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Compliance for Partnership Firms in India
A Partnership Firm in India, governed by the Indian Partnership Act, 1932, is one of the most popular business structures for small and medium enterprises. While registration of a partnership is optional, compliance with tax and regulatory requirements is mandatory to ensure smooth operations, avoid penalties, and maintain credibility with banks, investors, and government authorities.
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Importance of Compliances
- Legal Protection – Ensures the firm operates within the law.
- Financial Credibility – Proper filings improve access to loans and contracts.
- Avoid Penalties – Timely compliance prevents fines and legal disputes.
- Transparency – Builds trust with partners, clients, and stakeholders.
- Business Continuity – Keeps the firm eligible for government tenders and registrations.
List of Compliances for a Partnership Firm in India
Partnership firms in India must adhere to both annual and periodic compliances to remain legally valid and financially sound. Below are the key requirements:
1. Income Tax Return Filing
- Partnership firms are taxed at a flat rate of 30% of total income.
- Each partner’s share of profit/loss is reflected in their individual ITR.
- Forms applicable:
- ITR-4 – For firms with income up to ₹50 lakh under presumptive taxation.
- ITR-5 – Mandatory for firms subject to tax audit (turnover exceeding ₹1 crore).
2. GST Return Filing
- Mandatory if annual turnover exceeds ₹40 lakh (₹20 lakh for services).
- Regular filings include:
- GSTR-1 – Details of outward supplies.
- GSTR-3B – Consolidated monthly/quarterly return.
- GSTR-9 – Annual return.
- Firms under the Composition Scheme must file GSTR-4.
3. TDS Return Filing
- Applicable if the firm is a deductor with a valid TAN.
- TDS must be deducted on payments like rent, interest, professional fees, etc.
- Returns filed via specific forms:
- Form 24Q – For salary payments.
- Form 26QB – For immovable property transactions.
- TDS challans must be deposited within prescribed timelines.
4. EPF Return Filing
- Mandatory for firms employing 20 or more employees.
- Requires monthly deposit of EPF contributions and filing of challans.
- Ensures compliance with employee welfare and retirement savings laws.
5. Accounting & Bookkeeping
- Firms must maintain proper books of accounts if:
- Annual turnover exceeds ₹25 lakh, or
- Business income exceeds ₹2.5 lakh in any of the preceding three years.
- Proper records ensure transparency and smooth audits.
6. Tax Audit
- Mandatory if turnover exceeds ₹1 crore in the previous financial year.
- Limit may extend to ₹10 crore if cash transactions are less than 5% of turnover.
- Conducted by a Chartered Accountant to verify compliance with tax laws.
7. Intimation of Changes to Registrar of Firms
- Any changes in the partnership deed must be reported within 90 days.
- Includes:
- Addition/removal of partners.
- Change in capital contribution.
- Change in firm name, business nature, or principal place of business.
- Opening/closing of branches.
- Dissolution of the firm.
Deadline and Penalties for Partnership Firms
Income Tax Return (ITR-5)
- Deadline: 31st July (non-audit cases) / 31st October (audit cases)
- Penalty: ₹1,000–₹10,000 late fee under Section 234F + interest on tax due
Tax Audit Report
- Deadline: 30th September
- Penalty: ₹1.5 lakh or 0.5% of turnover (whichever is lower)
GST Returns (GSTR-1, GSTR-3B, GSTR-9)
- Deadline: Monthly/Quarterly depending on scheme
- Penalty: ₹50 per day of delay + 18% annual interest on tax liability
TDS Deposit & Return Filing
- Deadline: 7th of the following month (deposit); quarterly for returns
- Penalty: Interest @1% per month for late deposit + penalty equal to TDS amount for non-filing
EPF Returns
- Deadline: Monthly deposit and filing
- Penalty: Damages up to 25% of arrears + interest @12% per annum
ROC Annual Filing (if registered partnership)
- Deadline: 30th September
- Penalty: ₹100 per day of delay, up to ₹5,000 per partner
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List of Documents Required for Partnership Compliance
- Proof of Identity and Address for Partners
- Partnership Deed
- Address Proof for the Firm’s Registered Office
- PAN Card of Firm & Partners
- GST registration certificate (if applicable)
- Books of Accounts & Financial Statements
- Bank Account Details: A copy of a cancelled cheque from the firm’s bank account.
- Tax Audit Report (if applicable)
- ITR (Income Tax Return) Documents: For filing your firm’s ITR (usually ITR-5), keep sale/purchase invoices, bank statements, and financial records ready
FAQ's on Compliances For Partnership Firms In India
Partnership firms must file ITR-5 annually.
Yes, partners must file personal ITRs for income received from the firm.
The firm may face penalties, interest, and disqualification from government tenders.
Only if turnover exceeds the prescribed threshold (₹40 lakh for goods, ₹20 lakh for services).