THE Union Budget is expected to provide clarity on taxation of limited liability partnerships (LLPs) by treating them like partnership firms for tax purposes. A corporate tax is likely to be levied on the income of an LLP, with the partners being exempted from taxation, as in the case of partnership firms.
The government is likely to amend the Income Tax Act, paving the way for creation of LLPs, where a partner’s liability is limited to the extent of hisstake in the entity.
A parliamentary standing committee that examined the LLP bill before it was passed by Parliament had recommended that these entities should be allowed to choose between taxation at the level of the firm or partners.
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