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How to save tax in Partnership Firm

How to save tax in Partnership Firm

In India, a partnership firm is a separate taxed organization. Under certain restrictions, a partnership business in India is allowed to pay its working partners a salary. This salary is a permissible cost when calculating the partnership firm’s taxable revenue. Similar to this, an Indian partnership firm is allowed to charge its partners interest up to 12% per annum, and the interest charged is seen as a permissible cost by the partnership business. The compensation and interest of partners will be taxed in their hands as income from business from which they can deduct reasonable expenditures, such as depreciation and gas costs for their vehicles used for business, interest on the personal loan utilized for business, etc. I am talking about the article How to save tax in Partnership Firm.

How to save tax in Partnership Firm in India

  • Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.If you have investments in any of the investment instruments listed in Sections 80c, 80ccc, and 80ccd, such as PPF accounts.
  • If you spent money on health insurance for yourself or a family member, you may be able to deduct the expense from your taxes under Sections 80D, 80DD, and 80DDB.
  • Home loan deduction – If you’ve taken out a mortgage, you can claim a tax deduction for principal repayment. You may also claim a tax deduction under section 80c for interest paid on a mortgage under section 24.

How are Indian Sole Proprietorship Firms Taxed?

A sole proprietorship is a type of business where one person oversees all aspects of the operation and is completely accountable for both profits and losses. A sole proprietorship is not regarded as having an independent legal personality from its owner for tax purposes. The proprietor and the company are seen equally. Therefore, the sole proprietor is subject to personal income tax. His business income is regarded as being the same as his personal income for income tax purposes.

Income Tax on Partnership Firm

The Indian Partnership Act of 1932’s Section 4 definition of a partnership is followed here. Partnership firms are treated separately for tax purposes. For registered and unregistered businesses, the calculation is the same. A partnership firm must submit its partnership deed during the first year of assessment and only after the conditions and constitution of the partnership have changed.

What are the Tax rates for partnership firm?

A partnership firm is required to file a partnership firm income tax return in accordance with the Income Tax Act of 1961. The income tax rate for partnerships is 30% of their net profits. Additionally, a 12.5% income tax surcharge will apply if a partnership’s total revenue exceeds Rs. 1 crore.

Partnerships are required to pay education and a second higher education cess in addition to income tax and the surcharge.

A 2% education cess is applied to income tax and applicable surcharges. For students enrolled in secondary and higher education, the total income tax and the applicable surcharge are increased by 1%.

What are the allowable deductibles allowed?

The amount of income that is deductible must be taken into account when calculating the amount of tax that must be paid. The allowable deductible amounts are shown below. You are reading this article how to save tax in Partnership Firm 

  • The company’s non-working partners get a range of benefits, including salary, commissions, and incentives.
  • Companies that provide their partner’s interest might subtract that interest from their overall income. A partner’s interest, however, is only permitted to accrue at an annual rate of 12%.
  • A limited liability partnership or any business is subject to an Alternate Minimum Tax of 18.5 percent (+SC+EC/SHEC or HEC) on “adjusted total income” as of the assessment year 2012–2013. (as of the assessment year 2013-14).
  • compensating partners in line with their partnership agreement, even though compensation was been given before the contract was signed.

Due Date for Partnership Tax Return

The due date varies based on whether or not the partnership business is audited. The tax returns must be filed by July 31st even if the firm does not require an audit. If there is no audit, the corporation must submit its income tax returns by September 30. If you ask to know the due date of partnership firm. So you should also know how to save tax in Partnership Firm

Conclusion

I sincerely hope you enjoyed reading this post about tax savings for proprietorship firms. You may still visit our website to learn more about How to save tax in Partnership Firm in India if you are still unclear.