As per section 2(23) (i) of the Income Tax Act,1961 defines firm which is stated in the Indian Partnership Act,1932. As per section 4 of the Indian Partnership Act, 1932 Partnership Firm means persons who have entered into a partnership with one another who are individually called as partners but collectively termed as a firm and the name under which their business is carried on is called as a firm name.
The firm shall also include the Limited Liability Partnership as defined under the Limited Liability Partnership Act,2008.
Ø What are the heads of income under Partnership Firm?
1) Income from House Property:
Conditions for Taxability:
a) The house property should be any land or building thereto
b) The Taxpayer should be the owner of the property
c) The House property should not be used for the Business or profession of the Partnership firm
2) Income from Business and Profession:
The following income shall be taxable under the head Business and Profession:
a) Profits and gains from any business and profession carried on by the assessee for which the partnership firm is formed at any time during the relevant financial year
b) Any compensation or payment received or due to be received from any specified person.
3) Income from Capital Gains:
Conditions for chargeability and taxability:
a) There should be a Capital asset.
b) It should be owned and then transferred by the taxpayer
c) There should be gain as a result of the transfer
4) Income from Other Sources:
Any income not chargeable under the above heads will be included in the income from other sources except which is specifically excluded from the total income.
Ø Tax Payment under Partnership Firm:
a) As per Income Tax:
(i) Partnership Firm is liable to pay tax at flat 30% on the total income.
(ii) The amount of tax calculated above shall be further increased by surcharge @ 12% where the total income exceeds 1 crore.
(iii) Further, the amount of tax will be further added by health & education @ 4% of such tax amount and surcharge.
b) As per the Alternate Minimum Tax Method:
Tax can be calculated and paid by partnership firm which cannot be less than 18.5% as increased by surcharges and education cess and secondary and education cess of the adjusted total income as per the provisions of section 115JC.
Ø How Tax Payment will be done?
Taxes can be paid either electronically or through physical mode by downloading Challan ITNS 280 in the designated bank
Ø Which ITR is required to be filed?
1) It is mandatory to file Return of income for every partnership firm irrespective of the amount of income or loss.
2) Form ITR 5 shall be used in filing the return of the partnership firm.
Ø Manner of furnishing the return:
Return for the Partnership firm has to file has to be filed online by following the below modes:
a) By Digital Signature
b) Transmitting and submitting the data electronically under Electronic verification code
c) Transmitting and submitting the data electronically and thereafter submitting the verification of the return in the form of ITR V.
Kindly note it is mandatory to digitally sign the return if the accounts of Partnership Firm are required to be audited under section 44AB.
Ø What are the due dates for Return Filing?
a) Partnership Firms whose turnover exceeds 1 crore or contribution exceeds 50 lakhs is required to get is accounts audited under section 44AB or under any other law: 30th September of the relevant assessment year.
b) Partnership Firm who is mandatorily required to furnish a report in Form No. 3CEB under section 92E: 30th November of the relevant assessment year. (As per section 92E of the Income Tax Act, 1961 partnership firm involved in the international transaction with associated enterprise or has undertaken a specified domestic transaction are required to furnish a certified report by a Chartered accountant)
c) In any other case: 31st July of the relevant assessment year.