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Income Tax Return of an LLP. Step-Wise-Analysis for the Financial Year 2019-20

The LLP is a legal entity and is a taxable person (assessee) for income tax purposes. The filing of ITR is mandatory for all the LLP if it existed even for one day during the previous year. It means your LLP must file its ITR if it is incorporated on or before 31st March 2020 (the financial year 2019-20).
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The due date for filing ITR is 31st July 2020 for an LLP, following are a few simple and logical steps that shall be required for filing the ITR of your LLP. Click here to read a more detailed analysis on Annual Return Filing for your LLP (ROC Returns like Form 11 and 8).

Step – 1: Prepare Statement of accounts for the LLP”

The accounting of the LLP is the first step towards the preparation of the financial statements of the LLP. You should be careful and must comply with the provisions of the Income Tax Act, 1961. In particular, the following items require special attention while finalizing the accounts of the LLP.
  • Preliminary Expenses
  • TDS on payments of the LLP
  • Consider the provisions of GST on LLP (if applicable)
  • Partners remuneration (Special Treatment)
  • Professional tax Payment of LLP (if applicable)
  • Consider good practices of Tax Planning.

Step – 2: Income Tax Computation”

The computation of taxable income is the most important step in filing an ITR for the LLP. The correctness of the financial statements is very important while doing Tax Computation for your LLP. The income tax laws treat certain expenses differently, and if the expenses do not qualify the law, these are disallowed as an expense and thus increases the taxable income.

Step – 3: Check for expense disallowance under Income Tax Act/Rules”

Well, as said earlier the income tax department recognizes a particular payout as the expense of the LLP only if it follows the rules. Here is an example of common tax disallowances and the reasons relating to the ITR of LLP
  • The preliminary expenses are allowed only up to 1% of capital employed in the LLP
  • All payouts are disallowed as expenses if required TDS is not deducted.
  • Penalty on delayed tax payments like TDS, GST, etc is not allowed
  • Partners Salary is limited to 90% of the profit up to 3 Lakh or 60% after that.
  • Please check the LLP Agreement for the provision of partner remuneration.
  • Consult our specialist CA for further assistance.

Step – 4: Payment of Income Tax of the LLP”

The self-assessment Income Tax for the LLP can be paid online by visiting the Income Tax Portal. On the tax payment portal select Challan Number – 280 and follow the on-screen instruction. The Income Tax can be paid by way of internet banking of almost all the banks. The income tax for the LLP can also be paid by debit cards of some of the banks as listed on the income tax portal. You can also pay Income Tax by visiting your Bank and submit cheque along with Tax Challan 280.

Step – 5: Create a profile of the LLP on the Income Tax Portal for Filing Returns.”

As the LLP Income Tax Return is filed electronically, the LLP is required to register itself for the first time on the Income Tax E-filing Portal. To register the LLP, the mobile and email OTP is required. One designated partner must be registered at the Income Tax Portal as Authorized Signatory. The Digital Signature of the signatory Designated Partner is also registered on the ITR Portal for the purpose of authentication at the time of filing the ITR.

Step – 6: Filing of Income Tax Return for Your LLP”

The Income Tax Return for the LLP can be filed only after payment of self-assessment tax. The LLP ITR can be filed with the use of the digital signature of any designated partner. However, the LLP ITR Can also be verified by way of Aadhar Based OTP of the partner who has been registered on the income tax portal

Note – 1: Due Date of filing LLP Income Tax Return

  • ITR filing for the LLP has begun since 1st April.
  • The Last Date is 31st July
  • In the case of Tax Audit, the Last Date is 30th September
  • The applicable form is ITR-5
  • Belated ITR can be filed until the end of the assessment year.

Note – 2: Consequences of Not Filing LLP ITR

  • The loss of the LLP can be allowed to be carried forward
  • There shall be interest under section 234A
  • Refunds of TDS (if any) shall be delayed
  • You can still file late returns with late Fine under section 234F
  • The late fine is from Rs. 1000 to Rs. 1000 depending on taxable income and delay
  • Non-filing shall have an impact on due diligence of the LLP

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Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.

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