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Income tax returns filing on conversion to partnership firm

rakesh (student) (457 Points)

20 November 2021

how should we file income tax returns when we convert proprietorship business to partnership firm

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10 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 20 November 2021

For presumptive assessment file ITR 4

Otherwise File ITR 5 ..

Janak Shah (ca) (603 Points)
Replied 21 November 2021

File the return on the PAN of partnership while showing the assets and liabilities that are transferred from proprietary concern in the balance sheet.

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 21 November 2021

Agree with above comment

rakesh (student) (457 Points)
Replied 22 November 2021

So separate return for proprietorship till date conversion to partnership and separate return for partnership firm from date of partnership deed is not required?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 22 November 2021

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.

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Vasudevan C P (403 Points)
Replied 22 November 2021

Agreed

1 Like

JJJ (Need help) (673 Points)
Replied 22 November 2021

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?