ITR Filing for Partnership Firms: Which Form to Use

Partnership firms and LLPs in India must file their Income Tax Returns under specific forms depending on their income type and structure. For AY 2025-26, the Income Tax Department mandates the use of Form ITR-5 for most partnership firms, while ITR-4 (Sugam) applies only to small firms under presumptive taxation. The new Finance (No. 2) Act, 2024, has also revised key aspects such as partner remuneration limits and introduced TDS on partner payments. Understanding which ITR form applies ensures accurate compliance and smoother online filing.

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Table of Contents

• Understanding ITR Filing Requirements for Partnership Firms

• Which ITR Form Should Partnership Firms Use?

• When Can a Partnership Firm File ITR-4 (Sugam)?

• Filing Procedure for Partnership Firms under ITR-5

• E-Filing and Digital Signature Requirements for Firms

• Updated Tax Changes for Partnership Firms in AY 2025-26

• TDS and Partner Remuneration Revisions under Finance Act 2024

• Tax Rate, AMT, and Surcharge Details for Partnership Firms

• Bank Account and Compliance Requirements for Partnership Firms

• Recent CBDT Notifications and Deadline Extensions for FY 2024-25

• Why Use TaxBuddy for Partnership Firm ITR Filing

• Conclusion

• FAQs

Understanding ITR Filing Requirements for Partnership Firms

Partnership firms in India, including Limited Liability Partnerships (LLPs), are treated as separate legal entities under the Income Tax Act, 1961. This means they must file their own income tax returns independently, irrespective of the individual tax returns of their partners. The income of the firm is computed after deducting allowable business expenses, partner remuneration, and interest on capital, if applicable. Once the taxable income is determined, the firm must pay tax at the prescribed flat rate of 30%, along with applicable surcharge and cess. Filing the ITR correctly ensures compliance with the law and avoids penalties under Sections 234F and 271F.

Unlike proprietorships, where the owner’s and business’s income are filed together, partnership firms are required to file separate returns. It is also mandatory for every firm, even if no business activity took place during the financial year, to file an ITR showing a nil income.

Which ITR Form Should Partnership Firms Use?

For the assessment year 2025-26, partnership firms and LLPs must use Form ITR-5 to file their income tax returns. This form is specifically designed for entities such as firms, LLPs, Association of Persons (AOPs), and Body of Individuals (BOIs).

ITR-5 requires details such as income from business or profession, capital gains, income from house property, and other sources. It also includes schedules for balance sheets, profit and loss statements, and partner-wise details of remuneration and interest on capital. The form must be filed electronically through the official Income Tax e-filing portal.

ITR-3 is not applicable to partnership firms—it is meant for individual partners who earn income from the firm. Therefore, the firm itself must always file using ITR-5 unless it qualifies for presumptive taxation under ITR-4.

When Can a Partnership Firm File ITR-4 (Sugam)?

ITR-4 (Sugam) is available only to small partnership firms (excluding LLPs) that choose presumptive taxation under Sections 44AD, 44ADA, or 44AE of the Income Tax Act. Under presumptive taxation, the firm declares income at a fixed percentage of turnover instead of maintaining detailed books of accounts.

To qualify for ITR-4, the total income of the firm must not exceed ₹50 lakh, and the business must fall within the scope of presumptive sections. LLPs, firms claiming deductions under Sections 10AA, 80-IA to 80-IE, or those requiring audits cannot use ITR-4. In such cases, ITR-5 becomes mandatory.

Filing Procedure for Partnership Firms under ITR-5

• Access the Income Tax Portal: Log in using the firm’s PAN and password.
  

• Select the Correct Form: Choose ITR-5 and the appropriate assessment year.
  

• Fill Basic Details: Enter firm name, PAN, address, business nature, and partner details.
  

• Enter Income Details: Report income under various heads, including business, capital gains, or other sources.
  

• Upload Balance Sheet and P&L Account: Ensure figures match audited statements (if applicable).
  

