Income tax returns filing on conversion to partnership firm

how should we file income tax returns when we convert proprietorship business to partnership firm
Replies (10)
Quick Summary
This discussion clarifies how to file income tax returns when converting a proprietorship to a partnership. For the proprietorship, use ITR 4 or ITR 3 for the full year, reporting business details until closure. For the partnership, file ITR 4 or 5 from its incorporation date. The conversation also addresses practical concerns during the transition, such as handling income received in the proprietor's account and continuing expenses from the proprietor's account, with advice on natural justice and GST input credit transfer.

For presumptive assessment file ITR 4

Otherwise File ITR 5 ..

File the return on the PAN of partnership while showing the assets and liabilities that are transferred from proprietary concern in the balance sheet.
Agree with above comment
So separate return for proprietorship till date conversion to partnership and separate return for partnership firm from date of partnership deed is not required?

Yes, for proprietor/Individual ..... ITR 3/4 for complete year, but business details till its closure.

For Partnership firm ITR 4 or 5 from the date of incorporation till the end of financial year.

Agreed

I don't want to hijack this topic, but I had similar queries, so I thought it was best to ask here!

Like Mr Rakesh I am also checking on how to account for Proprietorship to Partnership conversion. The ITR part is now clear, but there were some more concerns especially about the transition period because many activities will overlap for some time.

E.g. 

a. Some payments for the Firm are being received in the Proprietor's bank account. Can we just transfer the money to the Firm's bank account and record the sales / income against the Firm?

b. Also many expenses will continue from proprietor's account for some time because it is not feasible to change everything overnight. Like rent and electricity bills. Is there a rule for distributing the expenses?
 

 

1. Correct.

2. Natural justice applied.

Can we carry forward gst input credit from proprietary to Partnership firm

Yes, if total business is transferred/ carried over as per GST. act.

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