ITR filing for LLP partner
Learn everything about ITR filing for LLP partner such as taxability, tax rate, choosing ITR form, tax rates, due date, penalty, how to file ITR. Contact us for filing!
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As a partner in a Limited Liability Partnership (LLP), understanding the nuances of Income Tax Return (ITR) filing is crucial for both compliance and financial planning. In this guide you will learn about taxability, tax rates, how to choose ITR form, how to file ITR, Due date and penalties for not filing ITR for LLP partner.
Taxability of LLP partner
Understanding the tax implications for a partner in a Limited Liability Partnership (LLP) is essential for effective financial planning and ITR filing. Here’s a comprehensive guide on the taxability of an LLP partner in India.
Income Sources for an LLP Partner
Partners in an LLP can earn income through various sources, primarily categorized as:
- Salary, Bonus, Commission, or Remuneration: Payments made to partners for their services.
- Share of Profit: The portion of the LLP’s profit allocated to the partners.
- Interest on Capital: Interest earned on the capital contributed by the partners to the LLP.
Tax Treatment of Different Income Sources
1. Salary, Bonus, Commission, or Remuneration
- Taxable Under: Income from Business/Profession.
- Allowable Deduction: Deductible as an expense for the LLP, subject to limits specified under Section 40(b) of the Income Tax Act.
- Tax Rate: Taxed at the individual partner’s applicable slab rate.
2. Share of Profit
- Taxable Under: Exempt from tax.
- Section: 10(2A) of the Income Tax Act.
- Tax Rate: Since the LLP itself pays tax on its profits, the share of profit received by partners is exempt from further taxation.
3. Interest on Capital
- Taxable Under: Income from Business/Profession.
- Allowable Deduction: Deductible as an expense for the LLP up to a specified limit.
- Tax Rate: Taxed at the individual partner’s applicable slab rate.
- Limits: Deductible interest on capital is limited to 12% per annum.
Income tax slab for LLP partner below 60 years (Old Regime)
| Income | Tax rates |
| Less than Rs.2,50,000 | 0% |
| Rs.2,50,000 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
In Old tax regime, a maximum tax rebate of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs.
Income tax slab for LLP partner for all age groups (New Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.6,00,000 | 5% |
| Rs.6,00,001 – Rs.9,00,000 | 10% |
| Rs.900,001 – Rs.12,00,000 | 15% |
| Rs.12,00,001 – Rs.15,00,000 | 20% |
| More than Rs.15,00,000 | 30% |
You cannot claim any deduction under Section 80C, 80D, 80G, etc
In New tax regime, a maximum tax rebate of Rs. 25,000 is available for income upto Rs. 7 lakhs meaning your income is totally tax free till Rs. 7 lakhs.
Income tax slab for LLP partner between 60 & 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for LLP partner above 80 years (Old Regime)
| Income | Tax rates |
| Less than Rs.5,00,000 | 0% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax deduction under Old regime for LLP partner
Income tax deductions helps to reduce their taxable income, thereby lowering their overall tax liability. These deductions can apply to various expenses and investments of personal nature.Here’s a comprehensive guide to the key income tax deductions available to them:
1. Section 80C Deductions
- Maximum Limit: ₹1,50,000 per financial year.
- Eligible Investments and Expenses:
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- National Savings Certificates (NSC)
- Life Insurance Premiums
- Tuition Fees for Children
- Principal Repayment on Home Loan
- Equity-Linked Savings Scheme (ELSS), etc
2. Section 80D Deductions
- Health Insurance Premiums:
- Self, Spouse, and Children: Up to ₹25,000.
- Parents: Additional ₹25,000 (₹50,000 if parents are senior citizens).
- Preventive Health Check-up: Up to ₹5,000 within the overall limit.
3. Section 80E Deductions
- Education Loan Interest: Deduction for interest paid on education loans for higher education, with no maximum limit. Applicable for loans taken for self, spouse, or children.
4. Section 80G Deductions
- Donations to Charitable Institutions: Deduction for donations to specified funds and charitable institutions. The percentage of deduction (50% or 100%) depends on the organization.
5. Section 80TTA and 80TTB Deductions
- 80TTA: Deduction on interest income from savings accounts up to ₹10,000.