• Compute Tax Liability: The system auto-calculates tax, surcharge, and cess.
  

• Attach Audit Report (if required): Firms under audit must upload Form 3CA/3CB and Form 3CD.
  

• Verify Return: Use Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) for submission.
  

Once filed, acknowledgment in Form ITR-V is generated. This can be e-verified instantly or sent physically to CPC, Bengaluru, within 30 days of filing.

E-Filing and Digital Signature Requirements for Firms

All partnership firms must file their ITR electronically through the official Income Tax portal. In the case of audited firms, a Class 3 Digital Signature Certificate (DSC) is mandatory for verification. Non-audited firms can verify using an Electronic Verification Code (EVC) sent to the registered mobile number or email.

The use of DSC ensures authenticity and prevents unauthorized access. It also helps in securely signing audit reports and other forms such as Form 3CA, 3CB, and 3CD. The e-filing process has eliminated paperwork, making compliance faster and more transparent.

Updated Tax Changes for Partnership Firms in AY 2025-26

The Finance (No. 2) Act, 2024, introduced several updates effective from April 1, 2025. These include an increase in permissible remuneration to working partners and the introduction of TDS under Section 194T. The revision aims to bring greater transparency and ensure that partner payments are properly recorded and taxed.

Key updates include:

• Doubling of the remuneration limit payable to working partners.
  

• Mandatory deduction of TDS on partner remuneration and interest.
  

• Enhanced digital compliance through mandatory DSC for e-filing and audits.
  

These updates simplify taxation while ensuring better reporting standards for partnership firms.

TDS and Partner Remuneration Revisions under Finance Act 2024

From April 1, 2025, Section 194T mandates that firms must deduct TDS before making payments to partners, including remuneration, interest, or profit shares. This measure improves tax transparency and aligns with other withholding provisions.

Revised partner remuneration limits now allow:

• For the first ₹6,00,000 of book profit or in case of loss: ₹3,00,000 or 90% of book profit, whichever is higher.
  

• For the remaining book profit: 60% of book profit.
  

This change benefits working partners by allowing higher compensation while ensuring that deductions remain within reasonable limits.

Tax Rate, AMT, and Surcharge Details for Partnership Firms

The tax rate for partnership firms, including LLPs, remains at a flat 30% on total income. An additional surcharge of 12% applies when the total income exceeds ₹1 crore. Further, all firms are subject to a 4% Health and Education Cess on the total tax amount.

Firms must also pay Alternate Minimum Tax (AMT) at 18.5% of adjusted total income if regular tax liability is lower. AMT ensures that firms with large deductions still contribute a minimum level of tax to the exchequer.

Bank Account and Compliance Requirements for Partnership Firms

For banking compliance, partnership firms must submit specific documentation while opening or operating accounts. These include a copy of the partnership deed, registration certificate, PAN, address proof, and KYC documents of all partners. Additionally, a resolution must be passed authorizing specific partners to operate the account.

Though Form ITR-5 is not directly linked to bank account opening, banks may request the latest filed ITR as proof of income or during loan evaluations. With the rise of digital onboarding, firms are encouraged to maintain updated eKYC details, digital signatures, and current ITR acknowledgments to streamline banking and compliance processes.

Recent CBDT Notifications and Deadline Extensions for FY 2024-25

The Central Board of Direct Taxes (CBDT) recently extended due dates for filing returns and audit reports. For FY 2024-25, the due date for non-audited firms remains 31 July 2025, while audited firms have time until 31 October 2025. However, this year, the deadline for audit cases has been extended to 10 December 2025 due to procedural delays and increased digital compliance workloads.

CBDT also released new e-filing guidelines ensuring that all firms use DSC for audited filings and adhere strictly to Section 44AB audit report requirements. These measures aim to make the filing process efficient, reduce last-minute rushes, and enhance accuracy.

