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If you run a business as a partnership firm, filing your Income Tax Return (ITR) every year is a legal duty. It doesn’t matter that your firm made a loss, a profit, or had no business at all. This guide explains who must file, which form to use, the tax rate, the documents you need, the due dates, and the step-by-step process.
A partnership firm run by two, three, or more persons under a partnership deed. CBDT treated the firm like a separate taxpayer from its partners. It has its own PAN, pays its own tax, and files its own return.
This applies to:
Yes. Every partnership firm must file an income tax return each year, even if:
There are no basic exemptions for firms. Filing on time also lets the firm carry forward business losses to future years, which is not allowed if the return is filed late.
Partnership firms and LLPs generally file ITR-5. This form is meant for firms, LLPs, Associations of Persons (AOP), and Bodies of Individuals (BOI).
Firms that are not LLPs and earn income only under the presumptive tax scheme may be able to file ITR-4. Most firms, however, use ITR-5, so it is best to check your case before filing.
ITR-5 has several sections, including:
| Particulars | Rate |
|
Income tax rate |
30% flat |
|
Surcharge (if total income exceeds ₹1 crore) |
12% of tax |
|
Health and Education Cess |
4% of tax plus surcharge |
|
Alternate Minimum Tax (AMT) for LLPs and firms claiming certain deductions |
18.5% of adjusted total income |
The firm's profit is taxed in the firm's hands. The profit share received by a partner is exempt in the partner's hands under ITR Act Section 10(2A). This avoids double tax.
Please note that tax rules can change with each Union Budget, so always check the current year's rates before filing.
A tax audit under Section 44AB is needed in these cases:
The audit must be done by a Chartered Accountant, who gives the report in Form 3CB-3CD. Before submitting a return, the report should be filed.
Within limits set by Section 40(b), the firm can claim a deduction for interest and salary paid to partners.
Interest on capital: Maximum 12% per year (simple interest).
Remuneration to working partners:
| Book Profit | Maximum Allowed Remuneration |
|
On the first ₹6,00,000 profit |
Whichever is higher - ₹3,00,000 or 90% of book profit |
|
On the balance book profit |
60% of book profit |
The partnership deed must mention the amount or calculating method for it, and only working partners can receive remuneration. Any amount above these limits will be added back to the firm's income.
Keep these ready before you start:
GST registration and GST returns details (if applicable):
If the firm's tax liability for the year is ₹10,000 or more, it must pay advance tax in instalments:
| Due Date | Amount to Be Paid |
|
On or before 15 June or as per CBDT dates |
15% of the tax |
|
On or before 15 September or as per CBDT dates |
45% of the tax (cumulative) |
|
On or before 15 December or as per CBDT dates |
75% of the tax (cumulative) |
|
On or before 15 March or as per CBDT dates |
100% of the tax |
| Default | Consequence |
|
Late filing of return (Section 234F) |
₹5,000 Fee |
|
Delay in filing (Section 234A) |
Interest of 1% per month on unpaid tax |
|
Short or late advance tax (Sections 234B and 234C) |
1% per month Interest on the shortfall |
|
Not getting the tax audit done (Section 271B) |
Penalty of 0.5% of turnover, up to ₹1,50,000 |
|
Loss not carried forward |
If the return is filed late, business losses cannot be carried forward |
Filing a firm's return involves audit rules, partner payment limits, and several schedules in ITR-5. A small error can lead to a notice or extra tax. With CA Arpit Gupta, you get:
Do not wait for the last date. Get your firm's return prepared and filed correctly by an experienced Chartered Accountant.
Contact on Call or Whatsapp: +91-7081220600
Call today to book a consultation and get your partnership firm's income tax return filed without delay.
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