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Taxation of Partnership Firms in India: FY 2024-25 ITR Filing Guide by Alliance Tax Experts

Are you running a partnership firm in India? Understanding your tax obligations is crucial for avoiding penalties and ensuring smooth business operations. As we enter Financial Year 2024–25, it's the perfect time to review the latest tax regulations and prepare your Income Tax Return (ITR) with expert guidance. This detailed blog by Alliance Tax Experts will walk you through everything you need to know about taxation of partnership firms, how to file your ITR, claim deductions, and avoid common pitfalls.

Introduction: Why Partnership Firms Must Prioritize Tax Compliance

Partnership firms are the backbone of India’s MSME sector, contributing significantly to trade, services, and manufacturing. Whether it’s a family-run business, a professional services firm, or a growing enterprise, timely and accurate ITR filing ensures not only legal compliance but also builds trust with stakeholders, lenders, and the Income Tax Department.

Understanding Partnership Firms in India

✅ What is a Partnership Firm?

A partnership firm is a business structure where two or more individuals come together to run a business and share profits and losses as per an agreed ratio.

✅ Types of Partnership Firms:

1. General Partnership – All partners share unlimited liability.
2. Limited Liability Partnership (LLP) – Offers limited liability to partners and is registered under the LLP Act, 2008.

✅ Legal Framework:

• Governed by the Indian Partnership Act, 1932.
• Registration is not mandatory but highly recommended.
• LLPs are governed by the LLP Act, 2008, offering more flexibility and limited liability.

Taxation Overview for Partnership Firms (FY 2024–25)

✅ How Partnership Firms are Taxed:

• Partnership firms (other than LLPs) are taxed as separate legal entities.
• Income Tax Rate for partnership firms (including LLPs) for FY 2024–25: 30% on taxable income Surcharge: 12% if total income exceeds ₹1 crore Health & Education Cess: 4% on income tax and surcharge

✅ Tax on Partners:

• Salary and interest to partners (as per partnership deed) are allowed as deductions to the firm.
• These amounts are taxable in the hands of partners as business/professional income.

Step-by-Step Guide: Filing ITR for Partnership Firms

Applicable ITR Form:

• ITR-5 is applicable for partnership firms (excluding LLPs taxed as companies).

Key Due Dates for FY 2024–25:

• Non-Audit Firms: 15th September 2025
• Audit Cases (under Sec 44AB): 30th September 2025

ITR Filing Process:

1. Gather Financials: Profit & Loss account, Balance Sheet, Capital account.
2. Audit (if applicable): Firms with turnover > ₹1 crore (business) or ₹50 lakhs (profession) must conduct a tax audit.
3. Prepare Computation Sheet with all deductions.
4. File ITR-5 online through the Income Tax e-Filing portal.
5. Verify ITR using DSC or EVC.

Common Mistakes to Avoid:

• Not mentioning the correct PAN of partners
• Ignoring tax audit applicability
• Delay in verifying ITR or uploading audit reports
• Incorrect classification of income or expenses

Deductions & Exemptions Available to Partnership Firms

Eligible Deductions:

• Remuneration to partners (subject to limits under Section 40(b))
• Interest to partners (not exceeding 12% p.a.)
• Business expenses like rent, salaries, depreciation, etc.
• Tax-saving investments under specific sections like 35AD, 80JJAA (if applicable)

Importance of Documentation:

• Ensure that the partnership deed is updated and valid.
• Maintain invoices, bank statements, GST returns, and ledgers to substantiate all claims.

Impact of Recent Tax Reforms on Partnership Firms (2024–25)

Key Updates:

• E-verification Deadline strictly enforced—within 30 days of filing.
• Reporting of MSME payments under Section 43B(h) may affect expense deductions.
• Changes in depreciation rules for some asset classes.
• More scrutiny on high cash transactions and non-filing firms.

Implications:

• These reforms increase the need for accurate reporting and compliance-friendly accounting.
• Non-compliance may result in disallowance of expenses or penalties.

Expert Tips to Optimize Your Tax Liability

Tips from Alliance Tax Experts:

1. Maintain proper books of accounts from Day 1.
2. Pay advance tax quarterly to avoid interest.
3. Keep your GST, TDS, and ITR records synchronized.
4. Prepare a financial projection and tax estimate mid-year.
5. Get your accounts audited on time and file Form 3CA/3CB + 3CD, if required.
6. Consult professionals regularly to plan remuneration and capital withdrawal tax-efficiently.

Why Choose Alliance Tax Experts for ITR Filing?

At Alliance Tax Experts, we specialize in:

• Accurate ITR filing for partnership firms and LLPs
• Tax audit support and representation
• Tax planning, financial reporting, and compliance consultation

✅ 1300+ Clients Served  Based in Vashi, Navi Mumbai  Call: 9769201316  Website: www.alltaxfin.com WhatsApp for a FREE consultation today!

Conclusion: Tax Compliance is Non-Negotiable

Running a partnership firm is exciting but comes with serious tax responsibilities. Timely and accurate ITR filing not only prevents penalties but also enhances your firm's credibility. With evolving tax laws, partnering with professionals like Alliance Tax Experts ensures peace of mind and long-term financial growth.

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