A Limited Liability Partnership is a legal entity and a taxable person (assessee) for all income tax purposes. So, it is mandatory to file income tax return for LLP on or before the 31st of March every assessment year. Filing ITR is mandatory even if the LLP existed for a single day in the financial year for which it is being filed.
To file Income Tax Return for LLP, you need to submit Form ITR-5 to the Income Tax Department through the Income Tax e-filing portal. The entire process is 100% online and can be completed in a few simple steps. The purpose of this blog is to discuss these steps in detail for your clear and precise understanding. Read the entire blog for complete information!
What is the Process of Filing Income ITR of LLP?
The process of filing ITR of LLP begins with the preparation of its account statements. These statements have to be prepared according to the provisions of the Income Tax Act, 1961. Upon preparing the statements, you can calculate the taxable income and proceed to its payment. Let us understand each of these steps one by one.
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. Tax audit is applicable if the annual turnover has crossed Rs.40 lakhs, or if the capital contribution has crossed Rs.25 lakhs in the concerned financial year
- In case, the LLP has carried out international transactions or certain Specified Domestic Transactions and has to file Form 3CEB, the last date is 30th November
- 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
Conclusion
Income Tax Return or ITR is a summary of the income earned by a tax assessee during a particular financial year. This summary is required to be filed to the Income Tax Department for computation and verification of the taxable income and tax payable of the income tax assessee. Since LLP is a legally incorporated entity, filing ITR and paying income tax is mandatory for it under the Income Tax Act of 1961.