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1 |
Rate of tax |
Flat rate of 30% on the total income after deduction of interest and remuneration to partners at the specific rates. The rate to be increased by surcharge @ 12% (if total income exceeds ₹ 1 crore) (surcharge @ 10% up to A.Y. 2015-16) and education cess secondary and higher education cess @ 3% on Income-tax. |
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2 |
Interest to Partners |
(Simple interest) Not exceeding 12% p.a. from 1-6-2002 (18% p.a. up to 31-5-2002) |
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3 |
Remuneration to Partners |
a. |
Payment to a non-working partner will not be allowed as a deduction. |
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b. |
A ‘working partner’ is an individual who is actively engaged in conducting the affairs of the business or profession of the firm |
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c. |
Quantum of allowance is to be determined with reference to ‘book profit which is defined to mean an amount computed in the manner laid down in Chapter IV-D as increased by the amount of remuneration to partners if deducted in determining book profit |
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d. |
Maximum permissible deduction for payment of remuneration to working partners from A.Y. 2010-11, is as under : On the first ₹ 3 lakh of the Book profit or in case of loss ₹ 1.5 lakh or at the rate of 90% of the Book Profit whichever is more.
On the balance of the Book Profit – at the rate of 60%.
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4 |
Conditions for allowance of remuneration and interest to partners |
a. |
Remuneration should be to a working partner. |
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b. |
Payment of remuneration and interest should be authorised by and should be in accordance with the terms of the partnership deed and should relate to any period falling after the date of such partnership deed. |
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c. |
No deduction u/s. 40(b)(v) will be admissible unless the partnership deed either specifies the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration — Circular No. 739 dated 25-3-1996. |
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5 |
Conditions for assessment as a firm |
a. |
The partnership should be evidenced by an instrument in writing specifying individual share of the partners. |
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b. |
A certified copy of the instrument signed by all the partners (not being minors) shall accompany the return of the firm for the firm assessment as a ‘firm |
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c. |
In case of any change in the constitution of the firm or shares of the partners in any previous year, the firm shall furnish a certified copy of the revised instrument of partnership signed by all the partners (not minors) along with the return of income for that A.Y. |
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d. |
If any default is made in compliance with the above provisions, the firm will be assessed as a firm without deducting interest and salary to partners from A.Y. 2004-05 onwards and as an AOP up to A.Y. 2003-04. |
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e. |
If any failure is made as mentioned in s. 144 (ex parte assessment) the firm shall be assessed as a firm from A.Y. 2004-05 without deducting interest and salary to partners and as an AOP up to A.Y. 2003-04. |
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6 |
Partners’ assessments |
a. |
Once tax is paid by firm no tax will be payable by the partners on share of income from the firm. |
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b. |
Amount of interest and/or remuneration, etc. received by a partner will be taxed in his hands as ‘Business or Professional Income’, excluding the amount disallowed in the hands of the firm being in excess of limits laid down in s. 40(b) and from A.Y. 2004-05 amount disallowed in the event of any failure as mentioned in s. 144 or non compliance of s. 184. |
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7 |
Losses of the firm |
Unabsorbed loss including depreciation in respect of A.Y. 1993-94 onwards of the firm will not be apportioned amongst the partners and will be carried forward by the firm only. |
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8 |
Allowability of remuneration and interest vis-a-vis presumptive taxation |
Remuneration and interest will not be allowed as deduction from the presumptive income computed at prescribed rate u/ss. 44AD, 44ADA and 44AE. |
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9 |
Due dates for filing return of firm |
a. |
30th November, where the partnership firm is required to furnish a Transfer Pricing report u/s. 92E. |
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b. |
30th September, where the partnership firm is not covered under (a) above, but accounts of the firm are required to be audited under Income-tax Act or under any other law for the time being in force. |
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c. |
31st July in any other cases. |
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10 |
Due dates for filing of returns of partners |
a. |
30th November in case of a working partner of a firm (whether or not he is entitled to remuneration), where due date for firm return of firm is 30th November. |
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b. |
30th September in case of a working partner of a firm whether or not he is entitled to remuneration) where due date for return of is 30th September. |
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c. |
31st July for other partners. |
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11 |
Alternate Minimum Tax |
From A.Y. 2013-14, Alternate Minimum Tax (AMT) is applicable to firm please refer for 'MAT & AMT'. |
