Did you know that not until 2009 a defined rules set was established to govern LLP Taxation? It was Budget 2009 that realized the importance of laying down taxation policies for LLP as an entity type. In this blog, we will quickly look into the major takeaways for LLP’s in terms of Tax planning.
Income Tax Policy For A Limited Liability Partnership
1. Income tax rate of 30% is applicable for LLP registered in India on the total income earned during a financial year. If the income is more than Rs 1 Crore in any financial year, the firm would also have to pay 10% surcharge.
2. All LLPs have to pay Education Cess of 2% and Secondary and Higher Education Cess(SHEC) of 1% on the amount of income and applicable surcharge.
- If the firm is making a profit by selling an asset, then it will be taxable.
- In case of sale of shares and mutual funds, if selling within a year of purchase of the securities, a tax rate of 15% would be applicable to the earned profit.
- In case the securities are being sold after a year of purchase and exceed INR 1 lakh in amount, then a tax rate of 10% would be applied according to Union Budget 2018.
3. LLP is subject to minimum alternate tax which is the minimum tax rate that is applicable to any firm. Hence, the income tax paid by a LLP having profits must be equal to or more than 18.5% of the total income of the LLP.
4. Tax deductions are allowed for the portion of the total income of the firm which is used for donations.
5. LLPs are also liable to advance tax payments if the tax payable exceeds INR 10,000. The due dates for advance tax payment are as follows:
Due Date – Advance Tax Payable
- 15th June – 15% of advance tax
- 15th September – 45% of advance tax
- 15th December – 75% of advance tax
- 15th March – 100% of advance tax
Deadline For LLP Tax Filing
- In case there is no mandatory audit requirement, the deadline to file an income tax return for an LLP is 31st July of the current year.
- LLP whose revenue exceeded INR 40L are must get their accounts audited by a practicing Chartered Accountant. The tax filing for LLP, which requires obtaining audit, should be done before September 30th of current year.
- LLPs that are involved in international transactions with associated enterprises or have undertaken certain Specified Domestic Transactionsare required to file Form 3CEB. The form must be certified by a CA. The deadline for tax filing for LLPs that are required to file Form 3CEB is 30th November.