Taxability of LLPs (Limited Liability Partnerships) in India

  Limited Liability Partnership (LLP) has gained popularity even though it is relatively new in our country.  Start-Ups and SMEs have the liking in setting of their business through LLP.  Lets talk about the taxation part of LLP in our country:     Income Tax Return ITR – 5 is applicable to LLP. Tax Rate Tax will be payable by the LLP at 30% plus Education Cess. No surcharge will be payable by the LLP from A.Y. 2010-11. Authority Signing Income Tax Return In LLP “designated partner” has greater responsibility and so, it is provided that the designated partner shall sign the income tax return of an LLP, or, where for any unavoidable reason such designated partner is not able to sign the return or where there is no designated partner as such, any partner shall sign the return. Advance Tax Advance Tax is required to be paid to the credit of government if advance tax on estimated income comes (after deducted TDS/TCS if any)  to Rs. 10,000/- or more in a Financial Year. Thus, if Income Tax payable (after deducting all deductions, rebates and TDS) is less than 10000 in a financial year, there is no need to deposit any Advance Tax and the same tax will be deposited at the time of self assessment before filing of income tax return. LLP’s are required to pay advance tax in the following installments on the following dates:

  • On or before 15 September – not less than 30% of tax payable
  • On or before 15 December – not less than 60% of tax payable
  • On or before 15 March – not less than 100% of tax payable

Liability to Pay Tax Every partner of the LLP shall be jointly and severally liable for the payment of any tax due from an LLP which cannot be recovered, unless the partner proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the LLP. Presumptive Taxation Under Income Tax Act, 1961 LLP’s are not eligible for presumptive taxation i.e, they are not entitled to avail benefit of section 44AD. Alternate Minimum Tax LLP is also liable to Alternate Minimum Tax @ 18.5 % and it will be imposed w.e.f AY 2012-13 on the adjusted total income if regular income-tax on total income of LLP is less than the Alternate Minimum Tax. Furnish Audit Report LLP are also required to submit audit report u/s 115JC(3) on or before the due date of filing of Income tax return certifying the adjusted total income and Alternate Minimum Tax.   Carry – forward of Alternate Minimum Tax Credit LLP is entitled to carry forward Alternate Minimum Tax Credit for ten years succeeding the year in which such credit becomes allowable. The credit allowed to be set off in a financial year will be restricted to the difference between the regular income tax computed under the normal provisions and the Alternate Minimum Tax. have the expertise in Business Start-Up Services , assisting many businesses in solving their start-up and also day to day business maintenance issues.

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2 thoughts on “Taxability of LLPs (Limited Liability Partnerships) in India”

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