—Guide
Income Tax Returns for LLPs and Partnership Firms: Rates, Forms and Deadlines
How LLPs and partnership firms are taxed, partner remuneration and interest limits, AMT, ITR-5, and the deadlines that apply.
LLPs and partnership firms are taxed as separate entities, with rules on what they can pay their partners. This guide covers how their returns work.
Note: this article covers the rules for FY 2025-26 under the Income-tax Act, 1961. The Income-tax Act, 2025 applies from tax year 2026-27, with renumbered provisions and some changes, so check the current position for later years.
Tax Rate
- 30% on total income.
- Surcharge of 12% where income exceeds ₹1 crore.
- 4% health and education cess.
There's no concessional regime like the one available to companies.
Partners' Share of Profit
A partner's share of the firm's or LLP's profit is exempt in the partner's hands, because the entity has already paid tax on it.
Partner Remuneration and Interest
Firms and LLPs can deduct payments to working partners and interest on partners' capital, within limits and if authorised by the partnership deed or LLP agreement:
- Interest on capital up to 12% a year.
- Remuneration to working partners up to limits based on book profit.
These amounts are taxable in the partners' hands as business income, and TDS may apply on payments to partners above the threshold.
Alternate Minimum Tax (AMT)
LLPs and firms claiming certain deductions may be subject to AMT at 18.5% of adjusted total income, plus surcharge and cess, if it exceeds normal tax. Credit is available in later years.
Filing the Return
- Form: ITR-5.
- Due date: 31 July if no audit is required, and 31 October if a tax audit applies.
- Verification: with a DSC where the accounts are audited, otherwise by e-verification.
Losses
Business losses can be carried forward for eight years if the return for the loss year is filed on time. LLPs don't lose their losses on a change in partners, but there are specific rules for losses on conversion from a company.
Presumptive Taxation
Partnership firms, but not LLPs, can use the presumptive scheme for small businesses within the turnover limits.
Getting Help
Think Filing prepares and files returns for LLPs and partnership firms, including partner remuneration workings and AMT.