Annual Compliances for Partnership Firms
Statutory Duties Governed by the Indian Partnership Act, 1932
Annual Compliances For Partnership Firm and Mandatory Registrations
A Partnership Firm is formed when two or more persons come together to carry on a business as co-owners. In India, Partnership Firms are governed by the Indian Partnership Act, 1932. According to Section 4 of the Indian Partnership Act, 1932, a partnership is defined as “the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” All partners in the firm share profits and losses either in proportion to their ownership or as mutually agreed upon. The limitations of a sole proprietorship firm often give rise to the formation of partnership firms.
Essential Registrations:
- Permanent Account Number (PAN): Compulsory to be obtained in the name of the Partnership Firm.
- Tax Deduction Account Number (TAN): Mandatory if the firm is required to deduct TDS.
Income Tax and Audit Obligations
Mandatory ITR Filing
A Partnership Firm must file ITR (Income Tax Return) compulsorily irrespective of revenue, loss, or zero turnover for the year.
Tax Audit Requirement
A Tax Audit is required if the firm's annual turnover exceeds Rs 50 Lakhs (or other prescribed limits under the Income Tax Act).
TDS Filing Obligation:
- TDS Returns: If the firm has a TAN and is liable to deduct tax at source (TDS), it is required to file quarterly TDS returns as per TDS rules.
GST Registration and Returns
GST Applicability:
- Registration Threshold: GST registration is required if the firm's annual turnover exceeds Rs 40 Lakhs (or Rs 20 Lakhs for North Eastern states and specified categories).
- GST Returns: If registered, the Partnership Firm must file the necessary monthly, quarterly, and annual GST returns.
Simple & Transparent Pricing for Annual Compliance Partnership
Scale your features as your business grows. Find the plan that fits your needs today.
Basic Plan
Every month payment option Available
- Turnover up to 50 Lakhs
- GST filing including GST 9
- Up to 2 Partners
- Income Tax filing of firm including filing of partners
- Assistance & filing of tax audit report
- Book-Keeping and Accounting are not part of this package
Standard Plan
Every month payment option Available
- Turnover up to 1 Crore
- GST filing including GST 9
- Up to 3 Partners
- Income Tax filing of firm including filing of partners
- Assistance & filing of tax audit report
- Book-Keeping and Accounting are not part of this package
Premium Plan
Every month payment option Available
- Turnover up to 2 Crore
- GST filing including GST 9
- Up to 4 Partners
- Income Tax filing of firm including filing of partners
- Assistance & filing of tax audit report
- Book-Keeping and Accounting are not part of this package
FAQ's on Annual Compliances For Partnership
Your Questions Answered
Which Income Tax Return (ITR) form is applicable for a Partnership Firm?
A Partnership Firm (whether registered or unregistered) must mandatorily file its Income Tax Return using ITR-5. The income is taxed at the flat corporate rate applicable to the firm (currently 30% plus surcharge/cess).
What is the default due date for ITR filing for a Partnership Firm?
The due date for filing ITR-5 depends on the requirement of a tax audit. If a tax audit is not mandatory, the due date is typically July 31st of the subsequent assessment year.
When does a Tax Audit become mandatory for a Partnership Firm?
A Tax Audit (Form 3CB-3CD) is mandatory if the annual turnover from business exceeds ₹1 Crore (or ₹10 Crore if cash receipts/payments are limited) OR if the gross receipts from a profession exceed ₹50 Lakh.
What is the ITR filing deadline if the Partnership Firm requires a Tax Audit?
If a Tax Audit under Section 44AB is mandatory, the due date for filing the Audit Report and the Income Tax Return (ITR-5) is extended to October 31st (the audit report itself must be submitted by September 30th) of the subsequent assessment year.
Is GST Registration and filing mandatory for a Partnership Firm?
No, GST registration is mandatory only if the annual aggregate turnover exceeds the threshold limit (₹40 Lakh for goods and ₹20 Lakh for services in most states) or if the firm engages in inter-state sales. If registered, monthly/quarterly returns (GSTR-1, GSTR-3B) and the annual return (GSTR-9) are mandatory.
How is a partner's remuneration and interest treated in the Firm's ITR?
Salary, bonus, commission, or remuneration paid to working partners is allowed as a deduction to the firm (subject to limits under Section 40(b)) and is taxable in the hands of the partner (filed in ITR-3). Interest paid to partners is also deductible (up to 12%).
Does a Partnership Firm need to file an Annual Return with the ROC?
No. Partnership Firms are registered with the Registrar of Firms (RoF), not the Registrar of Companies (ROC). They are exempt from filing statutory annual returns like Form AOC-4 or MGT-7, unless it is a Limited Liability Partnership (LLP).
Is a Partnership Firm required to pay Advance Tax?
Yes. A Partnership Firm is treated as a separate taxable entity. If the firm's total estimated tax liability for the year (after deducting TDS) exceeds ₹10,000, it is required to pay Advance Tax in four installments by the 15th of June, September, December, and March.
