Taxed Like a Firm, Audited on Two Tests
An LLP is taxed as a firm: it files ITR-5, pays a flat 30 per cent plus surcharge above the prescribed income level and cess, and deducts partner remuneration and interest only within the limits the Act allows. What distinguishes an LLP in practice is that it faces two separate audit questions, one under the LLP Act and one under the Income Tax Act, and they are triggered by different thresholds. An LLP can be inside one and outside the other.
Which form
ITR-5, the same form used by partnership firms, AOPs and BOIs.
An LLP cannot use ITR-4, and cannot opt for presumptive taxation under Section 44AD. This is a frequent and expensive misunderstanding, particularly among professionals who converted from a proprietorship where Section 44ADA was available.
Designated partners file their own returns, usually ITR-3, reporting their share of profit, remuneration and interest.
The rate
Flat 30 per cent, with surcharge reported at 12 per cent above Rs 1 crore of total income, and cess at 4 per cent.
No slab, no concessional regime equivalent to Section 115BAA. The company-versus-LLP comparison in our structure articles turns substantially on this: a company can elect into a lower rate, an LLP cannot.
What the LLP loses by not being an individual
Three things worth stating plainly for a professional considering conversion:
No presumptive taxation. Section 44ADA is available to a resident individual and a partnership firm but not to an LLP. A consultant billing Rs 40 lakh who incorporates as an LLP moves from presumed 50 per cent income to actual profits with books.
No slab rates. The first rupee of profit is taxed at 30 per cent.
Partner remuneration is capped. Only amounts within the prescribed limits, and only where the LLP agreement authorises them, are deductible.
See our articles on private limited company versus LLP and on company registration for consultants.
The two audit tests
LLP Act audit. An LLP must have its accounts audited where turnover or contribution exceeds the thresholds prescribed under the LLP Act and Rules.
Tax audit under Section 44AB. Triggered on the ordinary turnover and receipts basis applicable to any business.
These are different tests with different thresholds. Verify both current sets of figures before advising, because sources state them inconsistently and getting it wrong changes the filing date.
The due dates
Case | AY 2026-27 |
ITR-5 with tax audit | 31 October 2026, extended to 21 November 2026 by CBDT Circular 07/2026 |
ITR-5 without audit | Sources differ, between 31 July and 31 August |
The Finance Act 2026 change moving non-audit filers to 31 August applies to ITR-3 and ITR-4, and whether it reaches a non-audit ITR-5 filer is not clearly stated in the sources. Confirm before filing.
Note also that the audit extension to 21 November is a one-off for AY 2026-27 and not a new baseline.
The ROC layer
An LLP’s income tax return is only part of its annual cycle. Form 11, the annual return, and Form 8, the statement of account and solvency, are filed with the MCA on their own dates.
An LLP that files its tax return and forgets the ROC filings accumulates penalties that run per day. See our compliance calendar article.
Documents
LLP agreement and any supplementary agreement authorising remuneration and interest
Financial statements
Partner capital accounts with remuneration and interest workings
Bank statements
Form 26AS and the AIS
TDS returns and certificates
GST returns, reconciled to turnover
Audit reports, where either audit applies
How Northrop LLP helps
Northrop LLP checks both audit tests, computes the partner remuneration limits against the agreement, files ITR-5 and aligns the partners’ individual returns.