Why Use TaxBuddy for Partnership Firm ITR Filing

TaxBuddy provides a seamless, AI-driven tax filing experience for partnership firms and LLPs. The platform simplifies the entire process — from auto-fetching data using PAN and Form 26AS to verifying partner details and computing partner remuneration limits. Firms can opt for either a self-filing mode guided by AI or expert-assisted filing for complex cases.

TaxBuddy’s platform also offers real-time compliance alerts, audit report uploads, and automatic calculation of TDS under Section 194T. This helps firms stay compliant with changing tax laws while reducing errors and penalties.

Conclusion

Filing the correct ITR form is essential for every partnership firm to ensure compliance and avoid penalties. For AY 2025-26, most partnership firms and LLPs must use Form ITR-5, while smaller firms under presumptive taxation can use ITR-4. With updated partner remuneration limits, TDS obligations, and audit deadlines, timely and accurate filing has become more critical than ever. Platforms like TaxBuddy simplify this process through automation, expert guidance, and compliance support, making ITR filing smoother and more reliable.

For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? TaxBuddy offers two flexible options for partnership firms and other taxpayers — self-filing and expert-assisted filing. In the self-filing mode, users can upload their documents like Form 16, PAN, and financial statements, and the AI-driven platform automatically pre-fills the data, checks for errors, and guides them through the process. This option is ideal for small firms with straightforward filings. On the other hand, the expert-assisted plan connects users with certified tax professionals who prepare, review, and file the return, ensuring compliance with the latest Income Tax Act provisions. This option is especially useful for firms with audits, multiple partners, or complex income structures.

Q2. Which is the best site to file ITR? The official Income Tax Department portal (incometax.gov.in) is the government-mandated platform for filing all income tax returns. However, many taxpayers prefer specialized platforms like TaxBuddy because of their user-friendly design, automated data import features, and real-time compliance checks. TaxBuddy simplifies the process for partnership firms by providing step-by-step guidance, automatically applying new tax rules such as revised partner remuneration limits and Section 194T requirements, and ensuring the correct form (ITR-5 or ITR-4) is used. Additionally, it provides expert support to review computations, making it one of the most efficient online filing solutions available.

Q3. Where to file an income tax return? An income tax return for a partnership firm can be filed electronically through the Income Tax Department’s official portal or via trusted e-filing platforms like TaxBuddy. When filing directly on the government site, firms must manually enter their data and ensure compliance with audit and DSC requirements. TaxBuddy, however, simplifies this by importing relevant financial details, generating the right forms automatically, and verifying partner data. Both methods are valid under the Income Tax Act, but using an automated platform ensures greater accuracy and time efficiency, particularly for firms managing multiple partners or audits.

Q4. Which ITR form must partnership firms use for AY 2025-26? For the assessment year 2025-26, all partnership firms and LLPs are required to file returns using Form ITR-5. This form captures all types of income including business, capital gains, and other sources. It also includes schedules for balance sheet details, profit and loss accounts, and partner-specific remuneration data. However, small partnership firms (not LLPs) that opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE and have income up to ₹50 lakh may use Form ITR-4 (Sugam) instead. This simplified form eliminates the need to maintain detailed books of accounts. For all other partnership structures, ITR-5 remains mandatory.

Q5. What are the due dates for filing ITR for partnership firms? The standard due date for filing ITR for partnership firms not requiring an audit is 31 July 2025. For firms subject to audit under Section 44AB, the due date is 31 October 2025. However, the Central Board of Direct Taxes (CBDT) has provided an extension until 10 December 2025 for audit cases due to recent system updates and compliance workload. Filing before these deadlines is crucial to avoid late filing penalties under Section 234F, which can range from ₹1,000 to ₹5,000 depending on the delay and income level. Early filing also ensures faster processing of refunds and minimizes interest liabilities.

