Corporate Affairs Minister Salman Khursheed has said, contrary to expectation, the Budget will not address the taxation issue related to limited liability partnerships. The issue will be clarified only next year, he added.
“It is too short a time for us to sort out the issue, but it is flagged,” Khursheed told. The Ministry of Corporate Affairs has written to finance ministry to amend the Income Tax (I-T) Act to address the issue.Online GST Certification Course by TaxGuru & MSME- Click here to Join
At present, the I-T Act recognises companies, partnership firms, individuals and so on but does not recognise LLPs, although they are now recognised under an Act that was notified on April 1.
Under the LLP structure, the liability of the partner is limited to his stake and no partner is liable on account of any independent or unauthorised acts of other partners. In traditional partnership firms, on the other hand, every partner is liable, jointly with all the other partners and also severally, for all acts of the firm while he is a partner, irrespective of his stake.
So far, 38 firms have registered as LLPs since the LLP Act was notified and many more are waiting to do so once the tax issue is clarified.
Partnership firms wanting to convert to LLPs also want stamp duty and capital gains tax waiver after the conversion.