Partnership Firm Compliances & Filings
Partnership Firm is formed as a result of an association of two or more persons to carry on a business in the capacity of co-owners. Partnership Firms in India are governed by the Indian Partnership Act 1932. Section 4 of the Indian Partnership Act of 1932[1] defines partnership as “the relation between person who has agreed to share profits of a business carried on by all or any of them acting for all.” All the partners of the firm share the profits and losses in proportion of their respective owners, or as agreed between them. The limitations of sole proprietorship firm gave rise to Partnership firms. Further, in this page, you shall learn about the compliances involved in Partnership Firms.
There are two types of Partnership Firms, registered and unregistered Partnership Firms. A firm needs to comply with Section 58 of the Indian Partnership Act, 1932 to be fully registered. It is not compulsory to register the firm, but it is more advantageous to register a firm. Partnership firms are formed by drafting the Partnership Deed between the partners.
Filing of Compliances for a Partnership Firm in India.
Depends upon case to case basis
- Filing of Compliances for a Partnership Firm in India.
- Business or Individual planning to comply with a Partnership Firm in India.
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- Preparation & Filing of Compliances for Partnership Firm in India
- Monthly Sales and Purchase bill for GST return.
- Monthly TDS sheet (Draft sheet we will provide) for TDS payment and Return.
- Monthly Expenses bill for Accounting.
- Monthly ESI & PF sheet (Draft sheet we will provide) for payment and return.
Choose from various Applicable Compliances for Partnership Firm
What is Partnership Firm Compliance?
In India, Partnership firm is very popular to start a new business. Partnership firms are required to maintain compliance like LLPs and Companies registered in India. Partnership firm is regulated by Partnership Act, 1932. In addition to the basic compliance, partnership firms may also be required to comply with TDS regulations, GST regulations, ESI regulations and others. The compliance requirement for a business would vary based on the type of entity, industry, state of incorporation, number of employees and sales turnover. Partnership firm has to comply with following compliance:
- Monthly or Quarterly GST Return (If registered under Goods & Services tax).
- Monthly TDS payment and Quarterly TDS return.
- Monthly ESI and EPF return.
- Income Tax Return (ITR) filing of Partnership firm.
- Income Tax Return (ITR) filing of Partners.
- Audit Report certified by CA.
Partnership firm compliance is based on the turnover of business and applicability of particular act.
| GST | Goods and Services tax (GST) registration is based on the turnover of business. If partnership firm is registered under GST, it is compulsory to file GST return. |
| TDS | Tax deducted at source (TDS) rules is applicable on transaction based. Like: if partnership firm is paying salary to any employee which is more than the basic exemption limit and tax is applicable, TDS is required to deduct from salary and paid to government on monthly basis. |
| ESI & EPF | In nutshell, every factory/business engaged in the business as per the act and employed 20 or more persons are required to register under the act. Monthly payment of PF contribution and filing of Return is mandatory. |
| Income Tax Return (ITR) | As per the income tax act, 1961, Income Tax Return (ITR) of partnership firm is compulsory to file irrespective of its Income. |
| ITR of Partners | Partners in the firm will get Remuneration and Interest on capital invested in a firm. They are also required to file their Income tax return annually. |
| Audit | As per the act, audit of accounts and submission of audit report certified by CA (Chartered Accountant) is mandatory, if specified turnover limit exceed. Audit Limit for Business is Rs. 1 crore and Audit Limit for Profession is Rs. 50 Lakhs for FY: 2019-20. |
Details of Compliances for Partnership Firm
Details of Compliances for Partnership Firm
Filing of Income Tax Return
In relation to taxation, the partnership firms taxed as per income tax slab applicable for firms and the partners are taxed as per the income tax slab of individuals.
Tax Slab for Partnership Firms
The partnership firms are taxed at 30%.
Note:
Health & Education cess @ 4% is also levied for partnership firms.
Surcharge @12% is also charged along with the cess, if taxable income exceeds ₹1 Crore
Marginal relief shall also be provided, wherever applicable.
Tax slab for Partners
As stated above, the income of partners is treated as income earned by individuals. Therefore, the individual’s income tax slab is equally applicable on partner’s income.
Income Tax Return for Partnership Firms
The Partnership Firms can either file their Income Tax Return either through Form ITR-4 or ITR-5.
ITR-4:
ITR-4 is to be filed by those partnership firms which are having ing Total Income up to ₹ 50 lakh and having income from Business and Profession which is computed on a presumptive basis.
ITR-5:
ITR-5 is to be filed by those partnership firms who are required to get their account audited.
Filing of Goods & Service Tax Return & Compliances
Every GST registered person is required to file GST Returns and every partnership firm is required itself under GST, if its aggregate annual turnover exceeds Rs. 20 lacs. Usually, the GST registered partnership firms have to file GSTR-1, GSTR-3B and GSTR-9 returns. If the firm has opted for composition scheme, then GSTR-4 is to be filed.
Filing of TDS Return & Compliances
The TDS Return is to be filed where the partnership firm has a valid TAN and the type of return to be filed depends upon the purpose of deduction.
The types of TDS Return are:
Form 24Q – TDS on Salary
Form 27Q – TDS where deductee is a non-resident, foreign company
Form 26QB – TDS on payment for transfer of immovable property
Form 26Q – TDS in any other case
Filing of EPF Return & Compliances
The partnership firm is required to get EPF registration if it employs more than 10 persons and accordingly, filing of EPF return becomes mandatory
Accounting & Book-Keeping
Books of account are required to be maintained, if the partnership firm’s sale/turnover/gross receipts from the business is more than Rs. 25,00,000 or the income from business is more than Rs. 2,50,000 in any of the 3 preceding years.
Tax Audit
Partnership firm is required to 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.
The threshold limit of Rs. 1 crore for tax audit is proposed to be increased to Rs. 5 crore w.e.f., AY 2020-2021, if the cash receipts are limited to 5% of the gross receipts or turnover. The Finance Bill, 2021 has proposed to further increase this limit from ₹5 crore to ₹10 crore.
