Partnership Compliance
Operating a Partnership Firm in India involves a range of crucial financial and legal responsibilities. It is imperative to adhere to various tax and regulatory requirements to ensure the smooth functioning and growth of your business. These obligations encompass filing Income Tax Returns, TDS Returns, GST Returns, EPF Returns, and occasionally undergoing a Tax Audit.
Partnership Firm
A partnership firm is a business entity formed by two or more individuals working together under a single enterprise. There are two main categories of partnership firms:
Registered Partnership Firm: A registered partnership firm is one that has undergone formal registration with the RoC and has received a registration certificate as evidence of its legal existence.
Unregistered Partnership Firm: Any partnership that lacks a registration certificate from the Registrar of Firms is referred to as an unregistered partnership.
Partnership, in essence, is an agreement entered into by two or more persons who have mutually consented to share the profits or losses arising from a jointly conducted business. The individuals involved in a partnership arrangement are individually known as partners and collectively referred to as a firm. Partners need to be aware of the partnership firm tax rate and how it affects the distribution of profits. Partners are responsible for maximizing firm advantage, fair dealings, and maintaining accurate records with full transparency for all partners' benefit.
Under the provisions of the Income Tax Act 1961, a partnership firm in India is subject to the following tax percentages:
Partnership firm tax rate: Partnership firms are liable to pay income tax at a rate of 30% on their taxable income.
Surcharges: If the taxable income of the partnership firm exceeds one crore rupees, a surcharge of 12% is applicable in addition to the income tax.
Interest on Capital: Partnership firms can claim a deduction of up to 12% on the interest paid on capital.
Health and Education Cess: A 4% Health and Education Cess is levied on the total tax amount, including surcharges.
Marginal Relief : In case Net Income exceeds 1 crore, the amount payable as income tax and Surcharge shall not exceed the total amount payable as income tax on Total Income of Rs.1 crore by more than the amount of income that exceeds Rs.1 crore.