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ALL ABOUT PARTNERSHIP COMPLIANCES

ALL ABOUT PARTNERSHIP COMPLIANCES

PARTNERSHIP COMPLIANCES

Partnership is a business which is carried out by two or more individuals by entering into an agreement and forming a registered deed. Therefore when individuals enter into partnership to carry out a business, then that business formation is called as partnership firm and the individuals are called partners. Indian Partnership Act, 1932 governs all the partnership firms registered in India.

In partnership firm, all the terms and conditions of the business are decided by the partners and a legal agreement is drafted, the deed also contains the business objects on which the partnership is destined. The regulations on partnership firm are very minimal.

In a partnership firm business the partners of the firm are jointly and individually liable for the debts of the firm. All the partners are the joint owners of the partnership firm business.

Basic compliances under a partnership firm:

Certain annual compliances to be conducted in a partnership firm are as follows:

  • Filing of Income tax return
  • TDS returns
  • GST returns
  • ESI regulations

All the above compliances are generally based on the type of entity and its nature of business, state of incorporation, annual turnover and number of employees, etc.

BENEFITS

Completing all the compliances also comes with various rewards, some of the benefits of getting the partnership compliances are as follows:

  • Reduction in legal risk
  • Cost effectiveness
  • Improvement in operations and safety
  • Various Tax benefits
  • High productivity
  • Increase in profitability
  • Improved operations and safety
  • Deeper insights into business accounting
  • Not obligated to file its annual accounts with the registrar
  • No audited financial statements preparation required (unless crosses the turnover threshold)
  • Low compliances in comparison to companies

ANNUAL COMPLAINCES LIST

A confined list if the all the annual compliances to be done in a partnership firm business are enumerated as below:

  • Accounting and book-keeping
  • Monthly or Quarterly filing of the GST returns
  • Monthly filing of PF and ESI returns
  • Monthly payment of TDS
  • Quarterly filing of the TDS returns
  • Preparation and finalization of Balance sheet and profit and loss statement
  • Annual income tax return filing of the firm
  • Annual income tax return filing of all the partners of the firm
  • Submission of Tax audit report (based on turnover and other criteria)
  • ITR form 5 (for the persons other than individuals, companies, HUF, pension filing ITRs) is to be filed.

Documentation is the base of every business unit, therefore for the purpose of annual partnership compliance one needs to fulfill the below documentation:

FOR INCOME TAX RETURN FILING

  • Books of accounts
  • Other general ledge balances
  • Profit and loss statement
  • Balance sheet
  • Banking details of the partnership firm
  • Details of sales and purchase as per GST ledger
  • Purchase and sales invoices
  • Expense invoices
  • Details with regard to TDS and respective statements
  • Copies of TDS challan deposited
  • GST user id password
  • Partner’s income details
  • Credit card statements, in case the expenses of the form are incurred on behalf of the partners
  • Bank statement of the partnership firm from 1st April to 31st March of the relevant financial year
  • Bank details of all the bank accounts of the firm
  • Any other supporting document in case required.

Certain FAQs regarding contribution in LLP are enumerated as below:

Q1. Is tax audit mandatory for partnership firm?

A.Tax Audit of partnership firm is not mandatory. When the turnover/ gross receipt exceeds Rs. 1 Crore in case of business and Rs. 50 Lacs in case of profession or Profit of Partnership firm below as prescribed under sec 44AB.

However, it is highly recommended that every partnership firm should go for audit of their accounts.

Q2. Are BALANCE SHEET and PROFIT AND LOSS ACCOUNT preparation required for partnership firm compliance?

A. Yes, it is the part of compliance process on the basis of these documents only compliances can be done.

Q3. What is the penalty if compliances are not filed?

A. Penalties are enumerated as below:

  • IN INCOME TAX: If ITR filed after 31st July of the succeeding Year then Rs. 1,000 or 5,000 or 10,000 Depends on the case. Plus Interest on late payment of Tax under sec 234A,B,C
  • IN GST RETURN: there is multiple penalties depends on the type of Return For GSTR 3B and GSTR 1 Rs 20/50 per day plus 18% Interest on delayed payment of Tax
  • IN TDS: For Delayed filling Rs 200 Per day and on delayed payment 1.5% per month
  • IN TAX AUDIT: In case of a delay in completing audit and submitting the report on time (before or on September 30), then 0.5% of the turnover, a maximum of Rs. 1.5 lakh, has to be paid as penalty. If there is a genuine reason for delay or non-filing of audit report, then as per Section 273B, no penalty will be applicable.

Q4. What is the procedure for getting partnership compliances done?

A. procedure for getting partnership compliances done is enumerated below:

  • Finalize the accounts and maintain the ledgers and books.
  • Proper filling of all the monthly GST returns.
  • Preparing P&L and Balance sheet of firm.
  • Filling of ITR of the firm.
  • Extracting employee’s data and their salary of particular month then filing EPF return.
  • Analysis Payment and Deduct TDS and Submit Quarterly Return

For further queries please contact us on: Email Id Swati@neusourcestartup.com and Phone Number 9540026175.

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01 Jul

Navya Gupta
Navya Gupta

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