ITR Filing (Firms & LLP)

ITR-5 is the income-tax return for Partnership Firms, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), Artificial Juridical Persons and Cooperative Societies. Every such entity must file ITR-5 annually — regardless of profit, loss or turnover, and even if dormant. It is a comprehensive return with balance-sheet, P&L, partner-capital, AMT and audit schedules, so accuracy across all schedules is essential.

Partnership firms and LLPs are taxed at a flat 30% on total income, plus a 12% surcharge if income exceeds ₹1 crore, plus a 4% health & education cess on tax + surcharge. Unlike individuals, there are no slabs and no old/new-regime choice for firms/LLPs. The taxable income is computed after allowing partner remuneration and interest within the Section 40(b) limits.

Deduction for working-partner remuneration is capped under Section 40(b) (enhanced by the Finance (No. 2) Act, 2024, effective AY 2025-26): on the first ₹6 lakh of book profit (or in case of a loss), ₹3,00,000 or 90% of book profit, whichever is higher; on the balance book profit, 60%. The remuneration must be authorised by the partnership deed — if the deed is silent or specifies no cap, the entire amount can be disallowed. We review your deed to structure tax-optimal, compliant remuneration.

Section 194T is a new compliance from 1 April 2025. A firm or LLP must deduct 10% TDS on remuneration, interest, commission or bonus paid to a partner where the aggregate exceeds ₹20,000 in a financial year. To comply, the firm needs a valid TAN and must report these deductions through its TDS return. This is a significant change — previously partner payments were outside TDS. We set up and manage 194T compliance for firms and LLPs.

Yes — the Alternate Minimum Tax (Section 115JC) applies to firms, LLPs, AOPs, BOIs and AJPs claiming specified deductions (Chapter VI-A Part C, Section 10AA, Section 35AD). Importantly, the ₹20 lakh exemption threshold (Section 115JEE) applies only to individuals, HUF, AOP, BOI and AJP — NOT to firms and LLPs: a firm/LLP claiming such deductions attracts AMT regardless of income level. AMT is 18.5% of adjusted total income (+ surcharge + cess), and any excess over normal tax can be carried forward as AMT credit for up to 15 years.

Yes — interest on partner capital is deductible only up to a maximum of 12% per annum, and it must be authorised by the partnership deed. Interest above 12% (or interest not provided for in the deed) is disallowed when computing the firm’s taxable income. From 1 April 2025, interest paid to partners also falls within the Section 194T TDS net if the aggregate exceeds ₹20,000. We ensure both the 12% cap and 194T are correctly handled.

Yes — partnership firms (but not LLPs) can opt for presumptive taxation under Section 44AD, declaring income at 8% of turnover (6% for digital receipts) without maintaining detailed books. The turnover limit is ₹2 crore (or ₹3 crore if cash receipts are ≤5% of turnover). If the firm declares profit below the presumptive rate and income exceeds the basic exemption, a tax audit under Section 44AB becomes mandatory.

For AY 2026-27: non-audit cases by 31 July 2026, audit cases (Section 44AB) by 31 October 2026, transfer-pricing cases (Section 92E) by 30 November 2026, and a belated return by 31 December 2026. A tax audit under Section 44AB is required if turnover exceeds ₹1 crore (or ₹10 crore where cash transactions are ≤5%), or for professionals above ₹50 lakh. Failure to get the audit done by the due date attracts a penalty of 0.5% of turnover or ₹1.5 lakh, whichever is lower (Section 271B).

For income-tax purposes, an LLP is taxed like a partnership firm — flat 30% + surcharge + cess, the same Section 40(b) remuneration limits, the 12% interest cap, AMT applicability, and ITR-5 filing. The key differences are non-tax: an LLP is a separate legal entity with limited liability and MCA annual filings (Form 8/11), whereas a traditional firm is governed by the Partnership Act. Both, however, now face Section 194T partner-TDS from 1 April 2025.

You need finalised books of account, balance sheet and P&L, the partnership deed/LLP agreement (for remuneration/interest authorisation), partner capital and profit-sharing details, TDS and challan records, and GST returns for reconciliation. Common mistakes: claiming remuneration beyond the Section 40(b) limit, missing the new 194T TDS, ignoring AMT, and a deed that is silent on remuneration. Every return should be CA-reviewed. Fees depend on the firm’s size and audit complexity — contact us for a customised quote.