budget said small corporates hv to pay only 25% from now on. does that include partnership firms and LLPs too?
Can you try to find out.
A partnership firm and an LLP are taxed the same way. They aren’t considered corporates for the purpose of income tax. So, the 25% tax slab is not applicable for firms. They will continue to be charged at the 30% rate.
Excerpt from the Finance Bill: Paragraph C of Part I of the First Schedule
In the case of every firm,—
Rate of income-tax
On the whole of the total income 30 per cent.
Surcharge on income-tax
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section 111A or section 112 or section 112A of the Income-tax Act, shall, in the case of every firm, having a total income exceeding one crore rupees, be increased by a surcharge for the purposes of the Union calculated at the rate of twelve per cent. of such income-tax:
Provided that in the case of every firm mentioned above having total income exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
But honestly isn’t that just way too much, what do you really think about that ? I thought that small improvement like 25% instead of 30% could boost many businesses and it’s really not, I am quite depressed right now, i still hope for some changes.
There are some benefits too. Simple Interest up to 12% on partners capital paid to the partners can be deducted from the profits as an expense. Also, remuneration upto a certain limit to working partners is a deductible expense. (This is taxable in the hands of the partner and not the firm.)
Excerpt from the Income Tax Act: Section 40 (b) -
Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”,—
( b ) in the case of any firm assessable as such,—
(iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of twelve percent simple interest per annum; or
(v) any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :—
(a) on the first Rs. 3,00,000 of the book-profit or in case of a loss Rs. 1,50,000 or at the rate of 90 percent of the book-profit, whichever is more;
(b) on the balance of the book-profit at the rate of 60 percent