ITR-5 — partnership firms, LLPs and associations
ITR-5 is the return for entities that are neither individuals nor companies: partnership firms, limited liability partnerships, associations of persons, bodies of individuals, estates and business trusts. The firm files ITR-5 and pays tax at the firm rate; the partners separately file their own returns for what they take out.
At a glance
- Who files it
- Firms, LLPs, AOPs, BOIs, estates, business trusts
- Who does not
- Individuals, HUFs, companies, and those filing under section 139(4A)-(4D)
- Partner remuneration
- Limited by section 40(b)
- Partners file separately
- Yes — ITR-3
- Our fee
- Quoted before we start
Firm and partner are taxed separately
The firm computes its profit, deducts partner remuneration and interest on capital within the section 40(b) limits, and pays tax on what remains. The partners then report their remuneration and interest on their own ITR-3 returns. Share of profit itself is exempt in the partner's hands because the firm has already been taxed on it.
Getting this two-layer structure right is most of the work in a firm return. The figures the firm claims as a deduction must exactly match what the partners report as income.
Where LLPs differ from ordinary firms
An LLP cannot use presumptive taxation under section 44AD, so ITR-4 is closed to it. It files ITR-5 and declares actual results, whatever its size. An ordinary partnership firm can use 44AD and file ITR-4 where it qualifies.
This single difference is worth knowing before you choose a structure, because it decides whether your annual compliance is a short presumptive return or a full set of accounts.
Partner remuneration disallowed at the firm is still taxed in the partner's hands
Section 40(b) caps what a firm may deduct as partner remuneration, by reference to book profit and by requiring the partnership deed to authorise the payment. Where a firm pays more than the cap, or where the deed does not provide for remuneration at all, the excess is disallowed to the firm — but the partner has still received the money and is still taxed on it. The same rupee is taxed twice. The fix is a deed that authorises remuneration properly and a calculation done before the payments are made, not after the year has closed.
Questions we get asked
Can an LLP file ITR-4?
No. LLPs are excluded from section 44AD and must file ITR-5 with actual figures.
Do partners pay tax on their share of profit?
No. Share of profit is exempt in the partner's hands because the firm has already paid tax on it. Remuneration and interest on capital are taxable and must be reported.
What is the due date for a firm?
31 July where no audit applies, and 31 October where the firm is subject to a tax audit. The partners' own due dates follow the firm's.
Want us to handle it?
Flat ₹499 including GST for ITR-1 and ITR-4. Everything else quoted before any work starts, with no charge for the quote.