LLP Income tax Return
Limited Liability Partnerships (LLPs) have become a popular business structure in India in a very short time and this is only because of the mixture of benefits of both companies and traditional partnerships. There are several important responsibilities for an LLP, one of which is to comply with the income tax rules which include filing timely and accurate income tax returns.
The main objective of this article written by Blacktie Legal Services Indian LLP is to provide you with a comprehensive guide on various aspects of filing LLP Income Tax Returns and ensure that business owners and professionals have a clear understanding of the procedure.
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Understanding LLP Taxation
In India an LLP is taxed using the Income Tax Act, 1961, just like a partnership firm. Based on the tax liabilities of the LLP, it is understood that the LLP earns a certain amount of income which is taxed at a fixed rate of 30%. Additionally, there is a surcharge at the rate of 12% on total income above Rs 1 crore. In addition, Education Cess and Secondary and Higher Education Cess is 4% of Income Tax.
Types of Income
Income of LLP is computed in different ways, which we have covered in a good way below:
- Income from Business or Profession: These are the primary sources of income for most people.
- Income from House Property: Rental income arising from property owned by the LLP.
- Capital Gains: Based on the sales of other assets or investments that have been sold and realized through the transaction.
- Income from Other Sources: Any other income not catered for by the classes of income listed in the above categories.
Deductions and Allowances
There are several deductions and allowances available to LLPs which they can avail to significantly increase their taxable income; which we have mentioned below:
- Section 80C to 80U: Deductions made for specific investments and expenses are set out in this section.
- Depreciation: In this, deduction is made for all wear and tear of immovable property as per the Act.
- Business Expenditures: Expenses explicitly incurred for business purposes are included as deductions, such as salaries and
Filing Deadlines
The deadline for filing an LLP income tax return depends on whether the LLP is subject to audit or not, so we have mentioned its due dates below:
Non-Audited LLPs: July 31st of the assessment year.
Audited LLPs: September 30th of the assessment year.
Audit Requirements
If the turnover of an LLP is more than Rs 40 lakh or Rs 25 lakh then it must get all its accounts audited by a Chartered Accountant (CA) and the audit report, along with the audited financial statements, will be filed with the Income Tax Department.
Books of Accounts
All LLPs are more required to maintain comprehensive books of accounts; Which includes:
- Cash Book: It contains records of daily financial transactions.
- Journal: Documents of non cash transactions.
- Ledger: Summary of all financial transactions.
- Bank Statements: Account statements of all the accounts which is held by LLP.
Advantages of Filing Income Tax Returns for LLPs
There are many advantages of filing an LLP income tax return, which we have mentioned below:
- Limited Liability Protection: The personal properties of all the company’s partners are protected from business liabilities.
- Separate Legal Entity: One can enter into an LLP agreement without any permission and keep the property in its name.
- Tax Benefits: All LLPs are successful in avoiding double taxation.
- Ease of Compliance: Compared to other companies, LLP has significantly reduced compliance requirements, administrative burden and costs.
Eligibility Criteria for Filing Income Tax Returns for LLPs
Under the Income Tax Act of 1961, every LLP in India is required to file llp income tax returns, but our government has also set specific eligibility criteria for the same, which we have mentioned below:
- Mandatory Filing: It is so much mandatory for every LLP in India to file income tax return annually without worrying about their earnings and profits.
Designated Partner’s Responsibility: It is solely the responsibility of the nominated partners to file their income tax returns on time, and failure to do so may result in the LLP being penalized or even imposed a fine.
Procedure for Filing LLP Income Tax Returns
Filing an LLP Income Tax Return is a very lengthy process which includes several steps, and hence, we have explained all the steps below:
Step 1: Obtain Digital Signature Certificate (DSC)
It is very important for the nominated partners of LLP to obtain Digital Signature Certificate (DSC) while filing income tax return. This is because filing income tax returns has to be done online and it only comes with digital authentication.
Step 2: Register on the Income Tax Portal
It is essential for your LLP to be registered on this filing. Nominated Partners will be required to create a user ID and password to login to the portal if not already registered.
Step 3: Collect Required Documents
We have mentioned below a list of all the primary documents required to file LLP Income Tax Return:
- PAN of the LLP: It is very important to have a PAN number to file an LLP Income Tax Return.
- Financial Statements: Audited financial statements along with Balance Sheet, Profit and Loss Account and other relevant documents.
- Tax Deduction and Collection Account Number (TAN): If LLP has deducted tax at any source then it will have to be submitted.
- Details of Partners: Information about all the members included in the
Step 4: Choose the Appropriate ITR Form
ITR-5 form was published for filing LLP income tax return and this form is created only for the use of Firms, LLP, AOP, BOI and other similar organizations.
Step 5: Fill in the Details in ITR-5
The ITR-5 form contains various fields wherein details regarding the income, deductions and computation of tax of the LLP have to be filed. The key sections include:
- Part A – General Information: The LLP identification details and information such as the name and identity number, registered office address, type of Line of Business, telephone, and email ID.
- Part B – Balance Sheet: Particulars of the balance sheet as of the close of the year.
- Part C – Profit and Loss Account: Balance sheet as of December 31st for the year of the financial reports.
- Part D – Computation of Income: Calculation of adjusted gross income/total income and the amount of tax payable.
Step 6: Upload the Form and Attachments
After filling up the ITR-5 form, the same has to be uploaded in the e-filing portal of the Income Tax Department. Where the document relies on audited financials as the basis for a statement, such documents must be annexed.
Step 7: Verification
To perform this action, the return must be verified after the uploading of the form has been done. This can be done using one of the following methods: This can be done using one of the following methods:
- Digital Signature Certificate (DSC)
- Aadhaar OTP: OTP which is generated one time and sent to the registered mobile number connected to Aadhaar.
- Electronic Verification Code (EVC): Code to registered mobile number and email was sent.
- Sending a signed physical copy (ITR-V): In case of no electronic mode of filing is possible the signed ITR-V is accepted at the CPC located in Bengaluru.
Step 8: Acknowledgement
After that the verification is complete, an acknowledgement receipt is issued out. This receipt is evidence that we have filed the income tax return.
What we can offer ?
Black Tie can offer a variety of services to help with LLP income tax returns. Here are some of the common ones:
Preparation and Filing:
- Gathering Information: Collecting all the necessary financial documents from the LLP, including bank statements, profit and loss statements, balance sheets, and details of any investments or deductions.
- Tax Calculation: Calculating the LLP’s taxable income, taking into account applicable deductions and exemptions.
- Form Selection: Choosing the appropriate LLP Income Tax Return (ITR) form based on the LLP’s income and nature of business. (For LLPs, it’s usually ITR-5)
- Return Completion: Filling out the ITR form accurately and comprehensively, ensuring all relevant information is captured.
- E-filing: Submitting the completed ITR form electronically to the Income Tax Department.
Additional Services:
- Tax Minimization Strategies: Advising on legal tax-saving methods the LLP can adopt.
- Record keeping: Helping the LLP maintain proper financial records for future tax filings.
- Tax Audit Support: Assisting the LLP in case of a tax audit by the Income Tax Department.
- Compliance Management: Ensuring the LLP adheres to all income tax regulations and deadlines.
Benefits of having Black Tie:
- Expertise: Black Tie professionals can help navigate the complexities of tax laws and ensure the LLP complies with all regulations.
- Accuracy: Black Tie can minimize errors in tax calculations and filing, reducing the risk of penalties.
- Time-Saving: Outsourcing tax filing frees up the LLP’s time and resources to focus on core business activities.