Professional Documents
Culture Documents
LLPCollege
LLPCollege
PARTNERSHIP
- AN INSIGHT TO TAXATION
Content
Introduction
Difference between Partnership & LLP
Formation of LLP
An Insight to Taxation of LLP
CASE STUDY
CONCLUSION
History
Objectiv
es
.An Introduction
.Overview
However
unlike
corporate
shareholders, the partners have the
right to manage the business directly.
An LLP also limits the personal liability
of a partner for the errors, omissions,
incompetence, or negligence of the
LLP's employees or other agents.
Content
Introduction
Difference between Partnership & LLP
Formation of LLP
An Insight to Taxation of LLP
CASE STUDY
CONCLUSION
LLP-vs.-PARTNERSHIP FIRM
.Comparison
LLP are separate legal entity and its registration is mandatory unlike the
erstwhile Partnership frm. The name of the LLP has to be approved by
the registrar and must have LLP as suffix.
An LLP can hold the property in its name, however a partnership frm
cannot do the same.
Content
Introduction
Difference between Partnership & LLP
Formation of LLP
An Insight to Taxation of LLP
CASE STUDY
CONCLUSION
.Formation
Deciding the
partners and
designated
partners
Filing of
Incorporation
Documents
Obtaining
Certifcate of
Incorporation
Obtaining DPIN
Obtaining
Digital
Signature
Name
Availability
Registration on
LLP portal
Drafting of LLP
Agreement
Content
Introduction
Difference between Partnership & LLP
Formation of LLP
An Insight to Taxation of LLP
CASE STUDY
CONCLUSION
10
.Taxation Aspects
Tax
Planning of
LLP
Pros and
Cons of LLP
being taxed
as Firm
Conversion of
Company
into LLP
LLP Taxation at a
glance
11
FACTS
FACTS
Eligibility
A certifed copy of LLP agreement and if a change take place in the constitution
must be accompanied in the ROI of the LLP of the P.Y. Notices of assessment
must be complied without failure.
Entity
Rates
Tax Rate
3%
CHAPTER
CHAPTER XII-BA
XII-BA -- AMT
AMT
Section 115JC vide Finance Act 2012 shall be applicable not only on LLPs but certain other person other than
company.
The Section starts with an non obstinate clause that where the regular income-tax payable for a previous year by
a LLP in less than the alternate minimum tax payable for a P.Y. the adjusted total income shall be deemed to be
the total income of the limited liability partnership for such previous year and it shall be liable to pay income-tax on
such total income at the rate of eighteen and one-half per cent.
Section 115JC(2) states the meaning of Adjusted total income as under
Adjusted total income referred to in sub-section (1) shall be the total income before giving effect to
this Chapter as increased by
(i) deductions claimed, if any, under any section (other than section 80P) included in Chapter VI-A
under the heading "C.Deductions in respect of certain incomes"; and
(ii) deduction claimed, if any, under section10AA.
Section 115JD deals with tax credit available for alternate minimum tax which are as follows :
Tax Credit for an assessment year shall be the excess of AMT over the regular incometax payable of that year. Such credit is allowed to be carried forward not beyond the
tenth A.Y. succeeding the A.Y. in which tax credit becomes allowable.
If in any A.Y. the regular income-tax exceeds the AMT, the tax credit shall be allowed to
be set of to the extent of the excess of regular income-tax over the AMT and the
12
.Continued
Example
Example
CASE LAW
TAX
Particulars
2012-13
2013-14
1,000
1,000
5.000
1,100
5,000*18.5% = 925
1,100*18.5% = 203.50
1,000*30% = 300
1000*30% = 300
925-300 = 625
300-203.5 = 96.50
625
AMT Payable
Regular Income Tax Payable
Amount of credit available as per section
115JD(2)
Credit allowed to be set off u/s 115JD(5)
Amount of tax to be paid
Balance of credit carried forward
As per section 115JD(4) tax credit shall be allowed to be carried forward not beyond the
tenth A.Y. immediately succeeding the A.Y. 2012-13. In the instant case it shall be carried
forward upto A.Y. 2012-13+10 = A.Y. 2022-23.
If the amount of regular income-tax or the AMT is reduced or increased as a result of any
order the amount of tax credit allowed under this section shall also be varied accordingly.
