How to start a partnership business with the legal framework?
As per the Indian Partnership Act 1932 partnership registration is not mandatory however carrying on partnership business without partnership registration with the registrar of firms has certain disadvantages, such as you will be not able to file a case against the third party representing the firm and also there will practical difficulties without form c -partnership registration certificate. Once the partnership deed is signed by all the partners, the partnership firm and its business will be effective from the date of commencement of the firm as stated in the partnership deed for all practical purposes.
What to do next after all partners sign the partnership deed?
Without possessing a PAN number issued by the income tax department, the firm cannot proceed with financial transactions as the pan is mandatory for opening bank accounts, etc. We strongly recommend the TAN application for partnership firms, as TDS provisions are mandatory for partnership firms without any turnover limit. Apply for partnership registration with the registrar of the firm along required documents
Amendments in partnership
There may be a case where the partner may be admitted or retired, in such a case amendment deed need to be executed on the stamp paper, and at any time in the life of the partnership firm the partner’s limit should not fall below 2 partners due to any reasons.
Is GST mandatory for partnership firms?
GST is not mandatory for a partnership firm unless it crosses 20 lakhs of the turnover limit. However, GST is compulsory if your business falls under any of the categories where a turnover limit is irrelevant e.g.: Import and export, Interstate sales, franchisee, etc. GST return filings are mandatory in case your firm is registered under GST.
When to file Income tax returns?
Income tax filing is mandatory for a Partnership firm even if there is no business, and the due date is 31 July following the financial year. A belated return can be filed before the expiry of the next financial year in normal circumstances.
List of frequently applicable TDS provisions for partnership firm
TDS provisions are applicable for partnership firms without any threshold limit of turnover.
TDS provisions as applicable for the financial year 2018-2019. (Only generally used sections included).
Section 192 -Salaries – Rate as applicable to employees.
A partnership firm is liable to deduct TDS if the employee estimated income crosses the basic exemption limit as provided in the financial year, and the employer can consider Chapter VI-A deductions and loss from house property only. The employer is bound to include other income of the employee if it was declared in form 12BB for continuing employees and form 12B for new employees joined in between.
The rate of TDS: As applicable to the employee.
Section 194A – TDS on interest other than securities – Rate @ 10 % if interest exceeds Rs.10,000.
TDS at the rate of 10 % shall be deducted on payments of interest of more than 10,000 in aggregate during the financial year
Section 194C – TDS on contract payments at 1 % if payment/credit is made to individuals or HUF and 2 % for other people.
Limit – Rs.30,000 for a single transaction during the financial year through any mode of payment/credit.
Rs.1,00,000 In case of the aggregate total during the financial year
194I – TDS on rent: 10 % for land and building, 2 % for other types of rent. Limit, 180000, and more.
TDS on rent of land and building: TDS is to be deducted at the rate of 10 % if the aggregate rent is Rs. 1,80,000 or more during the financial year.
TDS on rent other than Land and Building @ 2 %
194J – Professional charges. Limit above 30,000 at the rate of 10 %
Fees paid to professionals (Lawyer, doctor, engineer, software development, consultancy charges, interior decorator, and fees for technical services)
194H – Commission.
Commission/brokerage exceeding Rs.15000 in aggregate is covered under TDS @ the rate f 5 %.
TDS deduction, payment, and returns filing.
Deduction – TDS should be deducted on payment in case of salary income and payment or credit in case of payment of other income listed above. The deduction is to be made on the same date of payment or credit.
Payment – Payment of TDS should be made to Govt account on or before 7 th day of the following month and for March month the due date is 30th April.
Filing of TDS returns: Quarterly returns need to be filed for each quarter within the end of the month following each quarter, and for the Month of March it is within the end of May month.
Return form no 24Q for salary.
26Q for other income.
If due dates are not complied with, Penalty and interest will be applicable.
1. This is not an inclusive list, we had given only frequent transactions.
2. NON-deduction, the lower deduction, is not covered.
3. Payment to non-residents not covered.
4. Points are written considering only partnership firms.
5. Educational cess applicable only to salary tds.
6. If the receiver of Income does not have pan tds @ 20 % will be deducted.
7. The full amount of TDS is to be deducted on payment of Income in case the limit exceeds covering the previous transactions.
8. Income tax department provides a calendar for income tax purposes, it may be used for reference. https://www.incometaxindia.gov.in/Pages/deadline.aspx