Provision for it in case of partnership

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parth jani

parth jani (Querist)

01 October 2013 whether provision for tax is allowed or disallowed in case of partnership firm

Ajay Mishra

Ajay Mishra (Expert)

01 October 2013 Hi

PARTNERSHIP UNDER INCOME TAX ACT
A Partnership to be recognized for the purpose of Income Tax liability of the partners and their firm is required to comply with certain provisions of the Income Tax Act. While therefore drafting a deed of Partnership the provisions of the Act are required to be taken into account. A partnership is a common vehicle in India for carrying on business activities (particularly trading) on a small or medium scale. A profession is generally carried on through a partnership. There is no restriction on a company's participation in a partnership, but this is rate in practice.
Under the general law a partnership is not a separate entity distinct from the partners, but for tax purposes a partnership is an entity. The provisions related to the taxation of partnership firms are included in Chapter XVI of the Income Tax Act, 1961.U/s 184(1) of the Act, with effect from April 1, 1993 a firm shall be assessed as a partnership firm (PFAS), if the given conditions are satisfied as follows:
• Partnership is evidenced by a partnership deed and a certified copy thereof, which is duly signed by all partners, and is filed along with the Return of Income (ROI).
• Individual shares (profit/loss) of all the partners are also specified in the instrument i.e. in the partnership deed
• Whenever there is some change in the constitution of the firm, then the firm requires to furnish along with the ROI, the certified copy of the partnership deed that is duly signed by all the partners.
• A change in constitution of the firm has been defined under section 187 of the Act which includes admission of new partner(s), retirement of existing partner(s) as well as any change in the profit/loss-sharing-ratio and excludes dissolution of the firm incase of death of any of its partners.

Ajay Mishra

Ajay Mishra (Expert)

01 October 2013
Partnership firm arises from a contract between two or more persons who contribute some tangible and some intangible assets together with an objective of earning profit therefrom which will be shared between them in predefined portion. Therefore-
1. The firm should be evidenced by an instrument [Section 184(1i)]
2. The individual shares of the partners in the asset of the firm and the profits (or losses) should be specified in the instrument [Section 184(1ii)]
3. A certified copy of the instrument of partnership shall a company the return of income of the previous year in respect of which assessment of the firm is first sauté [Section 184(2)]
4. Whenever Changes takes place in the constitution of the firm due to death or resignation of the partner or in the profit sharing ratio of the existing partners, a certified copy of the revised instrument of partner shall be submitted along with return of income of the related year. Where a minor is admitted to the benefit of the firm and the shares of the partners are unequal, it is necessary to specify how the shares of loss of the minor will be borne by the major partner.

Ajay Mishra

Ajay Mishra (Expert)

01 October 2013 For tax slab; go to the following link:

https://finotax.com/itax/itslabs-curr.htm

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