ADVANTAGES
DISADVANTAGES
200% weighted
deduction
on
expenditure on In
House
scientifc
research
Tax
neutral
amalgamation/demerger
of
companies
possible
ISSUE
ISSUE
BIG
QUESTION
Is there no
beneft for
conversion
SOLUTION
Conditions
Conditions
All assets and liabilities of the company immediately before the conversion
become the assets and liabilities of the LLP;
All the shareholders of the company immediately before the conversion
become partners of the LLP in the same proportion as their shareholding in
the company;
For conversion, shareholders of the company do not receive any
consideration, directly or indirectly, other than share in proft and capital
contribution in the LLPs
The shareholders of the company continue to be entitled to receive at least
50 per cent, in aggregate, of the profts of the LLP for a period of 5 years from
PARTICULARS
Proft Before Tax
Less: Income Tax
Proft After Tax
Less; Transfer to Reserves
Less:
Dividend
Distribution
Tax
COMPANY
100.00
32.45
67.55
6.75
8.50
LLP
100.00
30.90
69.10
-
52.30
69.10
40.95
30.90
16.22%
Dividends
Proft
16
Content
Introduction
Difference between Partnership & LLP
Formation of LLP
An Insight to Taxation of LLP
CASE STUDY
CONCLUSION
17
Case Study
PROFIT
&
LOSS
ACCOUNT Particulars `
Turnover
Other Operating Data
Income
.Analysis
(Rs. In thousands)
X CO.
X LLP
2,48,793
4421
2,53,214
2,48,793
4421
2,53,214
1,09,242
1,09,242
7,103
7,103
75,761
75,761
1.956
190
58,962
-
1.956
190
58,962
250
28,800
58,962
29,912
18,260
40,682
9,240
20,672
FINANCIALS
FINANCIALS
Operating Expense :
Staf costs
Depreciation, Amortization and Impairment
Other operating expenses
Finance Cost :
Interest payable
Other Similar charges
Profit before appropriation
Interest on Partners capital
Partners remuneration
Profit after appropriation before
taxation
Taxation
Profit after taxation
Case Study
BALANCE SHEET
Particulars
Fixed Assets
Investments
.Continued
(Rs. In thousands)
X CO.
X LLP
17,189
17,189
-
FINANCIALS
FINANCIALS
Current Assets :
Debtors
Amount due from members
Cash at Bank and in Hand
1,44,306
18,366
4,576
1,44,306
18,366
4,576
1,67,248
1,67,248
62,041
62,041
2,141
2,141
64,182
64,182
1,03,066
1,20,255
1,03,066
1,20,255
14,739
14,739
47,971
20,543
47,971
20,543
Current Liabilities :
Creditors : Amount falling due within
one year
Amount due to members
Net Current Assets
Total Assets less Current Liabilities
Non Current Liabilities :
Creditors: Amount falling due after one
year
Revolving capital loans
Provision for liabilities & charges
Case Study
COMPUTATION
TAXATION
TAXATION
Particulars
Income from Business Profession
(Note1)
Gross Total Income
Taxable Income
(A)
Tax on (A) above @ 30%
Add : EC @ 2%
Add : SHEC @ 1%
Total Tax Liability under
normal provision
(i)
Book Profit for MAT (B)
Income for AMT
(C)
MAT on (B)
(ii)
AMT on (C)
(ii)
Tax payable (Higher of (i) or
(ii)
Savings in Rs.
.Continued
(Rs. In thousands)
X CO.
X LLP
58,962
29,912
58,962
58,962
17,960
350
190
29,912
29,912
8,970
180
90
18,260
9,240
58,962
-
29,912
11,235
5,700
18,260
9,240
18,260-9240 = 9,020
Tax Savings
INR 90.20 lacs.
Effectively
49,40%
Case Study
NOTE 1
TAXATION
TAXATION
Particulars
Proft as per P&L A/C
Add : Items to be added
separately
Interest on partner capital
Partners remuneration
Depreciation
.Continued
(Rs. In thousands)
X CO.
X LLP
58,962
7,103
29,912
250
28,800
7,103
ANALYSIS
ANALYSIS
NOTE 2
Particulars
On frst Rs. 3,00,000/Higher of
Rs. 1,50,000/- or 90% of Rs.
3,00,000/On balance Rs. 5,86,62,000
Eligible Remuneration
Actual remuneration
Allowable remuneration (lower of
the above)
Amount
(inRs.)
2,70,000
3,51,97,200
3,54,67,200
2,88.00,000
2,88.00,000
Content
Introduction
Difference between Partnership & LLP
Formation of LLP
An Insight to Taxation of LLP
CASE STUDY
CONCLUSION
22
LLP-vs.-PARTNERSHIP FIRM
.Conclusion
On the horizon of business matrix, a new star is now sited. While ease in
operations of partnership and armor of limited liability is provided under a
new format of business entity i.e. Limited Liability Partnership: (LLP).
L For the purpose of taxation, the Income-tax Act, 1961 (the Act) equates LLP
with the partnership frm [section 2(23)]. Therefore, no separate tax rate or
legal provisions are prescribed for LLPs. Tax rate prescribed for frms of 30%
is automatically applicable and similar is in case of the rest of the provisions.
23
LLP-vs.-PARTNERSHIP FIRM
.Limitation
The Income Tax Act, 1961, is too vast and it is not possible to
cover each and every provision in the available short span of
time.
Since, the act itself has not precisely declared provisions about
the taxation of Limited Liability Partnership in certain cases,
thereby, there may arise a contradiction of opinion.
24
25