- 80TTB: For senior citizens, a deduction up to ₹50,000 on interest from savings accounts, fixed deposits, etc.
6. Section 80GG Deductions
- Rent Paid: Deduction for individuals who do not receive HRA (House Rent Allowance). The deduction is the least of:
- ₹5,000 per month.
- 25% of total income.
- Rent paid minus 10% of total income.
7. Section 80GGB and 80GGC Deductions
- Political Contributions: Deduction for contributions to political parties or electoral trusts. (80GGB for companies and 80GGC for individuals).
Which ITR form is applicable for LLP partner?
ITR-3:
- Who Should Use It: This form is applicable for individuals and Hindu Undivided Families (HUFs) who have income from salary, house property, capital gains, other sources and proprietary business or profession or income from partnership firm and LLP.
- LLP Partners: LLP partners typically use ITR-3 if they have income from the LLP in the form of salary, remuneration, commission, or any other business income.
ITR-2:
- Who Should Use It: This form is for individuals and HUFs who do not have income from a business or profession.
- LLP Partners: LLP partners should use ITR-2 if they only have income from the LLP that is exempt from tax (such as the share of profit) and other sources of income like salary (not from business), house property, capital gains, and other sources.
Detailed Scenarios
If the LLP partner receives salary/remuneration from the LLP: Use ITR-3. The salary/remuneration is considered business income and should be reported under the head “Income from Business/Profession.”
If the LLP partner has a share of profit from the LLP: Use ITR-2 or ITR-3 depending on other income sources. The share of profit from an LLP is exempt from tax under Section 10(2A) of the Income Tax Act, but it still needs to be declared in the return as exempt income.
If the LLP partner has other sources of income (like rental income, capital gains, or interest):
- Use ITR-3 if they also have business income.
- Use ITR-2 if they do not have any business income.
How to Choose the Right Form
- Primarily Business Income from LLP: Use ITR-3.
- No Business Income, Only Exempt Share of Profit and Other Incomes: Use ITR-2.
What documents are required for ITR filing for LLP partner?
- PAN Card
- Aadhaar Card
- Savings bank statement
- Capital account of LLP partner from LLP
- Investment proof under section 80C or proof of any other deduction
- Details of Capital Gains related to the sale of property, shares, mutual funds, gold, and other assets. This includes sale deeds, broker statements, and transaction receipts
- Form 26AS and AIS
- Other relevant documents depending on income sources
Difference between Form 26AS and AIS
Form 26AS and the Annual Information Statement (AIS) are crucial documents for taxpayers in India, each serving distinct purposes. Form 26AS acts as a tax passbook, summarizing taxes deducted, collected, and paid by the taxpayer during a financial year. It includes details on Tax Deducted at Source (TDS), Tax Collected at Source (TCS), advance tax payments, self-assessment tax payments, and tax refunds received. The data in Form 26AS is sourced from employers, banks, and other entities. In contrast, the AIS provides a comprehensive view of a taxpayer’s financial transactions, covering interest and dividend income, transactions in shares and mutual funds, property transactions, and significant gifts. This information is sourced from banks, financial institutions, and other entities. Both Form 26AS and AIS are accessible on the Income Tax Department’s e-filing portal.
Step-by-Step Guide for ITR filing for LLP Partner
Registering on the Income Tax E-Filing Portal
Visit the official Income Tax Department e-filing website at www.incometaxindiaefiling.gov.in. If you are a first-time user, click on ‘Register Yourself’, select the ‘Individual’ category, and enter your PAN, which will serve as your User ID. Provide your basic details, contact information, and create a password to complete the registration process.
Choosing the Correct ITR Form (ITR-2 or ITR-3)
Determine the appropriate ITR form based on your income sources. ITR-2 is used for individuals with income from salary, multiple properties, capital gains, and other sources but not from business or profession. ITR-3 is for individuals with income from business or profession.
Filling Out Personal Details and Income Information
Select the appropriate assessment year for which you are filing the return. Enter your income details under the relevant heads:
- Salary Income
- Income from Other Sources
- Business Income
- House Property Income
- Capital Gains
Claiming Deductions and Exemptions
- Deductions under Section 80C: Include eligible deductions such as life insurance premiums, PPF, NSC, and tuition fees.
