Partnership Firm / LLP for AY 2026-27: Returns, Forms, Tax Rate and Deductions

What a firm and LLP mean for tax purposes

Section 2(23)(i) of the Income-tax Act, 1961 links the meaning of firm to the Indian Partnership Act, 1932. The Partnership Act describes a firm as the collective name of persons who have entered into partnership with one another.

The department page also notes that a firm includes a Limited Liability Partnership as defined in the LLP Act, 2008. An LLP is a separate legal entity from its partners, but for income-tax filing it is still covered in the firm and LLP guidance.

When ITR-4 may apply

The department page lists ITR-4 for a resident firm other than LLP where total income does not exceed Rs. 50 lakh and business or professional income is computed on a presumptive basis under section 44AD, 44ADA, or 44AE, along with the permitted other sources of income.

This is an optional simplified form. It is not mandatory even where the assessee is eligible to use it.

• Resident firm other than LLP
• Total income up to Rs. 50 lakh
• Presumptive business or profession income under section 44AD, 44ADA, or 44AE
• Permitted additional income sources include two house properties, other sources such as interest, family pension or dividend, and agricultural income up to Rs. 5,000

When ITR-4 cannot be used

The page gives a long list of exclusions that push the case out of ITR-4 and into a regular return such as ITR-5.

• Director in a company
• Unlisted equity shares held during the year
• Any asset or financial interest outside India
• Signing authority in an account outside India
• Income from a source outside India
• Deferred tax on ESOP in the specified cases
• Any brought-forward loss or loss to be carried forward under any head
• Total income above Rs. 50 lakh
• Income from retirement benefit account maintained in a notified country under section 89A
• Income from retirement benefit account maintained in a country other than a notified country under section 89A
• Any income chargeable at a special rate

When ITR-5 is commonly used

ITR-5 is the main return form listed for firms and LLPs in the general case. The same page also reminds users that ITR-5 is a wider non-company form used by several other kinds of persons as well.

• Firm
• Limited Liability Partnership
• Association of Persons
• Body of Individuals
• Artificial Juridical Person referred to in section 2(31)(vii)
• Local Authority referred to in section 2(31)(vi)
• Representative Assessee referred to in section 160(1)(iii) or (iv)
• Co-operative Society
• Society registered under the Societies Registration Act, 1860 or similar state law
• Trust other than trusts eligible to file ITR-7
• Estate of deceased person
• Estate of insolvent
• Business Trust referred to in section 139(4E)
• Investment Fund referred to in section 139(4F)

Important forms partnership firms and LLPs commonly deal with

The department page lists both general reconciliation forms and specialist forms for audit, transfer pricing, AMT, foreign tax credit, and certain deduction claims.

• Form 26AS: TDS and TCS related tax-credit view
• AIS: broader annual information statement showing TDS, TCS, SFT information, taxes paid, demand or refund details, and other information
• Form 16A: TDS certificate on income other than salary
• Form 3CA-3CD: audit report and statement of particulars where section 44AB applies and audit is under another law
• Form 3CB-3CD: audit report and statement of particulars where section 44AB applies
• Form 3CEB: accountant's report for international transactions or specified domestic transactions under section 92E
• Form 3CE: accountant's report in section 44DA cases for non-resident taxpayer or foreign company doing business in India
• Form 29C: report under section 115JC for computing adjusted total income and Alternate Minimum Tax for a person other than a company
• Form 67: statement of foreign income and foreign tax credit
• Form 10CCB: audit-report form linked to specified deduction claims under the sections listed on the page

Tax rate for partnership firms and LLPs for AY 2026-27

The page states a simple rule for the main tax rate: for AY 2026-27, a partnership firm, including an LLP, is taxable at 30 percent.

Unlike the individual pages, this is not a slab-based rate structure. The main variation comes later through surcharge, cess, AMT, and deduction eligibility rather than through slab bands.

• Partnership firm including LLP: 30 percent

Surcharge, marginal relief, and cess

The department page states that surcharge is levied at 12 percent if taxable income exceeds Rs. 1 crore. It also states that marginal relief is available so that tax plus surcharge on income just above Rs. 1 crore does not exceed the tax on Rs. 1 crore by more than the excess income.

Health and education cess at 4 percent is payable on income tax plus surcharge, if any.

• Surcharge: 12 percent if taxable income exceeds Rs. 1 crore
• Marginal relief applies around the Rs. 1 crore threshold
• Health and education cess: 4 percent

AMT point that firms and LLPs should not miss

The department page states that a firm or LLP is liable to Alternative Minimum Tax at 18.5 percent of book profit, plus applicable surcharge and health and education cess, where the normal tax liability is less than 18.5 percent of book profit.

This is important because a firm or LLP can appear to have a lower normal tax liability after deductions, but still have to compare that result with the AMT computation.

Key deduction sections listed on the partnership firm and LLP page

The page lists a wide set of Chapter VI-A and business-linked deduction sections that may matter depending on the activity of the firm or LLP and the legal conditions of each provision.

• Section 80G: deduction for eligible donations, subject to category rules and the cash-payment restriction
• Section 80GGA: deduction for specified scientific-research or rural-development donations, subject to conditions
• Section 80GGC: deduction for eligible contribution to political party or electoral trust by non-cash mode
• Section 80IA: deduction linked to industrial parks and power undertakings, subject to conditions
• Section 80IAB: deduction for development of Special Economic Zone, subject to conditions
• Section 80IAC: deduction for eligible start-up profits, subject to conditions
• Section 80IB: deduction for specified industrial undertakings and related activities, subject to conditions
• Section 80IBA: deduction for developing and building housing projects, subject to conditions
• Section 80IC and 80IE: deductions for specified undertakings in Himachal Pradesh, Sikkim, Uttarakhand, and North-Eastern states, subject to conditions
• Section 80JJA and 80JJAA: biodegradable-waste business deduction and additional employee-cost deduction, subject to conditions
• Section 80LA: deduction for offshore banking units and IFSC income, subject to conditions

A practical checklist before filing

Most filing issues in firm and LLP cases come from choosing the wrong return form, ignoring audit or transfer-pricing forms, or not testing AMT where deductions reduce the normal tax result.

• Confirm first whether the case qualifies for ITR-4 or belongs in ITR-5
• If using ITR-4, verify every disqualifying condition before filing
• Review AIS, Form 26AS, and Form 16A before final computation
• Check whether audit under section 44AB requires Form 3CA-3CD or 3CB-3CD
• Check whether Form 3CEB, Form 3CE, Form 29C, or Form 67 is required
• Test AMT where deductions or incentives materially reduce the normal tax liability
• Verify any Chapter VI-A deduction against the exact section conditions before claiming it