Separate the firm, partners and LLP rules
A partnership firm is taxed as a person under the Income-tax Act. Its share of profit allocated to a partner is generally exempt in the partner's hands under section 10(2A), while allowable interest and remuneration can be taxable to the partner. An LLP is also taxed at the firm rate but remains a distinct entity under the LLP Act and should not be described as a type of general partnership.
Choose the deadline from the filing trigger
ITR-5
Used by firms and LLPs, subject to the form's eligibility instructions for the relevant assessment year.
Audit report
Where section 44AB or another audit rule applies, the report is generally furnished before the return due date under the current statutory calendar.
Transfer pricing
International or specified domestic transactions can trigger Form 3CEB and a different return timeline.
Belated/revised return
Availability and deadline depend on section 139 and the relevant assessment year; verify before relying on a generic date.
Reconcile deed, books and section 40(b)
Test whether the partnership deed authorises interest and remuneration, whether payments fit its terms, and whether the statutory deduction limits are met. From 1 April 2025, section 194T introduced withholding by a firm on specified payments to partners when the statutory threshold and conditions apply; build it into the payment workflow.
Correction to the draft: partners are not normally taxed again on their exempt share of the firm's assessed profit. Interest, salary, bonus, commission or remuneration require separate treatment.
Run advance tax and self-assessment controls
If the statutory advance-tax threshold is met, instalments generally follow 15 June, 15 September, 15 December and 15 March cumulative targets. Compute from forecast taxable income, refresh for actual performance and document major changes. Interest under sections 234B/234C can arise from shortfall or delay.
Keep transaction taxes on their own calendars
| Workstream | Control | Evidence |
|---|---|---|
| TDS | Identify section, threshold, rate, deposit and return | Challan, statement, certificate, reconciliation |
| Partner payments | Review section 194T and deed authority | Ledger, resolution/deed, TDS trail |
| GST | Registration, invoice, place of supply, returns and ITC | GSTR data, e-invoice/e-way bill where applicable |
| Books | Close monthly and reconcile bank/tax ledgers | Trial balance and exception log |
GST registration cannot be reduced to one ₹40 lakh rule. Thresholds and compulsory-registration triggers vary by supplies, state/UT, goods/services and statutory exceptions.
Build one audit-ready evidence pack
Reconcile revenue
Books, GST returns, AIS/TIS, Form 26AS and bank credits.
Validate expenses
TDS, GST input credit, related parties, cash limits and supporting invoices.
Close partner accounts
Capital, drawings, interest, remuneration, profit share and section 194T.
Lock filings
Audit report, ITR-5, tax payment and signed working papers.
Need a fact-specific review?
TargoLegal can help organise the search, filing or compliance record around your actual facts.
Request a consultationFrequently asked questions
Which income-tax return does a partnership firm generally file?
A partnership firm generally uses ITR-5, subject to the notified form and eligibility instructions for the relevant assessment year.
Is every partnership firm required to obtain a tax audit?
No. Audit depends on the applicable statutory test, including section 44AB and any other law that applies.
Is a partner taxed on the share of profit from the firm?
The partner's share in the total income of a separately assessed firm is generally exempt under section 10(2A); other partner receipts require separate analysis.
Does MAT apply to partnership firms?
MAT under section 115JB is a company provision. Firms and LLPs may instead need to test AMT under section 115JC where its conditions apply.
Is GST registration always required above ₹40 lakh?
No single threshold applies to every case. The threshold and compulsory-registration rules depend on state/UT, goods or services, supplies and exceptions.
What changed for payments to partners from 1 April 2025?
Section 194T introduced TDS by firms on specified salary, remuneration, commission, bonus or interest payments to partners when its conditions and threshold are met.
Official sources to verify
- Income Tax: Partnership Firm/LLP AY 2026-27 — current return, form and rate guidance.
- Income-tax Act, 1961 — sections including 10(2A), 40(b), 44AB, 139 and 194T.
- GST portal — official registration and return services.
- CBIC GST — Acts, rules, notifications, circulars and taxpayer material.
- Indian Partnership Act, 1932 — legal framework for partnership firms.