- Deductions under Section 80D: Enter premiums paid for health insurance.
- Other Deductions: Claim deductions under other sections like 80E for education loan interest and 80G for donations.
Verifying and Submitting the Return
Click on ‘Compute Tax’ to calculate your tax liability or refund. If there is any tax payable, pay it through the e-filing portal using net banking or other available options. Preview the completed ITR form, ensure all details are correct, and click ‘Submit’. After submission, verify your ITR within 30 days. You can e-verify using methods such as Aadhaar OTP, net banking, or a digital signature. Alternatively, you can send a physical signed copy of ITR-V to the Centralized Processing Center (CPC).
What is the Due date of ITR filing for LLP partner?
The due date for ITR filing for LLP partners in India depends on whether the LLP is required to be audited or not:
LLPs Not Requiring Audit: If the LLP does not require an audit under the Income Tax Act or LLP Act, the due date for filing the ITR is July 31 of the assessment year.
LLPs Requiring Audit: If the LLP is subject to audit under the Income Tax Act or LLP Act, the due date for filing the ITR is October 31 of the assessment year.
In case you have missed this deadline then you can file belated ITR till 31st December with late fees.
Also for any mistake made while filing ITR, you can make corrections by filing Revised ITR any number of times till 31st December.
If you miss deadline of Belated income tax return filing then you can file Updated ITR till 2 years from the end of relevant assessment year with late fees and additional taxes.
What are the Consequences of non-payment of Tax and non-filing of ITR by LLP Partner?
Non-payment of tax and non-filing of Income Tax Returns (ITR) by an LLP partner can lead to several consequences under the Income Tax Act in India. These include financial penalties, interest charges, and potential legal action. Here’s a detailed look at the repercussions:
Consequences of Non-Payment of Tax
Interest on Unpaid Tax (Section 234A, 234B, and 234C):
- Section 234A: Interest is charged at 1% per month or part of the month for delay in filing the return beyond the due date, on the tax amount remaining unpaid.
- Section 234B: Interest is charged at 1% per month or part of the month for non-payment or short payment of advance tax. This applies if advance tax paid is less than 90% of the assessed tax.
- Section 234C: Interest is charged for deferment of advance tax, calculated at 1% per month for a shortfall in installment payments.
Penalties for Non-Payment:
- Penalty under Section 221: The Assessing Officer may levy a penalty up to the amount of tax due if tax is not paid within the specified time.
- Unreported income is considered illegal, tantamount to tax evasion, which may result in a penalty ranging from 100% to 300% of the evaded tax under Section 271(C).
- A penalty of 10% to 90% of the undisclosed amount may be imposed under Section 271AAB, depending on the circumstances
Consequences of Non-Filing of ITR
Late Filing Fee (Section 234F):
- A late fee of up to ₹5,000 if the return is filed after the due date but before December 31 of the assessment year.
- A late fee of ₹10,000 if the return is filed after December 31. However, if the total income does not exceed ₹5 lakhs, the maximum penalty is ₹1,000.
Penalty for Non-Filing (Section 271F):
- If an ITR is not filed by the end of the relevant assessment year, a penalty of ₹5,000 may be levied. However, this penalty provision is typically overridden by Section 234F as per recent amendments.
Prosecution (Section 276CC):
- For willful failure to file returns, the taxpayer may face prosecution. The term of imprisonment can range from three months to two years, and in cases where the tax evaded exceeds ₹25 lakhs, the imprisonment can be from six months to seven years.
Loss of Carry Forward Benefits:
- Losses under various heads of income (except for house property loss) cannot be carried forward to subsequent years if the return is not filed on or before the due date.
Increased Scrutiny and Audit:
- Non-filing or late filing of ITRs increases the chances of the taxpayer’s accounts being selected for scrutiny by the Income Tax Department, which can lead to a detailed audit and additional compliance requirements.
Conclusion
ITR filing for LLP partner involves meticulous planning and understanding of income tax laws. By following the steps outlined in this guide, you can file ITR accurately. Regularly update yourself with the latest income tax rules to make informed decisions and optimize your tax liabilities. For complex cases, seeking professional advice from a chartered accountant is advisable.
In case you still have any query or want to file ITR with CA assisstance then you can contact us at +91 9769647582
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