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A partnership firm is a type of entity where more than one person is carrying out business under one entity. Partnerships firms in India are of two types – Registered partnership firms and unregistered partnership firms.
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A partnership firm is a type of entity where more than one person is carrying out business under one entity. Partnerships firms in India are of two types – Registered partnership firms and unregistered partnership firms.
Registering a Partnership is the right choice for small enterprises as the formation is straightforward and there are minimal regulatory compliances.
The Partnership Act has been in existence in India since 1932, making partnerships one of the oldest types of business entities in India. A partnership firm ca
But unregistered Partnership firms are denied certain rights under section 69 of the Partnership Act that majorly deals with the effects of non Registration of Partnership firms.
The income tax defines a Partnership firm as “Persons who have entered into a partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”. Hence, a firm that does not have a registration certificate from the registrar is an unregistered Partnership firm.
For Partnership income tax return filing should be done through Form ITR-5. This form ITR-5 is used to partnership firm income tax returns and not the tax returns for the partners.
Like all other income tax forms, ITR 5 is an attachment-less form and there is no requirement to submit any documents or statements along with the partnership firm tax returns. However, the taxpayers must save the records about business and produce the same before the tax authorities when requested.
ITR-5 can be filed online with the income tax department’s online portal. The documents need to be submitted only when they are asked for. While filing the Partnership firm tax returns the partners must have class 2 digital signatures for verification of the filing process.
The income tax return of a partnership firm can be filed online through the income tax website or manually. If the income tax return is filed online then a class 2 digital signature will be required for the partner of the firm. Also, online income tax return filing is mandatory for partnership firms required to obtain an audit.
In case of manual filing, the assessee must print out two copies of Form ITR-V. One copy of ITR-V signed by the assessee has to be sent by ordinary post to Post Bag No. 1, Electronic City Office, Bengaluru–560100 (Karnataka). The other copy should be retained by the assessee for his/her record.
Partnership firms are not required to make an audited financial statement each year. The tax audit may be necessary based on the turnover and other criteria.
The compliance for partnership firms mainly includes the income tax return filing unlike the corporate entities like the LLP and the company as they have to make income tax return filings as well as the annual return filing.
For filing the returns of a Partnership firm Invoices of sales and the purchases during a year, expenses invoice, bank statements of the partners, TDS return filed copy, GST returns filing copy is required.
The partnership deed contains all the Terms and conditions of the Partnership. It regulates the rights and the duties of each partner making the partnership deed a very crucial document.
The partnership firm and the partners of this firm are considered to be the same. In the case of the partnership firms, the liability of the partners is also unlimited and all the partners are jointly responsible for the liabilities of the firm.
Irrespective of the turnover and the profit or losses made by the partners, the partnership is required to file income tax returns.
There are certain limitations on the transfer of ownership of a partnership. A partner cannot transfer the partnership without the consent of all the partners.
Yes, it is possible to convert a partnership firm into a company or an LLP. The process of conversion is very cumbersome. Hence, the entrepreneur should consider starting an LLP or a company instead of opting for a Partnership.
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