GST and income tax compliance for partnership firm

Partnership firm compliance

A partnership firm is regarded as a separate person as per the Income Tax Act and GST Act, after the partnership registration is completed attention to tax compliance activity should be given priority.

GST compliance required for partnership firm

When to apply for GST registration for a partnership firm?

Broadly GST registration is required under 3 situations as follows

  • Based on threshold

    Partnership firms should apply for GST registration only when aggregate turnover exceeds Rs.40 lakhs or Rs.20 lakhs in case of supply of goods or services respectively. Once the turnover exceeds the mentioned limit, the GST registration application should be submitted within 30 days.
  • Based on the Nature of business
    In the case of a certain type of business, GST registration is mandatory without any threshold limit, some of the business that requires mandatory GST registration are export businesses, interstate supply of goods, e-commerce suppliers or operators, casual taxable persons, non-resident suppliers, input service distributor, the person who requires to make payment under reverse charge mechanism, the person who are using the brand name of others to supply goods on their behalf.
  • Based on the practical business environment in the industry
    For certain kinds of business, GST registration will be required irrespective of relaxation given by the GST act, as a generally known fact that business customers, who have GST registration will buy only from GST-registered dealers for utilizing input tax credit.  Therefore the partnership will be required to apply GST registration to increase the sales volume.GST registration will have a great impact on profitability, in the case of a partnership firm dealing with the supply of goods, profitability will increase due to the utilization of input tax credit. Similarly where there is an inverted GST rate structure for certain businesses then, without GST registration the firm will face a loss in profitability.

Important points for GST registration of partnership firm

  • In case GST registration is applied for a partnership firm the application will be approved, only if the GST registration belonging to individual partners is regular. If there is any GST number canceled by the officer for not filing the returns, then the application will be approved only after GST return filing and filing the GSTR-10 final return.
  • The address as per the partnership deed, and address provided for GST registration should match for approval irrespective of address as per TNEB receipt. In case where there is a change in business address partnership amendment deed should also be attached.
  • In case of any defaults of the partnership firm, all the partners existing during the default are liable individually as well as collectively.
  • In case of the removal of partners or admission of a new partner into the partnership firm, the GST registration profile should be updated by submitting a GST amendment application with supporting documents for change in the constitution of the partnership firm.
  • A partnership firm can opt to make payment of GST as a fixed percentage on the value of supply by opting for a composition scheme of tax payment, in such case the scheme can be opted only at the time of application of GST registration or only in next financial year after GST registration is approved.
  • Name as per PAN of the partners and Aadhaar should match for successful E-KYC,  E-KYC of GST registration application is required for quick processing of GST registration application without physical verification of business premises.

Income tax compliance for Partnership firm

Compliance with provisions of the Income Tax Act is required from day one after the partnership firm is formed, as a primary and initial step towards Income Tax Act compliance PAN number application and TAN number application should be made.

Income tax return filing for partnership firm

  • When to file an income tax return
    Income tax return filing is mandatory for partnership firms, irrespective of the turnover of the business or profit, the firm is required to file an income tax return even if it does not engage in business or the event of loss. In case there is no income for the partnership firm, a nil return or loss return should be filed.
  • Benefits of presumptive taxation
    A partnership firm can avail the benefit of presumptive taxation U/s 44AD available to small businesses, partnership firm can avail the benefit of presumptive taxation, if its turnover does not exceed Rs.2 crores in a financial year.


  • Due date for filing partnership income tax return
    The due date for filing an income tax return for the partnership firm is 31st July, in case if the firm is required to file a tax audit report then the due date for filing an income tax return is 31st October. The tax audit report should be filed on or before 30th September of the succeeding financial year.
    A partnership firm is required to file income tax returns in Form ITR-5, partnership firm cannot file ITR in ITR-3. Where a partnership firm is required to file a tax audit report the due date to file personal income tax returns for partners is 31st October of the succeeding financial year.
  • Deduction on amounts paid to partners

    While computing the total income of the partnership firm amounts such as remuneration, interests, and commission payable to partners are allowed to the maximum limit as authorized by the partnership deed.
    Interest payable to partners for capital contributed is restricted to 12 % per annum even if the partnership deed allows a higher percentage.
  • The income tax rate for partnership firm
    A partnership firm is subject to a flat rate of income tax, at 30 % on total income, a partnership firm is the best tax planning tool, to avail the benefit of presumptive taxation and GST threshold limit exemption, so in addition to tax benefits available to the proprietor, the additional exemption is available to a partnership firm. The provisions of minimum alternate tax are applicable for the partnership firm, therefore the minimum tax payable by the firm is 18.5 %  on adjusted total income.