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Partnership Firms –ignored entity in matter of Income tax. Attention is desired for incentives and lower rate in a balanced manner taking into provisions for Individuals, AOP , BOI and companies

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Partnership Firms –ignored entity in matter of Income tax. Attention is desired for incentives and lower rate in a balanced manner taking into provisions for Individuals, AOP , BOI and companies
February 7, 2023
All Articles by: DEV KUMAR KOTHARI       View Profile
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Firms are   important but  Ignored entity

Partnership firms including LLP are important entity in our economy. After an individual or his  proprietorship concern  partnership firm and LLP are only option to many professionals to carry profession as a team of members sharing profits.

Many small family businesses are also  run in partnership for  ease of doing business and because for family convenience proprietary concern is not found suitable.

Most of partnerships are in nature of concerns of self-employed persons and their family members or close relatives and friends who think for association  for different interest with a check and balance within the group.

Therefore, there must be fair treatment for firms in matter of taxation. When lower rates of tax are made optional to companies, co-operatives there is no reason for not extending such lower rate to tax and options to firms.

A manufacturing company can avail low tax rate of 15% then why a similar benefit is not extended to a firm engaged in manufacturing.

Number of partnership firms:

In web search any information about number of firms could not be found. The tax departments must have ready information about firms having PAN.

On ...

 there is mention as follows:

There are more than 1 Lakh LLP companies registered in India and all details of all registered Limited Liability Partnership Firm are available on our website

LLP is relatively  a new form of organization.  Normal  partnership firms must be in large number in India  although  there have been changes of constitution of large number of firms into LLP and companies.

Therefore, honorable FM is requested to get information and take a suitable decision in this regard.

Ignored entity:

Author is describing ‘firm’  ,  as an ignored entity or type of assessee  because we do not find desired  attention for them in tax laws. Old provisions are continuing without any extension of ease of doing business, compliances and lower rate of tax, concessions and options for tax regimes.

Budget Speech:

In the budget speech of 2023  of honorable FM we do not find any mention about firms, LLP, partnership firms. Similar is case of  budget speech of 2022 and may be in  many of earlier budgets also. Only attempts have been made to make some provisions, to reduce some long term  benefits availed by firms in ordinary and natural course of working as an  organization of a firm.

 Rate of tax:

Rate of tax on firms is higher @ 30% and surcharge in case income of firm exceeds prescribed amount.

There is no reduction during recent past when rate of tax on companies have been reduced. There is no basic exemption also.

In proposed amendments  and memorandum we find that at ten  places there is mention of ‘surcharge’ on income tax in case of firms where total income exceeds Rs. one crore.

There is one amendment proposed in section 189 which is consequential to new post of Joint Commissioner proposed in the Finance bill.

 Some mentions of ‘firm’ are found in relation to computation of tax, surcharge , presumptive tax and audit etc.

Therefore, there seems no change in nature of any incentive or concession or option allowed to firms.

Firms may  be allowed certain concessions by way of basic exemption per partner or as a percentage of capital employed, concessional rate of tax in case of new firms , firms engaed in manufacturing ,  firms engaged in business and / or profession when its partners are self-employed persons and also where firm creates new employments.

Readers  are   requested  to send their views and suggestions.


By: DEV KUMAR KOTHARI - February 7, 2023



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