What is Partnership Compliance?
Partnership compliance encompasses all mandatory financial and statutory obligations that a Partnership Firm must fulfill every year in India. It includes Income Tax Return (ITR-5) filing, GST returns, TDS compliance, maintaining books of accounts, and tax audit (if applicable).
Every partnership firm — whether active or dormant, profit-making or loss-incurring — must file income tax returns annually as per the Income Tax Act, 1961. Partnership firms are taxed as separate entities at a flat rate of 30% on taxable income.
Partnership Firm Tax Rates
| Category | Rate |
|---|
| Income Tax on Partnership Profit | 30% (flat rate) |
| Surcharge (if income exceeds ₹1 crore) | 12% |
| Health & Education Cess | 4% on total tax |
| Minimum Alternate Tax (MAT) | 18.5% of adjusted total income |
Annual Compliance Checklist for Partnership Firms
| Compliance | Form | Due Date | Condition |
|---|
| Income Tax Return | ITR-4 or ITR-5 | July 31 (non-audit) / Oct 31 (audit) | Mandatory always |
| Tax Audit | Form 3CB/3CD | September 30 | Turnover > ₹1 crore |
| GST Returns | GSTR-1, GSTR-3B, GSTR-9 | Monthly/Quarterly + Annual | If GST registered |
| TDS Returns | 24Q, 26Q, 26QB, 27Q | Quarterly (31st of next month) | If TAN obtained |
| EPF Returns | ECR Challan | 15th monthly | If 20+ employees |
ITR Form Selection
| Form | When to Use |
|---|
| ITR-4 | Partnership firms under presumptive taxation with income ≤ ₹50 lakh |
| ITR-5 | Partnership firms required to undergo tax audit (turnover > ₹1 crore) |
Allowed Deductions for Partnership Firms
- Interest on partners' capital: up to 12% per annum
- Partner remuneration as per partnership deed
- Business expenses incurred for earning income
- Depreciation on business assets