Q6. Is filing ITR online mandatory for firms? Yes, all partnership firms are required to file their returns electronically. Manual filing is not permitted. If the firm is subject to a tax audit, it must use a Class 3 Digital Signature Certificate (DSC) to verify its return. Non-audit firms can use either a DSC or an Electronic Verification Code (EVC) sent to the registered mobile number or email for verification. This shift to full digital compliance has reduced errors and made the filing process more transparent. Additionally, digital submission allows the Income Tax Department to process returns faster and cross-verify partner data seamlessly.

Q7. What is the tax rate applicable to partnership firms? Partnership firms and LLPs are taxed at a flat rate of 30% on their total income under the Income Tax Act, 1961. If the total income exceeds ₹1 crore, a surcharge of 12% applies, along with a 4% Health and Education Cess on the tax plus surcharge amount. Firms are not eligible for the concessional slab benefits available to individuals or HUFs. However, they can claim deductions for legitimate business expenses, partner remuneration (subject to limits), and interest on capital. These rates remain unchanged for FY 2024-25 (AY 2025-26).

Q8. What is the Alternate Minimum Tax (AMT) for partnership firms? The Alternate Minimum Tax (AMT) ensures that firms paying very low tax due to deductions still contribute a minimum amount to the exchequer. If the regular tax payable by a partnership firm is less than 18.5% of its adjusted total income, then AMT at 18.5% becomes applicable. Adjusted total income is calculated after adding back deductions claimed under sections such as 80-IA, 80-IB, or 10AA. AMT is particularly relevant for LLPs and firms availing large tax incentives. Credit for AMT paid can be carried forward for 15 assessment years to offset future tax liabilities.

Q9. What are the new partner remuneration limits from April 2025? Effective April 1, 2025, the Finance (No. 2) Act, 2024, has doubled the permissible remuneration payable to working partners. The revised limits are:

• On the first ₹6,00,000 of book profit (or in case of a loss): ₹3,00,000 or 90% of book profit, whichever is higher.
  

• On the balance of book profit: 60% of book profit. These changes allow firms to fairly compensate active partners while staying within tax-deductible limits. It also ensures that remuneration is taxed transparently, both at the firm and partner level. The amendment reflects the government’s effort to align compensation with inflation and modern business structures.
  

Q10. What is Section 194T and why is it important? Section 194T, introduced under the Finance (No. 2) Act, 2024, mandates TDS deduction on payments made by a partnership firm to its partners, including remuneration, interest on capital, or any share of profits. The provision comes into effect from April 1, 2025, and aims to improve tax transparency by ensuring that all partner payments are reported at the source. This change aligns partnership compliance with other TDS provisions, helping the department monitor cash flow and prevent underreporting. Firms must now deduct TDS at prescribed rates before making partner payments and deposit it within the due date specified under Section 200.

Q11. What documents are required for opening a bank account for partnership firms? When opening a current account for a partnership firm, banks require:

• The PAN card of the firm and all partners.
  

• A certified copy of the partnership deed.
  

• The firm’s registration certificate, if applicable.
  

• KYC documents (address proof, ID proof) of all partners.
  

• A partnership authorization resolution specifying who will operate the account.
  

• Proof of business address (utility bill, rent agreement, or property tax receipt). Some banks also ask for the latest ITR acknowledgment or Form 60/61 if PAN is unavailable. With the growing shift to digital banking, firms can now complete eKYC and upload documents online to speed up account activation.
  

Q12. How can TaxBuddy help in filing ITR for partnership firms? TaxBuddy simplifies ITR filing for partnership firms by combining AI-driven automation with expert guidance. The platform automatically detects whether the firm should file ITR-5 or ITR-4 based on income and structure. It pre-fills details using PAN, Form 26AS, and GST data, minimizing manual errors. For audit cases, TaxBuddy assists with uploading Form 3CA/3CB and 3CD, ensuring all partner remuneration and TDS details comply with the latest Finance Act provisions. The expert-assisted option connects firms directly with qualified tax professionals who review returns before submission. With built-in deadline reminders, compliance checks, and secure cloud storage, TaxBuddy offers an all-in-one solution for partnership firms seeking reliable, accurate, and timely tax filing.