Partnership Firm Taxes Confusion
Hello, I need some advice on filing taxes for a Partnership Firm.
We (family of four) work full time in a common home based business from last one year. Last week following some complication on business expenses sharing, we decided to get our business formally registered as Partnership Firm with notarized Partnership Deed to have mutual agreement on business matters and avoid any future complications. We were also issued separate PAN and TAN in the name of our firm.
Everywhere I read it says “Partnership firm has no distinct legal entity from its partners, however for the purpose of taxation it is assessable separately”. I am quite confused with this statement and want to understand better on the basis of following hypothesis.
Example: Our business made 1Lac Profit. And 4 partners of firm are sharing 25% profit equally.
1. Each individual partner files his/her personal ITR. Then do we need to file a separate ITR in the name of the firm? Will this not be double taxation because profits are already shared with partners?
2. I read somewhere that partners cannot be considered employees. Can partnership firm hire employees at all?
2a. Currently we already have few full time employees for our firm both in India and abroad who are paid monthly remuneration. Do we need to start deducting TDS for employees in India?
3. We currently are not service tax registered because all our clients are outside India and our sales proceeds involve no physical delivery of goods or services. Is there a need to?
4. We do not currently have a bank account in the name of firm. Can we apply for a Bank Account in the name of our partnership firm and perhaps later a credit card to cover our business expenses? more
We (family of four) work full time in a common home based business from last one year. Last week following some complication on business expenses sharing, we decided to get our business formally registered as Partnership Firm with notarized Partnership Deed to have mutual agreement on business matters and avoid any future complications. We were also issued separate PAN and TAN in the name of our firm.
Everywhere I read it says “Partnership firm has no distinct legal entity from its partners, however for the purpose of taxation it is assessable separately”. I am quite confused with this statement and want to understand better on the basis of following hypothesis.
Example: Our business made 1Lac Profit. And 4 partners of firm are sharing 25% profit equally.
1. Each individual partner files his/her personal ITR. Then do we need to file a separate ITR in the name of the firm? Will this not be double taxation because profits are already shared with partners?
2. I read somewhere that partners cannot be considered employees. Can partnership firm hire employees at all?
2a. Currently we already have few full time employees for our firm both in India and abroad who are paid monthly remuneration. Do we need to start deducting TDS for employees in India?
3. We currently are not service tax registered because all our clients are outside India and our sales proceeds involve no physical delivery of goods or services. Is there a need to?
4. We do not currently have a bank account in the name of firm. Can we apply for a Bank Account in the name of our partnership firm and perhaps later a credit card to cover our business expenses? more
Viewed by 408
View all 9 comments Below 9 comments
for partnership firm IT retruns should be filed & profit share by partners can show in their individual returns as exempted, since tax paid by the firm. separate bank a/c. - current a/c. Other tax registrations to be taken according to central & in state laws. more
Jun 19
Income from agriculture is Nil but loss. after payment of wages . government is well aware of this fact. Hence agricultural Tax was abolished. Further there are more some other difficulties in assessment and collection, other than bribe . more
Jun 12
The government knows very well that the black money is created by whom and hidden by showing as farm income. Since most of so called farmers, they are farmers on paper only, are from our elected representative law makers they will never want to change exemption on farm income. My question is, if a farmer is earning more than 10 lakhs profit why can he not pay at least 5% as income tax. The idea is to get more people in the tax net and dig out black money and also prevent creation of such hide-outs of black money. Mr. FM, Mr. Modi, are you listening. We all know charity begins at home. Another issue is the nonsense of subsidizing canteen food for MPs etc. They earn so much more than average citizen who does not get any subsidy and pays taxes on top of that. How can the citizen ever become rich if you keep making the MPs richer and richer at the citizen's cost? -Parimal more
Jun 12
Partnership firm is a separate legal entity. Net profit earned by the firm is taxable in the hands of Firm, while it is exempted income in the hands of partners. You will have to open separate current account of the firm and also have to compulsorily file Income Tax return of the firm whether it is in profit or in loss. For any further clarification / assistance may contact me either on mob.9415514541 or vps_advocate@rediffmail.com more
Jun 03
All the above explanations are correct and valid and still you have any doubt please consult a chartered accountant who will guide you properly. more
Jun 02
