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Estimation of Tax Liability for LLP, Advance Tax Due Dates and Payment

Tax Calculation
  1. Calculation of Book Profit and tax liability

Limited liability Partnership is a new concept in context of India. However, the tax provisions relating to LLP are similar to registered partnership firms. The accounts of registered partnership firm/LLP are maintained like other business firms. All the expenses relating to the partnership firms are booked within the permission limit of law.

For booking the expenditures, following points must be kept in mind for calculation of Income Tax on registered partnership firm/ LLP

A) Deduction on Account of Interest to Partners on Capital

Though, any amount of interest can be paid to the partners on their capital and can be booked as business expenditure but as per Indian Income Tax Act, interest is allowed only at the rate of 12% per annum. It means if the interest is paid more than this permissible limit, the extra payment will be disallowed while calculating the income of registered partnership firm/ LLP.

B) Salary & Other Remuneration to the Working partners

Partnership is an independent entity and is run by the partners. Therefore, the working partners are entitled for remuneration by way of salary, commission, bonus or whatever name called. Though, any amount can be given to partners as remuneration and can be booked in profit and loss account but for income tax purpose, there are certain restrictions in respect of remuneration paid to partners, according to Indian Income Tax Act.

These restrictions are defined below: –

Particulars                          Remuneration Allowed
In case of loss before booking the partner’s remuneration.                          Maximum of Rs.150000/-
For the first Rs.300000/- of book profit                          90% of the book profit or Rs.150000/- which ever is more
On the balance of book profit                          60% of book profit

 

 A.Book Profit

Computation of Book Profits would be calculated as under:

Step-1:  Find out the net profit of the firm as per the Profit & Loss A/c.

Step-II: Make adjustments as provided below-

a) Income chargeable to tax under the heads, Income from HP, Capital gain, Income from Other Source will not be a part of book Profit.

b) Brought forward business losses will not be deducted from book profit.

c) Permissible deductions from gross total income under sections 80C to 80U shall be ignored from computing Book Profit.

Step-III: Add remuneration to partners if debited to the Profit & Loss A/c

The resulting figure would be Book Profit.

B.Calculation of taxable income

Net Profit of firm as per Profit & Loss Account XXX
Add: Interest disallowed in excess of 12% XXX
Add: Remuneration disallowed to partners XXX
Total Income from Business and Profession XXX
Income from House Property XXX
Income from Capital Gains XXX
Income from Other Sources XXX
Total Income XXX
Less: Bought forward losses XXX
Gross Total Income XXX
Less: Chapter VI A deductions XXX
Total Taxable income XXX
Income Tax payable by the firm @ 30% XXX
Add: Education Cess @ 2% XX
Add: Secondary & Higher Education Cess @ 1% XX
Total Tax payable by the firm XXX

 

2.Computation of Advance Tax

If you have annual tax dues of more than Rs.10, 000, you must pay income tax in advance. Usually, for the salaried, these income tax payments are taken care of via TDS deductions by employer. But for an LLP or a registered partnership firm you need compute the advance tax and deposit to the department.

Due Dates of payment of Advance Tax for FY 2016-17

For LLP/Partnership Firm

On or before 15th June – Up to 15% tax

On or before 15th September – Up to 45% of tax

On or before 15th December- Up to 75% of tax

On or before 15th March- Up to 100% of tax

How to calculate and pay advance tax:

tax

Estimate your Total Income: Add income from all sources. Include salary income, interest income, capital gains etc.

Allow deductions:  From your total income reduce deductions and arrive at your taxable income.

Calculate Tax due on total income: Apply the latest income tax slab rates on your taxable income to calculate your income tax due. Reduce any TDS that may have been deducted from your total tax due.

 

These have to be paid as per the installments mentioned above.

3.For online payment of advance tax

Step 1: Login to http://www.tin-nsdl.com > Services > e-payment: Pay Taxes Online.

Step 2: Select the relevant Challan (CHALLAN NO./ITNS 280)

epaymentFigure: Challan for payment of Advance Tax and Self Assessment Tax

Step 3: Select your bank and pay the amount through net banking.

Step 4: A challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made. Please store the Counterfoil.

In case you need some expert help to calculate the tax payable and the amount of advance tax to be paid, contact us: info@unicomply.com or call: +91- 9739002844.

 

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