: A partnership firm that is formally registered with the Registrar of Firms (RoF).
Unregistered Partnership Firm: A partnership that operates without formal registration with the RoF.
The partners are responsible for managing the business, keeping transparent records, and ensuring that all profits and losses are distributed according to the terms of the partnership agreement.
Income Tax Return Filing for Partnership Firms:
Every partnership firm in India is mandated to file Income Tax Returns (ITR) annually, regardless of whether it has made profits or incurred losses. Filing a return even when the income is NIL is essential for legal compliance for partnership firms.
- Tax rate: Partnership firms pay 30% on their taxable income.
- Surcharge: A surcharge of 12% applies if the firm's taxable income exceeds INR 1 crore.
- Health and Education Cess: A 4% cess is levied on the total tax amount.
- Minimum Alternate Tax (MAT): A minimum tax of 18.5% of adjusted total income is applicable.
Deductions Allowed:
- Remunerations or interest paid to partners that align with the terms of the partnership deed.
- Salaries, bonuses, and commissions paid to non-working partners.
- Deductions for interest on capital contributions by partners.
- If no audit is required, the return should be filed by 31st July.
- If an audit is necessary, the return must be filed by 31st October.
ITR Forms for a Partnership Firm:
A Partnership Firm must file the income tax return using either ITR-4 or ITR-5 based on their financials and audit requirements:
- ITR-4: For firms with total income up to ₹50 lakh and whose income is computed on a presumptive basis.
- ITR-5: For firms whose accounts are required to be audited.
GST Return Filing for Partnership Firms:
All GST-registered partnership firms must file GST Returns. The types of returns depend on the firm's turnover and the GST scheme under which it is registered. Typically, GST-registered firms need to file GSTR-1, GSTR-3B, and GSTR-9. If the firm is under the composition scheme, GSTR-4 is filed.
TDS Return Filing:
If a partnership firm has a valid TAN (Tax Deduction and Collection Account Number), it must file TDS Returns for deductions made on salary, payments to non-residents, or other business-related expenses. The TDS forms include:
- Form 24Q – TDS on Salary
- Form 27Q – TDS for non-residents
- Form 26QB – TDS on property transactions
- Form 26Q – Other TDS cases
EPF Return Filing:
If the partnership firm has more than 10 employees, it is required to register for Employee Provident Fund (EPF). Consequently, the firm must file EPF returns to ensure compliance with EPF regulations.
TAX Audit for Partnership Firms:
A Tax Audit is mandatory if a partnership firm’s turnover exceeds ₹1 crore during the financial year. Even if the turnover is below this threshold, audits may still be required in specific circumstances.
At FilingIn, we make it easy to manage your partnership firm's compliance needs. Our experts provide assistance in the following areas:
- Income Tax Return Filing: We ensure accurate and timely filing of your partnership firm’s tax returns.
- TDS Return Filing: We handle TDS filings, ensuring you meet your tax deduction obligations.
- GST Return Filing: We streamline the filing process for GSTR-1, GSTR-3B, and GSTR-9 to maintain your GST compliance.
- EPF Return Filing: We manage EPF filings, ensuring adherence to EPF regulations.
- Tax Audit Assistance: If required, we assist with conducting the necessary tax audit for your firm.
With FilingIn, you can focus on growing your business while we handle your compliance responsibilities efficiently. Our services ensure that your partnership firm remains in good standing with all regulatory authorities.
Ready to get your partnership firm’s tax returns filed with ease? Let FilingIn assist you with our comprehensive compliance services. Get in touch today to experience the convenience of professional assistance!
Frequently Asked Questions in India
What is the deadline for filing Income Tax Returns for a partnership firm?
The deadline for filing Income Tax Returns (ITR) for a partnership firm depends on whether an audit is required:
- If no audit is necessary, the return must be filed by 31st July.
- If an audit is required, the return must be filed by 31st October.
What is the tax rate for partnership firms in India?
The tax rate for partnership firms in India is 30% on the taxable income. Additionally, a 12% surcharge applies if the firm’s income exceeds ₹1 crore, along with a 4% health and education cess.
What is Minimum Alternate Tax (MAT) for a partnership firm?
A partnership firm is subject to Minimum Alternate Tax (MAT) at 18.5% of its adjusted total income, in case its tax payable is less than the MAT.
What are the filing requirements for GST for a partnership firm?
Partnership firms registered under GST must file regular GST Returns:
- GSTR-1: Details of outward supplies
- GSTR-3B: Summary of inward and outward supplies
- GSTR-9: Annual GST return (for regular GST filers) Firms under the composition scheme must file GSTR-4.
When is a partnership firm required to get a tax audit done?
A partnership firm must get a tax audit conducted if its turnover exceeds ₹1 crore in a financial year. A tax audit is also required in some other specific cases, such as if the firm opts for a presumptive taxation scheme.
What are the TDS filing requirements for a partnership firm?
A partnership firm with a valid TAN (Tax Deduction and Collection Account Number) is required to file TDS Returns. The type of return depends on the nature of deduction, e.g., Form 24Q for TDS on salary, Form 27Q for TDS on payments to non-residents, and Form 26QB for TDS on property transactions.
What is the procedure for filing EPF returns for a partnership firm?
A partnership firm with more than 10 employees must register for EPF (Employee Provident Fund). The firm must file EPF returns monthly and ensure compliance with the regulations.
What are the consequences of not filing Income Tax Returns for a partnership firm?
Failure to file Income Tax Returns can lead to penalties, interest charges, and legal consequences. The firm may also face difficulties in obtaining loans or entering into contracts due to non-compliance.
Can a partnership firm claim deductions on interest paid to partners?
Yes, a partnership firm can claim a deduction of up to 12% on the interest paid to partners on their capital contributions as per the partnership deed.
What records should a partnership firm maintain for compliance?
A partnership firm must maintain books of accounts if its turnover exceeds ₹25 lakh or if the income exceeds ₹2.5 lakh in any of the three preceding years. These records should include financial statements, invoices, and tax-related documents to ensure transparency and proper filing.
