The Limited Liability Partnership (LLP) Act, 2008, specifies the laws and guidelines for a limited liability partnership in India. Further, an LLP is a separate legal entity. Also, while a partnership firm makes the partners personally liable for all its liabilities, an LLP offers limited liability (like a company). Further, being a separate legal entity, an LLP is liable to pay tax and file returns every year too. Today, we are going to talk about limited liability partnerships and look at the tax laws and the income tax rate for LLP.
What is a limited liability partnership?
A Limited Liability Partnership (LLP) is a partnership where all partners have limited liabilities. The liability of each partner is limited to the extent of his investment in the LLP. It offers a combination of features of a partnership firm and a company.
Income Tax Rate for LLP
The Income Tax Rate for LLP for the financial year 2020-21 is 30% on its total income.
The following surcharge is applicable on the income tax:
If the total income of the company is more than Rs.1 crore, then the applicable surcharge is 10% of the income tax. This is provided that the total amount payable as income tax + surcharge does not exceed the total amount payable as income-tax on a total income of Rs.1 crore by more than the amount of income that exceeds Rs.1 crore.
Health and Education Cess
An additional health and education cess of 4% is levied on the total amount of income tax plus the surcharge.
Alternate Minimum Tax
If the normal tax liability of an LLP is less than 18.5% of the adjusted total income, then the LLP must pay a Minimum Alternate Tax at the rate of 18.5% plus surcharge and cess. This is as per Section 115JC of the Income Tax Act, 1961.
Some important points
- If the LLP is not required to audit its accounts, then it must file its tax returns on or before July 31st of the assessment year corresponding to the relevant financial year.
- If the LLP has a turnover of more than Rs.40 lakh or a contribution in the excess of Rs.25 lakh, then it needs to mandatorily get its accounts audited via a practicing Chartered Accountant. Further, for such LLPs, the last date of filing its tax returns is September 30th of the assessment year corresponding to the relevant financial year.
- If the LLP has entered into an international transaction or some specific domestic transactions, then it must file Form 3CEB. Further, it must ensure that a Chartered Accountant certifies the form. Such LLPs must ensure that they file their tax returns on or before November 30th of the assessment year corresponding to the relevant financial year.
- LLPs need to file the returns via Form ITR5. This form is available on the website of the Income Tax Department. Further, you will need the DSC of the designated partner. Usually, we advise our clients to print two copies of the form after filing the return. We also ask them to sign one copy and send it via ordinary post to the Central Processing Center of the Income Tax Department at Bengaluru. Further, they retain the other copy for their record.
We hope that this article cleared all questions regarding the income tax rate for LLP. You can visit the Income Tax Department’s website for any updates on the same.