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Annual Compliance

Partnership Firm Annual Compliance and ITR Filing: Complete Guide for FY 2025-26

By Tradeviser Editorial • Updated October 2026 • 9 min read

A partnership firm has no ROC filings — it is not registered under the Companies Act and has no MCA obligations. Its annual compliance is income tax-driven: the firm files ITR-5, and if its turnover crosses the tax audit threshold, it must also get an audit done and report it in Form 3CB-3CD. Partners also have individual tax filings where the firm’s income flows through as their share of profit.

This guide covers the complete annual compliance picture for a partnership firm: income tax return, tax audit thresholds, partner remuneration limits, GST, TDS, and what an unregistered firm cannot do in court.

Governing law: Partnership firms are governed by the Indian Partnership Act 1932. Income tax obligations are under the Income Tax Act 1961 (Sections 40(b), 44AB, 44AD, 44ADA, 184, 185). GST obligations under the GST Acts apply if turnover exceeds the registration threshold.

Key Takeaways

  • Partnership firms file ITR-5; no MCA or ROC filings required
  • Tax audit under Section 44AB is required if turnover exceeds Rs. 1 crore (business) or Rs. 50 lakh (profession)
  • ITR-5 due date: 31 October 2026 (if audit applicable) or 31 July 2026 (no audit)
  • Partner remuneration is deductible only within Section 40(b) limits — excess is taxed at firm level
  • Partnership firms are taxed at a flat 30% (plus 12% surcharge if income exceeds Rs. 1 crore) plus 4% health and education cess
  • Partner’s share of profit is exempt from tax in partners’ hands under Section 10(2A) — no double taxation

Partnership firm income tax return: ITR-5 filing

A partnership firm is a separate taxable entity under the Income Tax Act. It files ITR-5 on the income tax e-filing portal (incometax.gov.in). The firm’s income is taxed at a flat rate of 30% (not slabs). The partners’ share of profit, once taxed at the firm level, is exempt in their individual hands under Section 10(2A) — this prevents double taxation.

Item Detail
ITR Form ITR-5 (online filing, DSC required for audit cases)
Tax rate (firm) 30% flat + 12% surcharge (if income > Rs. 1 crore) + 4% cess
Due date (no audit) 31 July 2026 (for FY 2025-26 / AY 2026-27)
Due date (audit applicable) 31 October 2026
Partner’s share of profit Exempt in partner’s hands under Section 10(2A)
Partner’s salary/commission Taxable in partner’s hands as “Income from Business” (Section 28(v)); TDS may apply
Advance tax Due in four instalments: 15 June (15%), 15 Sep (45%), 15 Dec (75%), 15 Mar (100%)
Late filing penalty Section 234F: Rs. 5,000 (or Rs. 1,000 if total income below Rs. 5 lakh)

Tax audit under Section 44AB: when is it applicable?

A tax audit is conducted by a Chartered Accountant and reported using Form 3CB (audit report) and Form 3CD (statement of particulars). The audit must be completed before the ITR filing due date.

Scenario Audit Threshold Applicable to
Business turnover Above Rs. 1 crore (or Rs. 10 crore if cash transactions below 5%) Firms with business income
Professional gross receipts Above Rs. 50 lakh (or Rs. 75 lakh if cash below 5%) Law firms, CA firms, consulting partnerships
Presumptive income opted but profit declared below 8%/6% Mandatory audit regardless of turnover Section 44AD / 44ADA firms
Presumptive taxation (Section 44AD): A partnership firm with business turnover up to Rs. 3 crore (AY 2026-27 limit) can opt for presumptive income at 8% of turnover (6% for digital receipts). If presumptive taxation is opted, no books of accounts or tax audit is required. However, remuneration and interest paid to partners cannot be claimed as deductions under the presumptive scheme.

Partner remuneration and interest: Section 40(b) limits

Partner remuneration (salary, commission, bonus) and interest on capital are deductible as business expenses of the firm only if they are authorised by the partnership deed and within the Section 40(b) limits.

Book Profit Slab Maximum Deductible Remuneration
First Rs. 3 lakh of book profit (or where there is a loss) Rs. 1,50,000 or 90% of book profit, whichever is higher
Balance book profit above Rs. 3 lakh 60% of the balance book profit
Interest on capital paid to partners Maximum 12% per annum simple interest (authorised in partnership deed)
Critical requirement: For remuneration and interest to be deductible, the partnership deed must explicitly authorise the payment, specify the remuneration amount or formula, and be valid during the year for which the deduction is claimed. If the deed does not authorise it, the entire payment is disallowed — even if within the Section 40(b) limits.

