Income tax rates for partnership firms & LLPs for FY 2022-23 (AY 2023-24)

A Partnership firm is not registered as a separate legal entity. However in the Income tax act, a partnership firm is considered as a separate tax entity. As such a separate permanent account number is issued in the name of partnership firm based on the deed signed by partners.

However, a limited liability partnership (LLP) is registered as a separate legal entity with the ministry of corporate affairs. For income tax purpose, a limited liability partnership (LLP) wil be assessable in the same manner as a partnership firm is assessed as a firm included limited liability partnership.

Therefore, following income tax rates, surcharge, health and education cess is applicable to both a partnership firm and limited liability partnership (LLP).

Tax rates applicable to partnership firms & LLPs for FY 2022-23

Income tax rates applicable to a partnership firm & LLP for the financial year 2022-23 (assessment year 2023-24) is 30% on the whole of the total income. This means, we do not have any tax brackets for partnership firms & LLPs.

Special deduction is allowed to the partnership firm (including LLP) on account of remuneration to working partners and interest paid to the partners. However, this deduction is not allowed if the firm opts for presumptive taxation scheme as per section 44AD or 44ADA.

The amount of tax calculated at a flat rate of 30% shall be increased by health and education cess at the rate of 4%.

Surcharge on partnership firms & LLPs

Surcharge at the rate of 12% on income tax should be levied in case the partnership firm’s total income exceeds 1 crore rupees for the financial year 2022-23.

If surcharge is applicable, the health and education cess at the rate of 4% shall be added on the tax and surcharge. This means, health and education cess @4% will be calculated on tax plus surcharge if total income of the firm exceeds 1 crore rupees.

In case the partnership firms, the total amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on a total income of 1 crore rupees by more than the amount of income that exceeds 1 crore rupees.

Summary showing tax rates, health and education cess, and surcharge applicable to a parternship firm and LLP for the financial year 2022-23;