Limited Liability Partnership (LLP) is an alternate corporate business that offers the twin benefits of limited liability companies and the flexibility of partnership firms. Introduction of LLPs in India is a path breaking reform which is in consonance with the changing environs of the business world. In todays date the LLP is the one of the common entity types which is choose by most of the start-ups. But many people have doubts regarding its taxability, hence today I am writing this article stating taxability of LLP.
Before staring please keep in mind that from the point of view of taxation, the LLPs are considered as Partnership firm only. Hence many points are similar in taxation of firm and LLPs.
|Long – term capital gain||20||%|
|Short – term capital gain u/s 111A||15||%|
Tax can be paid in any of the following mode – Physical Mode (payment by furnishing the hard copy of the challan at the designated bank) & E Payment Mode (making payment by using the electronic mode)
Note – E Payment mode is mandatory for those who is liable to get its accounts audited under Section 44AB of the Income Tax Act, 1961.
Advance Tax – to be calculated on the basis of expected tax liability of the year. Advance tax is to be paid in installments as given below –
|Status||By 15th June||By 15th September||By 15th December||By 15th March|
|Taxpayers (other than who opted for presumptive scheme)||Up to 15 % of advance tax||Up to 45 % of advance tax||Up to 75 % of advance tax||Up to 100 % of advance tax|
|Taxpayers (who opted for presumptive scheme Sec.44AD/44ADA)||Nil||Nil||Nil||Up to 100 % of advance tax|
* Any tax paid till 31st March is treated as Advance Tax.
|Particulars||Due Date of filing of Return|
|A firm who is required to get its accounts audited under the Income Tax Act or under any other law||September 30th of the AY|
|A firm who is required to furnish a report in Form No. 3CEB under section 92E||November 30th of the AY|
|In any other cases||July 31st of the AY|
# As per LLP Act, 2008 provides every LLP having turnover exceeds Rs. 40 Lakhs or whose Capital contribution exceeds Rs. 25 Lakhs are required to annually get their accounts audited by a chartered accountant. As per Income Tax Act, 1961 provides every LLP having turnover exceeds Rs. 100 Lakhs are required to annually get their accounts audited by a chartered accountant
Note: The due date has been extended by the government due to COVID -19, the revised due dates are as under:
|Particulars||Due Date of filing of Return|
|A firm who is required to get its accounts audited under the Income Tax Act or under any other law||31 October, 2020|
|A firm who is required to furnish a report in Form No. 3CEB under section 92E||30 November, 2020|
|In any other cases||30 November, 2020|
While computing income tax for LLPs, we should consider the income from House Property (if any property owned by firm or LLP & received rent from that), Capital Gains (at the time of dissolution of asset LLP as case may be) & Other Sources (like interest on investments held by the firm or LLP) also in addition to the income earned from Business or Profession.
√ At the time of calculating the total Business Income –
Deduct all the allowable expenses for business reduce allowable partner’s salary and interest from that profit.
Provisions for partner’s interest in case of LLP-
Allowed for deduction if the following conditions are satisfied:
Partner’s salary / remuneration in case of LLP –
Allowed to reduce net profit if following conditions are satisfied:
Permissible Limit for deduction of remuneration of partner in case of LLP –
|Book Profit||Amount deductible u/s 40(b) (maximum)|
|If book profit is Negative||Rs 1.5 Lakhs or 90% of book profit whichever is more|
|If book profit is Positive|
|On First Rs. 3 Lakhs||Rs 1.5 Lakhs or 90% of book profit whichever is more|
|On remaining balance||60 % of Book Profit|
Book Profit – Net profit less other income and don’t adjust brought forward losses and deduction u/s 80C to 80U plus add partner’s remuneration.
√ Other income say house property, capital gains and others sources– to be calculated similarly as calculated for Individual.
Aggregate all the income and need to deduct the allowable deductions under Section 80G, 80GGA, 80IA, 80IC, 80ID, 80IE, 80JJA & brought forward losses or unabsorbed depreciation as case may be, if any from the Income.
Finally we will get Net Taxable Income & hence tax is to be computed on this income.
Other Points to be kept in mind-
I hope this article will clear all the doubts with respect to taxation o LLP.
Author: Rahul Hakani, Advocate
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(Republished with Amendments by Team Taxguru)