5 Tax Saving Tips for Limited Liability Partnership

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In this article you will get 5 Tax saving tips for Limited Liability Partnership Company and Benefits of LLP Registration.

Limited liability partnership is a corporate business structure with benefits of partnership and private limited company. LLPs are preferable by small traders, family business owners and foreign direct investments.  Partnership firms do not have much benefit when compared to LLPs in India. The LLP registration consultant can help you to get more tax benefits. FilingPoint consultants are happy to help you with queries of LLP Registration in India.

Computation of Income of Designated Partners in LLP

The incomes of designated partners in LLP are remuneration and interest. They generally get taxed as business partner ‘business income’ of respective LLP partner. Hence if the LLP partner has incurred any business expense like interest payments etc. can be set off against remuneration and interest. No TDS has to be deducted towards remuneration and interest payment to LLP partners.

Income Tax rate on Limited Liability Partnership

For the purpose of calculation of Income tax LLPs and partnership firms get treated as same.

The income tax levied on LLP is in the same manner as income tax on partnership firms. LLP is a separate legal entity since incorporation and has separate PAN, while for the purpose of income tax partnership firms have to apply for separate PAN after incorporation though not a separate legal entity.

LLPs get taxed just like Partnership firm. No specific LLP taxation laws in India. Though, these LLPS can get industry-specific advantages from time to time.

Return Filing Provisions for LLP’s

Similar to partnership firm, LLPs has to pay 30% income tax and 3% education cess. It is very similar to private limited company. However, the computation of taxable income for an LLP follows a different policy. In LLP partners’ remuneration can be deducted.

Another deduction policy is interest of capital provided by partners of LLP. To claim the deductions, it is essential that the LLP agreement must lays down clause about functioning of the organization. The agreement in the clause must allow payment of remuneration and interest on capital and loan given to LLP from its partners to be considered deduction while ascertaining the taxable income. Remuneration is paid to active LLP partners who actively take part in conducting business affairs of LLP firm.

-It’s mandatory for partnership and LLP to file income tax returns within due date irrespective of turnover or loss.

– e-filing of partnership and LLP return is mandatory with or without DSC

– partnership income tax returns can be verified by EVC code. While this option is not available for LLP

-partnership is liable to get its accounts audited under section 44AB and furnish efiling returns with digital signature

– IT return signing – in case of partnership, the managing partner can sign the returns whereas in LLP the designated partner must sign the IT returns with DSC.

*Taxation of Designated Partners of Limited Liability Partnership Company

Taxation of Designated Partners of firm or LLP includes interest on capital, remuneration received from firm or LLP gets taxed in the hands of designated partner as ‘ profits and gains of business or profession.

However in case any amount gets disallowed by firm, such amount are non taxable in hands of partners. FilingPoint.com will help you for file your taxes on time.

Pre Incorporation Expenses

Pre-corporation expenses are expense met prior to LLP registration. Usually the LLP promoter pays these expenses on LLP behalf. After incorporation of the company, these pre-incorporation expense should get booked and recorded in the LLP’s account books and can claimed as exemption as pre incorporation expense over the period as per accounting standards. Like Preliminary consultation charges, employee training, project report, business plans and others. No such pre-incorporation expense is allowed in partnership firm tax computation.

How to Save Tax for Your LLP Using FilingPoint

FilingPoint.com will help you to save tax in the following ways like Pay Advance Tax on time and right amount, Filing ITR within Due date and avoid penalty and late fees, Calculation of Remuneration to Partners, Interest on Capital, Depreciation on Assets, Pre Incorporation Expenses, Salary to Family Members, Traveling Expenses, Meeting Expenses and others.

Talk to FilingPoint tax consultants today. Get your queries answered.