Income Tax Rates on Partnership Firms AY 2024-25

Income Tax Rates on Partnership Firms AY 2024-25: It is important to understand the income tax rates for partnership firms as well as Limited Liability Partnerships (LLPs) in order to effectively plan and comply with financial regulations. This article offers an inclusive view of the taxes applicable towards these entities, including when certain costs may be claimed. Partnership companies and LLPs are charged a fixed rate of income tax while additional surcharges and cess are imposed depending on the total income earned. Also, some expenses like partner’s remuneration or interest on partners’ capital can only be claimed if they are mentioned in writing within partnership deed however subject to certain limits. To make it easier for people we have provided this table below which summarizes all necessary information:

Income Tax Rates on Partnership Firms & LLPs

Category Details
Rate of Income Tax 30% of Total Income
Surcharge
– If Total Income upto 1 Crore NIL
– If Total Income > 1 Crore 12%
Health & Education Cess 4% of the Income Tax & Surcharge (replaced 3% Cess in preceding year)

Expenses Claimable (only if mentioned in the Partnership Deed)

Expense Type Details
Remuneration to Partners Subject to Limit prescribed below:
– In case of Loss Rs. 150,000/-
– Book Profit (BP) <= Rs. 3 Lakhs Higher of Rs. 1,50,000/- or @ 90 % of Book Profits
– Book Profit (BP) > Rs. 3 Lakhs Rs. 2,70,000/- + (BP – 3,00,000) * 60%
Interest on Partners Capital Allowed upto a Maximum of 12% p.a (if provided in the Partnership Deed)

Income Tax Rates on Local Authority

For the Assessment Year 2024-25, a local authority is taxable at 30%.
Add:

(a) Surcharge : The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

(b) Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.
Alternate Minimum Tax (AMT)

A partnership firm is liable to pay Alternative Minimum Tax where tax payable by it, on total income computed as per normal provisions of the Act, is less than 18.5% of `adjusted total income`. In such a case the `adjusted total income` is taken as the income of the firm and it shall be liable to pay tax at the rate of 18.5% of such `adjusted total income`.

However, AMT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange.

FAQ on Income Tax Rates of Partnership Firms & LLPs

Q1: What is the tax rate for income earned by partnership firms and LLPs?

A1: 30% of the total income is the tax rate for partnership firms and LLPs.

Q2: Is there any surcharge on tax payable by partnership firms and LLPs?

A2: Yes, there is a surcharge applicable on tax payable by partnership firms & LLPs depending upon their total income.

Q3: If the total income is up to INR 1 Crore, what would be the surcharge amount?

A3: There shall be no surcharge (NIL) where the total income exceeds Rs. 1 Crore.

Q4: If in case where aggregate partner’s interest exceeds INR 1 Crore, what will be surcharge?

A4: In such cases if Aggregate Partner’s Interest exceeds Rs. 1 crore then only Surcharge would apply @12%.

Q5: What is cess for Health & Education for partnership firms or LLPs?

A5: The cess for Health & Education is 4% of the income tax plus surcharge which has replaced last year’s 3% cess.

Q6. Can a firm claim partner remuneration as an expense ?

A6.Yes,but it should be provided in Partnership deed and subject to certain limits.

Q7. What is allowable remuneration to partners in case of loss ?

A7.In case of Loss ,the allowable remuneration to partners shall not exceed Rs.150,000

Q8.What is allowable Remuneration to Partners if Book Profit (BP) is upto Rs 3 Lakhs?

A8.If book profit (BP) does not exceed Rs.300,000, then allowable remuneration would be higher of Rs. 1,50,000 or 90 % of book profit

Q9.What is allowable Remuneration to Partners if Book Profit (BP) exceeds Rs 3 lakhs ?

A9.Allowable remuneration in case where book profit (BP) exceeds INR 30 million shall be equal to Rs.2,70,000 plus 60% of amount by which such exceeds thirty lakh rupees

Q10.Can a firm claim interest on partners capital as an expense ?

A10.Yes,but it should be provided in Partnership deed and allowed upto maximum of 12% per annum.

7 thoughts on “Income Tax Rates on Partnership Firms AY 2024-25”

  1. if my firm nett profit is less than 8% after deduction of remuneration and interest on capital to partners , do we require to get statutary audit of our a/cs for F.Y. 2017-18?
    pl provide information

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  2. Could we please request for an Automatic Income Tax Calculator for Partnership Firms with all possible sections to save maximum amount of tax payable?

    Reply
  3. I AM AJIT KUMAR SOLANKI. FROM JAIPUR, RAJASTHAN, INDIA. I WANT 2011 TO 2015. MY ALL BUSINESS SEARCH ALL INFORMATION, AND INCOME TEX INFORMATION, TDS, ALL BUSINESS RELATED INFORMATION SEND MY E-MAIL ID PLEASE SIR HELP ME. THANKX.

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  4. I am interested to know the ways of exemption from IT for a partnership firms like if say if a term insurance is taken for all partners then it’s premium is exempted?
    Or say if any other plan of insurance where the individual is getting a tax free income in lump sum is the premium exempted from the firms account?

    Reply

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