Written by : Rajiv Singh

A Chartered Accountant in UK with 15+ years of experience in FinTech Consulting, Accounting & International Taxation. I enjoy being a Social, Foodie and Father of two young children, reachable at linktr.ee/RajivSingh.

How To File Income Tax Return for LLP?

Rajiv Singh
Rajiv Singh, CA, FAIA

Sep 11, 2021 01:50

LLPs are one of the most in-trend forms of business entities in India. The ultimate aim of forming this type of business is to compensate for the disadvantages of partnerships and lower the strict criteria applicable to corporate entities. Hence, a limited liability partnership is a type of business that combines the characteristics of a partnership firm and a company. An LLP functions under the governance of its partners and operates as a distinct legal entity from them. As the LLP creation procedure is quick and does not need many regulatory formalities, LLPs are favored by professionals, micro and small enterprises, and businesses.

Return filing is a taxpayer's obligation and a symbol of moral responsibility that contributes to the nation's growth. Aside from that, an income tax return verifies your creditworthiness in the eyes of financial organizations. It thus allows you to enjoy various benefits such as bank credits, income, and address verification, rapid visa processing, simple loan acceptance, and so on. Every Limited Liability Partnership is obliged to submit an income tax return, regardless of the amount of money earned or loss incurred as per Section 139(1) of the Income Tax Act 1961.

The filing of returns for a Limited Liability Partnership (LLP) has to be regular to maintain compliance and avoid hefty penalties under the law for non-compliance. Compared to the compliance obligations imposed on private limited businesses, a Limited Liability Partnership has just a few compliances to follow each year. However, the fines appear to be fairly large. While non-compliance may only result in a fine of INR 1 lakh for a private limited company, it may result in a fine of up to INR 5 lakh for an LLP.

Annual income tax returns are the responsibility of LLP partners. As an LLP partner, you must be wondering how to file your (Income Tax Return) ITR for LLP. What is the procedure for filing ITR for LLP? What is the LLP income tax rate?
This blog shall walk you through the process of filing an ITR for LLP.

The rates for filing ITR for LLP are as follows:

Income TaxTax Rate
Income Tax30%
Surcharge if total income exceeds Rs. 1 crore12%
Health and Education cess4%

Consider these tax rates while calculating the ITR for LLP.

LLP Income Tax Return Filing Deadline

The filing of income tax returns for LLP is a yearly requirement. The LLP is a separate legal entity from its partners. Partners must file an annual tax return for their LLP. You must submit the ITR for LLP on or before the due dates shown below, and the form used to file the returns is ITR form 5.

Section 2(31)(vii) of the Income Tax Act, 1961 allows AOPs, LLPs, BOI, and companies to utilize ITR form 5. One should note that if there is a need to conduct an audit of the LLP's accounts under Section 44AB, lodge the return of income electronically using a digital signature as per the specified due date.

Particulars of ITRDue Date
If an audit is not required31st July every year
In the event of an Audit30th September every year
If LLP is involved in an international transaction30th November every year

Documents Required to Report an ITR for LLP

To file an ITR for LLP, the initial partners must prepare the LLP's books of accounts. LLP might keep its accounting on an accrual or cash basis. The income tax return of a limited liability partnership is a summary of its financial statements. Financial statements for LLP include a balance sheet and a profit and loss statement. The documentation required for the LLP's tax return filing is listed below.

  • Address, LLLP PAN, Registration Date
  • Contact details, Aadhar &Address, Partner PAN
  • Sales and Purchase Book
  • General Ledger
  • Cash Book
  • Bank Book
  • Bill, Vouchers, Expenses Invoices, etc.

Method of submitting income tax returns

Limited Liability Partnerships must submit returns in the following modes:

  • Under a digital signature, electronically
  • By electronically transmitting the data in the tax return using an electronic verification code
  • By electronically transmitting the data in the tax return and then submitting the return verification in form ITR-V.

However, if an LLP's accounts are required to be audited under Section 44AB of the Income Tax Act 1961, and it is expected to file an income tax return electronically using a digital signature.

Procedure to file ITR for LLP

ITR Form 5 is used to file ITR for LLP. It is mandatory for every LLP registered in India to file an annual tax return. ITR Form 5 is available for download from the income tax website. The procedure for filing the LLP's income tax return has been completed electronically. For income tax purposes, a digital signature from an authorized partner is necessary. The method for submitting an LLP tax return is summarized below.

  1. Register your Limited Liability Partnership (LLP) on the Income Tax website.
  2. Create the LLP Balance Sheet.
  3. Create a profit and loss statement.
  4. Prepare the LLP's income tax computation sheet.
  5. Online LLP Income Tax Payment
  6. Download Income Tax Form 5
  7. Fill in the LLP and financials.
  8. Upload the ITR along with the Partner's DSC.
  9. E Income Tax Return Verification

You can update your LLP's tax return of income at any point throughout the assessment year or before the conclusion of the assessment, whichever comes first. It is possible to update your return as many times as necessary as long as it is completed within the time frame provided. It is crucial to remember that if the submission of the initial return is not as per the due date provided in section 139(1), it is considered a belated return. As per rules, one cannot amend a belated return.

Penalty for Failure to File ITR for LLP

Section 234 F of the Income Tax Act applies to the penalty for failure to file ITR for LLP. Income tax returns filed beyond the due date are subject to a penalty of up to Rs. 10000. To avoid late filing penalties, file your income tax return on or before July 31 or September 30.

Audit of LLP Financial Statements

A Chartered Accountant will audit the LLP's finances. If the LLP's income reaches Rs.40 lakhs or its capital exceeds Rs.25 lakhs, Section 34(4) of the Act requires the LLP to dissolve. The LLP financial statements provide a detailed description of the LLP's annual transactions. Financial statements are created based on books of account. It contains the LLP balance sheet as well as the profit and loss statement. LLPs, like private limited companies, have no set structure for preparing financial statements.

The LLP shall employ a Chartered Accountant to conduct the annual LLP audit. The auditor is responsible for verifying the LLP's books of account and issuing an audit report on the LLP.

Compliances regarding ITR for LLP get streamlined with Gotaxfile!

Regardless of your LLP's annual turnover, an ITR for LLP income is a must. The due date for LLP tax filing is determined by the LLP's annual turnover or the partners' capital contribution. GoTaxfile is here to help you file ITR for LLP. Our eminence and prowess in the income tax segment can simplify your LLP filing hassles. Contact our team to know more!

Rajiv Singh
Rajiv Singh, CA, FAIA

Sep 11, 2021 01:50

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