Partnership Firm Tax Return Filing – eFile Procedure

Updated on: Oct 26th, 2023

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5 min read

A partnership firm is a body of more than one person conducting business under one entity. There are two types of partnership firms –

  • Registered partnership firm 
  • Unregistered partnership firm

A registered partnership firm is a partnership firm that has been registered with the Registrar of Firms and has received a registration certificate for the same. Any partnership firm that does not have a registration certificate from the Registrar of Firms is an unregistered partnership.

Taxation of Partnership Firms

Under the Income Tax Act, 1961, a partnership firm is liable to pay the following tax percentages: – 

  • 30% income tax 
  • 12% surcharges where taxable income is above one crore rupees  
  • Up to 12% on interest of capital is allowed 
  • Health and Education Cess 4% of tax including surcharges 

It is to be noted that a partnership firm has a different legal identity from that of its partners, unlike proprietorships. It is also important to know that for the purposes of paying income tax for a partnership firm it is immaterial whether the firm is registered or not. Just like LLPs and private limited companies, a partnership firm is also required to pay alternate minimum tax which cannot be less than 18.5% of the adjusted total income.

Deductions Allowed

When calculating the income tax that needs to be paid, one must pay heed to the available deductible incomes. They are as follows:

  • Remunerations or interest paid to the partners of the firm which are not in accordance with the terms of the partnership.
  • Salaries, bonuses, remunerations, commissions paid to the non-working partners of the firm.
  • If remuneration paid to partners are in accordance with the terms of the partnership deed but such transactions were made or was in relation to anything that pre-dates the partnership deed.

Filing of Tax Returns for a Partnership Firm

For the purpose of filing tax returns for a partnership firm, one must use the Form ITR-5. The form ITR-5 is used to file tax returns for the partnership firm itself and not for the partners of the firm. One must not confuse form ITR-5 and ITR-3. Similar to all other income tax return filings, ITR-5 can be filed online via the income tax departments online portal. 

Also, it needs to be noted that while filing these returns, one does not need to attach any supporting documents along with it. These documents need to be submitted to the Income Tax Department only if they are specifically asked for. 

It is compulsory for a firm to file income tax return electronically with or without digital signature. The firm can also file income tax return under Electronic Verification Code.However, a partnership firm is compelled to do e-filing of its income tax returns whenthe partnership firm is required to get an audit. While filing the income tax returns, the partners must have a class 3 digital signature for verification of the filing process.

Deadline for Partnership Tax Filing?

The deadline for filing an income tax for a partnership firm is dependent upon whether the firm is required to be audited or not. The deadlines for filing income tax return are as follows:

  • Where the firm is not required to be audited – the income tax returns must be filed by 31st July. 
  • Where the firm is required to be audited  – the firm has to file its income tax returns by 31st October

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
 

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Quick Summary

Partnership firms can be registered or unregistered, have different taxation rules, and need to file tax returns using Form ITR-5. Tax deductions and deadlines vary based on whether the firm requires an audit. Compulsory e-filing of income tax returns for audit-required firms and partners need a digital signature for verification.

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