A limited liability partnership (LLP) is created in
accordance with the Limited Liability Partnership Act of 2008. The individuals
who are associated with it as its partners are not considered to be a part of
it legally. The liability of the partners in an LLP is limited to the
investment they have made in the LLP; the LLP is responsible for all of its
assets. Because the partners' liabilities are limited to their agreed-upon
participation in the LLP, the LLP's organizational form contains aspects of
both a corporation structure and a partnership company structure. Additionally,
a partner is not personally liable for any fraudulent acts
1. When compared to corporations, LLPs are charged
less tax. It is one of their major tax advantages. LLPs are required to pay a
flat 30% tax on their profits and are exempt from the surcharge and cess that
apply to private limited companies.
2. LLPs can cut their tax burden and lower their taxable
income. Other expenses incurred while conducting the business can also be
claimed as operating expenses. This involves rent, salaries, utilities and
other options.
3. Any fixed assets owned by the LLP including
buildings, machinery, and equipment which is the non-cash expense can claim the
depreciation while ITR filing for LLP.
4. The LLP registered and engaged under research
and development activities are permitted to claim a deduction of up to 150% in
their expenses. Charitable donations are also recognized under Section 80G of
the Income Tax Act. This is also for the deductible. LLP's that are startups
can claim deduction of up to 100% of the profits for the first 3 years.
Documents Required
for LLP Income Tax Filing
1. Initial costs 2. TDS on LLP payments
3. Take into account the LLP provisions of the GST (if applicable)
4. Partners' compensation (Special Treatment).
5. Filing LLP Annual Return
In order to preserve compliance and keep away from severe legal
repercussions for non-compliance, a Limited Liability Partnership (LLP) needs
file returns on a regular basis. A limited liability partnership must conform
to a very small number of compliances annually, especially when compared to the
constraints placed on private limited corporations. Yet, it seems like the
fines are quite substantial. A private limited company may only be fined ₹1
lakh for noncompliance, but an LLP may be fined ₹5 lakhs.
LLPs must file an income tax return using Form ITR 5. Form ITR 5 can be
filed online through the income tax website using the digital signature of the
designated partner. After filing an LLP tax return, the taxpayer should print
two copies of Form ITR-V.
One copy of ITR-V, signed by the assesse should
be sent by ordinary post to Post Bag No. 1, Electronic City Office,
Bengaluru–560100 (Karnataka). The other copy can be retained by the assesse for
his record
Every LLP is required to submit a Form 11 annual return to the
registrar within 60 days of the end of the fiscal year. Therefore, yearly
returns must be submitted by May 30 of each year.
1. By the 31 of March
of each year, every LLP must have its accounts prepared and closed. At least
two authorized partners are required to submit Form 8 to the registrar no later
than 30 days following the end of the fiscal year. Because of this, the due
date for LLP Annual Filing Compliance accounts is always 30 October
2. Limited Liability
Partnerships (LLPs) having a turnover of more than ₹40 lakh or a contribution
exceeding ₹25 lakhs. In this case the book of accounts has to be audited by a
chartered accountant
3. LLPs that are
required to get their books audited have a deadline of 30 September to file
their tax return.
Penalty for Late Filing LLP, MCA
or Income Tax Return
LLPs are subject to severe fines
for filing MCA or income tax forms beyond the deadline. Failure to submit Form
8 or Form 11 may result in a fine of ₹100 per day per form. Hence, an LLP would
be subject to a fine of ₹100 per day for failing to file Form 11, and ₹200 per
day for failing to file Form 8.
LLPs would be subject to penalties
under the Income Tax Act in addition to the MCA penalty for failing to file
returns on time. Failure to file an income tax return results in a penalty of
₹5000 starting with the Assessment Year, if the return is due on July 31 and is
filed between August and December of the same assessment year. An obligatory
fine of ₹10,000 will be assessed if an income tax return that is due on July 31
is filed after 31 December of the same assessment year.
Income Tax Rate for LLP in India
Partnership firms and LLPs must pay a flat 30% income tax rate. Taxes
cannot be calculated using the income tax slab rates because these rates are
only applicable to individuals and HUFs. It would also be necessary to pay SHEC
at 1% and the Education Cess at 2%. Moreover, a surcharge of 10% would be due
if the partnership firm's revenue exceeded ₹1 Crore in any given fiscal year.
Recent Updates on LLP ITR Filing
1.
ITR-1 : Residents
(except not habitually residents) with income up to ₹50 lakh from salaries, one
house property, other sources (such as interest), and up to ₹5000 in
agricultural income. Cannot be used if tax has been withheld under Section 194N
or if income tax on ESOPs is owed. 2.
ITR-2 : Individuals
and HUFs without company or professional profits or gains, but with capital
gains or losses from the sale of assets such as equity shares, mutual funds,
real estate, etc. 3.
ITR-3 : Individuals
and HUFs who earn a living via the successes and gains of their enterprises or
professions. 4.
ITR-4 : Residents
with income from businesses or professions calculated under Sections 44AD,
44ADA, or 44AE, with a total income up to ₹50 lakh, and who are individuals,
HUFs, or firms (other than LLP). 5.
ITR-5 : Individuals
who are not (i) individuals, (ii) HUFs, (iii) businesses, or (iv) anyone submitting
Form ITR-7.
ITR for LLP mandatory
Every LLP is required to submit an annual income tax return. The due
date for an LLP return is always July 31. Nonetheless, any LLP that is the
subject of a tax examination must submit its income tax return by September 30.
All the Limited Liability Partnership are required to maintain proper
account banks on a cash basis or accrual basis. As Private Limited Companies
are required to maintain books of accounts only on an accrual basis.
The LLPs have the option of maintaining the books of accounts on a cash
basis as well. The books of accounts must be maintained at the registered
office of the LLP and must contain all the information like:
1. Money received and spent
2. Assets and liabilities
3. Statement of COGS
4. Inventories and finished goods statement. At the end of each financial year, the LLPs are required to prepare
their financial statements within 6 months for filing with the ROC.
Statements of Accounts and
Solvency
All registered LLPs are required to maintain their books of accounts
and fill the data regarding the profits incurred as well as other financial
data relevant to business and submit it along with Form 8 every year.
Form 8 must be attested by the designated partners by duly signing it.
It is also necessary to get it certified by a practicing chartered accountant
or a practicing company secretary or a practicing cost accountant.
Failing to filer the statement of accounts and the solvency report
within the specified duration will lead to a penalty of Rs. 100 per day.
Annual filing for Limited
Liability Partnerships LLPs are required to elect the partners for maintaining proper books
of accounts and filing the annual return with the Ministry of Corporate Affairs
annually.
The book of accounts of the LLPs need not be audited except in case the
annual turnover is more than Rs.40 lakh or if the contribution is more than Rs.
25 lakhs. Hence, the process of annual filing is simpler for the LLPs. Some of
the annual filings are mandatory even if the LLP has begun the business or not.
LLPs are required to get the accounts audited by a practicing chartered
accountant if the annual turnover in any financial year exceeds Rs. 40 lakhs or
if the contribution exceeds Rs. 25 lakhs.
To avail exemption from audits, the LLP accounts must contain a
statement by the partners to the effect that the partners acknowledge their
responsibilities for complying with the requirements concerning accounting and
preparation of financial statements.
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