GST and TDS compliance for partnership firms

  • GST registration: Mandatory if aggregate turnover exceeds Rs. 40 lakh (goods) or Rs. 20 lakh (services) in a financial year. Firms operating in special category states have lower thresholds.
  • GST returns: GSTR-1 (monthly or quarterly) and GSTR-3B (monthly or quarterly under QRMP); GSTR-9 (annual return) by 31 December if turnover above Rs. 2 crore.
  • TDS deduction: If the firm makes payments subject to TDS (salary to employees, rent above Rs. 2.4 lakh/year, professional fees above Rs. 30,000, contractor payments), it must deduct TDS, file quarterly TDS returns (Form 26Q, 24Q), and issue Form 16/16A certificates.
  • TDS on partner salary: Partner remuneration is not subject to TDS under Section 192 (which applies to employer-employee relationships). Partners are not employees of the firm.

Books of accounts, firm registration and partner changes

Partnership firms are required to maintain books of accounts under Section 44AA of the Income Tax Act if their income from business or profession exceeds Rs. 1.20 lakh or gross receipts exceed Rs. 10 lakh in any of the three preceding years (or from the first year if the firm expects to exceed these limits). Prescribed books include cash book, journal, ledger, and bills above Rs. 25,000.

Registration with the Registrar of Firms under the Indian Partnership Act 1932 is optional but strongly advisable. Key events requiring filing with the Registrar of Firms:

  • Admission of a new partner: File intimation with the Registrar
  • Retirement or death of a partner: Notify the Registrar
  • Change in firm name, address, or nature of business: File the relevant form
  • Dissolution of the firm: Notify the Registrar

Annual compliance checklist for partnership firms

Compliance Task Due Date (FY 2025-26) Applies If
Advance tax (Q1) 15 June 2025 Tax liability above Rs. 10,000 for the year
Advance tax (Q2) 15 September 2025 Tax liability above Rs. 10,000
TDS returns (Q1 Apr-Jun) 31 July 2025 If TDS deducted
Advance tax (Q3) 15 December 2025 Tax liability above Rs. 10,000
Advance tax (Q4) 15 March 2026 Tax liability above Rs. 10,000
Books finalised and accounts closed By 31 March 2026 All firms
Tax audit (Form 3CB + 3CD) Before 31 October 2026 If turnover above threshold
ITR-5 filing (audit case) 31 October 2026 If tax audit applicable
ITR-5 filing (no audit) 31 July 2026 If tax audit not applicable
GSTR-9 (GST Annual Return) 31 December 2026 If GST registered and turnover above Rs. 2 crore
Partners’ individual ITR filing 31 July 2026 (or 31 Oct if audit) All active partners

Partnership Firm Annual Compliance, Start to Finish

Tradeviser handles accounts finalization, tax audit coordination (Form 3CB-3CD), ITR-5 filing, GST returns, TDS returns, and partner-level individual ITR filings for partnership firms across India.

Start Partnership Compliance

Frequently Asked Questions

Which ITR form does a partnership firm file?

ITR-5 — for firms, LLPs, AOPs, and BOIs. It cannot be filed by individuals or HUFs. Filing is done online and must be verified by DSC in audit cases.

Is a tax audit mandatory for all partnership firms?

Only if turnover exceeds Rs. 1 crore (business) or Rs. 50 lakh (profession), or if presumptive income is declared below the prescribed percentage. Below these limits, no audit is required and ITR-5 can be filed by 31 July.

What is the ITR-5 due date for FY 2025-26?

31 October 2026 if tax audit is applicable; 31 July 2026 if not. Late filing attracts a fee of Rs. 5,000 under Section 234F plus interest on unpaid tax.

What are the partner remuneration limits under Section 40(b)?

On first Rs. 3 lakh of book profit: Rs. 1.5 lakh or 90% of book profit (whichever is higher). On the remaining profit: 60%. Interest on capital: maximum 12% per annum. Amounts beyond these limits are added back to firm income.

Does a partnership firm need to register with the Registrar of Firms?

Registration is optional but strongly recommended. An unregistered firm cannot file suits against third parties or co-partners to enforce contractual rights. Annual filing is not required with the Registrar, but partner changes and address changes must be notified.