LLP TAX FILING, INCOME TAX RATE AND DEADLINE

A Limited Liability Partnership (LLP) is a body corporate formed and incorporated under the Limited Liability Partnership Act, 2008. It is a legally separated entity from that of its partner. An LLP is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. Since liability of the partners is limited to their agreed contribution in the LLP, it contains elements of both a corporate structure as well as a partnership firm structure. There is no personal liability of a partner except in the case of fraud. Moreover, a partner is not responsible or liable for another partner’s misconduct or negligence as there is no joint liability in the case of LLP.

WHO IS SUPPOSED TO PAY INCOME TAX

Income-tax is to be paid by every person. The term ‘person’ as defined under the Income-tax Act under Section 2(3) covers in its ambit natural as well as artificial persons.

For the purpose of charging Income-tax, the term ‘person’ includes Individual, Hindu Undivided Families [HUFs], Association of Persons [AOPs], Body of individuals [BOIs], Firms, LLPs, Companies, Local authority and any artificial juridical person not covered under any of the above.

Thus, from the definition of the term ‘person’ it can be observed that, apart from a natural person, i.e., an individual, any sort of artificial entity will also be liable to pay Income-tax.​

HEADS OF INCOME

Income from House Property

Following are the conditions of taxability for income from house property:

• The house property should consist of any building or land appurtenant thereto
• The taxpayer should be the owner of the property
• The house property should not be used for the purpose of business or profession carried on by the taxpayer

Profits and Gains from Business and Profession

The following incomes are chargeable to tax under this head:

• Profit and gains from any business or profession carried on by the assessee at any time during the previous year
• Any compensation or other payment due to or received by any specified person

Income under Capital Gains

Conditions for Chargeability:

• There should be a capital asset. In other words, the asset transferred should be a capital asset on the date of transfer
• It should be transferred by the taxpayer during the previous year
• There should be profits or gains as a result of transfer

Income from Other Sources

Any income which is not chargeable to tax under any other heads of income and which is not to be excluded from the total income is chargeable to tax as residuary income under the head “Income from Other Sources”.

RATE OF TAX ON LIMITED LIABILITY PARTNERHSIP 

1. Income Tax:

LLP is liable to pay tax at the flat rate of 30% on its total income.

Surcharge: The amount of income-tax shall be further increased by a surcharge at the rate of 10% of such tax, where total income exceeds one crore rupees. However, the surcharge is subject to marginal relief (the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess and secondary and higher education cess calculated at the rate of 4% of such income-tax and surcharge.

1. Alternate Minimum Tax: Tax payable by LLP cannot be less than 18.5% (increased by Surcharge and HEC) of “adjusted total income”.

HOW TO PAY TAX?

Taxes can be paid in any of the following paid:

1. Physical Mode: Payment by furnishing the hard copy of the challan at the designated bank
2. E-payment mode: Making payment by using the electronic mode through incometaxindia.gov.in

Note: e-payment of taxes is mandatory for a Limited Liability Partnership who is eligible to get its accounts audited under Section 44AB of the Income-Tax Act, 1961.

PAN

Obtaining Permanent Account Number (PAN) is a mandatory step for filing income tax. PAN is a ten-digit unique alphanumeric number issued by the Income Tax Department. PAN is issued in the form of a laminated plastic card (commonly known as PAN card). The fourth character of PAN represents the status of the PAN holder. LLP is represented by the character ‘E’ (e.g. ALWE​​G5809L). Every person who is carrying on any business or profession whose total sale, turnover, or gross receipts are or is likely to exceed five lakh rupees in any previous year has to obtain PAN and every person who intends to enter into specified financial transactions in which quoting of PAN is mandatory needs to obtain it as well.

RETURN FILING

It is mandatory for every Limited Liability Partnership (LLP) to file the return of income irrespective of amount of income or loss. LLP can file its return of income in ITR-5.

Manner of furnishing return of income

LLP is required to file return in the following modes:

• Electronically under digital signature; or
• Transmitting the data in the return electronically under electronic verification code; or
• Transmitting the date in the return electronically and thereafter submitting the verification of the return in form ITR-5

However, it is mandatory for LLP to file return of income electronically under digital signature if its accounts are required to be audited under Section 44AB.

DUE DATE

July 31 is the date of LLP income tax return if tax audit is not required. LLP which are required to get its accounts audited under the Income-Tax Act or under any other law have their due date as September 30 for filing of return. LLPs required to furnish a report in Form 3CEB (international transaction or domestic specific transaction) have their due date as November 30 for filing of return.

APPEALS

Income tax liability is determined by the Assessing Officer first. A tax payer aggrieved by various actions of Assessing Officer can appeal before Commissioner of Income Tax (Appeals). Further appeal can be preferred before the Income Tax Appellate Tribunal. On substantial question of law, further appeal can be filed before the High Court and even to the Supreme Court.

DEDUCTABILITY OF SALARY OR INTEREST PAID TO PARTNER

Following sum paid by a Limited Liability Partnership to its partners shall not be allowed as deduction to such firm:

1. Salary, bonus, commission or remuneration paid to non-working partners;
2. Remuneration or interest paid to others which is not in accordance with the terms of the partnership deed;
3. If remuneration or interest paid to the partners are in accordance with the terms of the partnership deed but they relate to any period prior to the date of partnership deed;
4. Interest paid to partners exceeds 12% per annum;
5. Remuneration paid to partners is in accordance with the terms of the partnership deed but it exceeds the following permissible limit:

1. On first 3 lakhs of book profit or in case of loss – Rs. 1, 50, 000 or 90% of book profit, whichever is more
2. On the balance of the book profit – 60% of book profit

Note: “Book profit” means the net profit computed under the head ‘Business or Profession; as increased by the aggregate amount of the remuneration paid or payable to all partners of the firm if such amount has been deducted while computing the net profit.

COMPLIANCES AFTER PAYMENT OF TAX

After the tax has been paid, it is the responsibility of the Limited Liability Partnership to ensure that the tax credits are available in the tax credit statement and TDS/TCS certificates received by them and that full particulars of income and tax payment are submitted to the Income-tax Department in the form of Return of Income which is to be filed before the due date prescribed in this regard.