ITR Filing — Partnership Firm

Filing basis under the Income-tax Act, 1961. A partnership firm is assessed as a firm (not by aggregating partners' shares individually) once the conditions of Section 184 are satisfied — the partnership deed must specify individual shares of partners, and a certified copy must accompany the first return. Firms file Form ITR-5.

Partner remuneration is deductible only within the ceilings of Section 40(b)(v), and only for working partners under a deed that authorises it: on the first ₹6,00,000 of book profit (or in case of a loss), the ceiling is ₹3,00,000 or 90% of book profit, whichever is higher; on book profit beyond ₹6,00,000, the ceiling is 60% of the balance. These revised slabs apply from FY 2024-25 (AY 2025-26) onward under the Finance Act, 2024, replacing the earlier ₹1,50,000/90%/60% structure.

Interest paid to partners is separately capped under Section 40(b)(iv) at 12% simple interest per annum where authorised by the deed; any amount paid in excess of 12% is disallowed regardless of the rate specified in the deed.

Tax audit under Section 44AB applies at the same thresholds as any business assessee: turnover above ₹1 crore (₹10 crore where cash receipts and payments are each within 5% of the total); professional firms cross the audit threshold at gross receipts above ₹50 lakh. Where audit applies (AY 2026-27), the audit report is due 30 September 2026 and ITR-5 by 31 October 2026.

Sources: taxguru.in, taxadda.com, and taxgarden.in on the revised Section 40(b) remuneration slabs and Section 184 firm-assessment conditions; qwikfilings.com on Section 44AB thresholds (WebSearch, 8 Sep 2026).

Income tax return filing for a partnership firm covers the return of the firm under the Income-tax Act 1961. The firm is a separate taxable entity under Section 2(23) of the Act — the income is computed under Sections 28 to 44DB, the interest and the remuneration to the partners are allowed within the limits of Section 40(b), the firm pays tax at the slab rates, and the return is filed in ITR-5 under Section 139(1). The partners are taxed separately on their shares of the firm's income and their remuneration, which is not taxed again in the firm's hands.

The firm's return is the annual declaration of the partnership's profits, and the Section 40(b) limits are where the firm's positions are most often tested. The remuneration to the partners must fit within the statutory limits computed on the book profit, and the interest on the capital must be at the rate the section allows. The firm's return also drives the partners' returns — the share of the profit and the remuneration appear in each partner's own filing.

The cost of a mismanaged firm return is the disallowance and the cascading error: the remuneration beyond the Section 40(b) limits disallowed in the firm's hands, the partners' returns built on the wrong shares, and the interest running from the assessment. The firm's return is the cheapest place to have the partnership's positions right.

This service is for partnership firms and their partners. We compute the firm's income under the Act, apply the partner remuneration and the interest within Section 40(b), prepare and file the return in ITR-5 under Section 139(1), manage the advance tax and the assessments, and coordinate the partners' returns so the firm and the members file one consistent position.