The Points to be Considered in Taxation of LLPs .
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The Points to be Considered in Taxation of LLPs are as under:
- Profits will be tax in the hands of LLP and not in the hands of partners.
- Remuneration to partners will be taxed under the head of “PROFITS and GAINS from BUSINESS & PROFESSIONS”
- No tax is payable on the profits distributed to partners
- Minimum Alternate Tax (“MAT”) and Dividends Distribution Tax (“DDT”) will not be applicable.
- Instead of MAT, the provisions for Alternate Minimum Tax (AMT) will be applicable on LLP.
- LLP is not required to pay surcharge.
- LLP is not eligible for presumptive taxation. LLP has been specifically excluded from the meaning of eligible assesses for the purpose of presumptive taxation. Thus it is mandatory for a LLP to maintain its books of accounts irrespective of its scale of operations.
- Income tax return shall be signed and filled by DP. In case the DP cannot sign tax return due to unavoidable circumstances or there is no DP then any partner can sign and file the return.
- It is mandatory for a LLP to get its accounts audited for a financial year if its annual turnover is more than 4 million or contribution exceeds 2.5 million.
- Upon the conversation of a company into a LLP, Capital gain Tax will be exempted if the prescribed conditions are complied with.
- After the conversation, the succeeding LLP will be allowed the benefits of the following:
1) Carry forward and set off of accumulated losses and unabsorbed depreciation.
2) Amortization of expenditures incurred under the Voluntary retirement scheme.
- However the succeeding LLP will not allowed the credit of the MAT paid by preceding company.
- For the purpose of Income Tax Act,1961, a LLP shall always be deemed to be a resident in India, unless control and management of its affairs is situated wholly outside India
- Effective tax rates as applicable on LLP:
According to normal provision of IT Act.
|
Particulars |
In % |
|
Profit Before Tax |
100 |
|
Less: Income tax including cess @3% |
30.90 |
|
Profit after Tax |
69.10 |
|
Less: Statutory Transfer to Reserve |
NIL |
|
Profit Available for distribution |
69.10 |
|
Less: DDT @16.22% |
NIL |
|
Amount Available for distribution |
69.10 |
|
Effective Tax Rate |
30.90 |
According to AMT provisions under section 115JC Chapter XII-BA of IT Act.
|
Particulars |
In % |
|
Adjusted Total Income (ATI) |
100 |
|
Less: AMT on ATI @18.50% |
18.50 |
|
Less: Surcharge |
NIL |
|
Less: Cess @ 3% (18.50*3%=0.555) |
0.555 |
|
Amount Available for distribution |
80.945 |
|
Effective AMT Rate |
19.055 |
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