Partnership Firm Tax Return Filing

What is the definition of a partnership firm?

A partnership firm is a form of company in which several people work together to run a business. In India, there are two types of partnership firms: registered partnership businesses and unregistered partnership firms.

Small businesses might consider forming a partnership since the process is simple and there are few legal requirements.

Partnerships have been legal in India since 1932, making them one of the country’s oldest forms of commercial organisations. Even after it has been created, a partnership business can be registered. There are currently no consequences for failing to register a partnership business.

Unregistered Partnership businesses, on the other hand, are denied certain rights under Section 69 of the Partnership Act, which primarily addresses the consequences of non-registration.

“Persons who have joined into a partnership with one another are termed individually “partners” and collectively “a firm,” and the name under which their company is conducted on is called the “firm name,” according to the income tax. As a result, an unregistered Partnership firm is one that does not have a registration certificate from the registrar.

The tax rate for a Partnership firm

What is a partnership firm’s tax rate?

The Income Tax Act of 1961 requires a partnership firm to file a partnership firm income tax return. Partnership businesses are subject to a 30 percent income tax rate on their entire earnings. A partnership business is also subject to a 12 percent income tax penalty if its total income exceeds Rs.1 crore.

A partnership firm must pay the education cess and the secondary higher education cess in addition to the income tax and surcharge.

The Education Cess is imposed at a rate of 2% on the amount of income tax and relevant surcharge. The secondary and higher education cess is imposed at a rate of 1% on the amount of income tax and the relevant surcharge.

AMT stands for alternative minimum tax.

Partnership businesses, like a private limited company or LLP, are required to pay an alternative minimum tax of 18.5 percent of “adjusted total revenue.” The relevant surcharge, education cess, and secondary and higher education cess would all raise the alternative minimum tax.

The income tax calculation for Partnership firms

What are the deductibles that can be used?

An individual must examine the possible deductible income when computing the payable income tax.


The partnership agreement does not include remuneration or interest given to the firm’s partners.

Salaries, bonuses, remunerations, and commissions are all paid to the firm’s non-working partners.

If the requirements of the partnership agreement are followed when pay is provided to partners, yet the transactions were made or concerned anything that pre-dates the partnership deed.

How to File Tax Returns for a Partnership Firm?

Form ITR-5 should be used to file partnership income tax returns. This form ITR-5 is used to file partnership firm income tax returns, not individual partner tax returns.

ITR 5 is an attachment-free form, like all other income tax forms, and no papers or statements are required to be submitted with partnership company tax filings. Taxpayers must, however, keep track of their company documents and present them when required by the IRS.

The income tax department’s internet portal accepts ITR-5 filings. Documents should only be submitted when they are requested. Partners must have class 2 when submitting partnership company tax returns.

Procedure for filing Income tax returns of a partnership firm.

A partnership firm’s income tax return can be submitted either electronically or manually through the IRS website. A class 2 digital signature will be required for the firm’s partner if the income tax return is filed electronically. In addition, partnership firms that are subject to an audit must file their income tax returns online.

Audit Requirement for Partnership Firms

Partnership businesses that meet any of the following criteria will be obliged to have their accounts audited:

In the preceding year, business was carried on and total sales exceeded Rs.1 crore.

In any prior year, carrying on a profession and  total earnings in such profession exceeded Rs.50 lakhs.

In addition, there may be additional circumstances that make an audit required for a partnership company.

A report in Form No. 3CEB must be filed under section 92E if a partnership company engaged in foreign or specified domestic activities. The deadline for filing a tax return for partnership companies needed to submit Form 3CEB is November 30th.

Partnership Firm Tax Return Due Date

The partnership tax return filing deadline is determined by whether or not the company is needed to be audited. Income tax returns should be filed by July 31st if the company is not needed to be audited. If the company is not required to be audited, it must file its income tax returns by September 30th.

However, as compared to businesses, the cost of compliance is lower. Partnerships, unlike corporations, are not required to have meetings or keep a register. As a result, it’s important to remember that non-compliance might be more expensive than complying.

Assessment of Partners
  1. The partners will not have to pay any tax on their portion of the business’s income once the firm has paid the tax.
  2. Interest or remuneration received by a partner will be taxed as ‘Business or Professional Income,’ excluding amounts disallowed in the hands of the firm for exceeding the limits set out in S. 40(b) and amounts disallowed in the event of any failure as described in S. 144 or non-compliance with S. 184 from A.Y. 2004-05.
  3. The partner’s portion of the firm’s revenue (including a minor admitted for the firm’s benefit) is not included in determining his total income, i.e his share of the firm’s total income is tax-free under section 10(2A) of the Act.

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