Income Tax Return for Partnership Firms: ITR-5, Documents and Filing Procedure

Taxed as an Entity, Not as the Partners

Unlike a proprietorship, a partnership firm is a separate taxable entity. It files its own return in ITR-5 and pays tax at a flat 30 per cent, plus surcharge above the prescribed income level and cess. The partners then report their own share separately. The number that decides most firms’ actual liability is not the rate but the limit on how much partner remuneration and interest the firm can deduct.

Which form, and who uses it

ITR-5 is used by partnership firms, limited liability partnerships, associations of persons and bodies of individuals.

A firm cannot use ITR-4, even where it would otherwise qualify under presumptive taxation. Sources make this point explicitly, and it is a common error.

Partners file their own returns, usually ITR-3, reporting their share of profit, their remuneration and any interest received.

The rate

A flat 30 per cent, with surcharge reported at 12 per cent above Rs 1 crore of total income, and cess at 4 per cent.

There is no slab. A firm with Rs 3 lakh of profit pays at the same rate as one with Rs 3 crore, up to the surcharge threshold.

Partner remuneration: the number that matters

Remuneration paid to working partners is deductible only within the limits prescribed, and only where the partnership deed authorises it.

Two conditions do most of the damage in practice:

The deed must authorise it. Remuneration paid without the deed providing for it is not deductible, however commercially reasonable.

The limits are computed on book profit, on a prescribed scale. Pay above the limit and the excess is disallowed in the firm’s hands, while remaining taxable for the partner.

Interest to partners is similarly capped at the prescribed rate and must be authorised by the deed.

Verify the current limits and rate before publishing figures, because the remuneration scale was revised.

The due dates

One source expressly notes the non-audit date for firms as uncertain between those two. Given the Finance Act 2026 change applies to ITR-3 and ITR-4 rather than ITR-5, confirm the position for a non-audit firm before relying on either date.

Audit

Tax audit under Section 44AB applies on the same turnover and receipts basis as for other business taxpayers. Separately, an LLP has its own audit requirement under the LLP Act above prescribed thresholds, which is a different test.

Check both. A firm can be outside tax audit and inside LLP audit, or the reverse.

Documents

• Partnership deed, and any supplementary deed authorising remuneration and interest

• Financial statements

• Partner capital accounts, with remuneration and interest workings

• Bank statements

• Form 26AS and the AIS

• TDS certificates and TDS returns

• GST returns, reconciled to turnover

• Audit report, where applicable

The partner side

Each partner reports their share of the firm’s profit, which is exempt in their hands where the firm has been taxed on it, together with remuneration and interest received, which are taxable.

Getting the firm’s return right and the partners’ returns wrong is a common and avoidable mismatch.

How Northrop LLP helps

Northrop LLP checks the deed against the remuneration claimed, computes the limits, files ITR-5 and aligns the partners’ individual returns with the firm’s position.

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