Limited Liability Partnership (LLP) - Taxation and Remuneration to Partners
A new type of entity by the name of limited liability partnership (LLP) has come into existence by LLP Act, 2008. LLP is nothing but an alternate corporate business that offers twin benefits of a limited liability companies as well as the flexibility of partnership firms. With the introduction of the LLP Act, 2008 a taxing framework was the next essential step. The Finance Bill proposes to tax the LLP at entity level along the line of general partnership meaning that LLP shall be liable to pay tax at the entity level while the share of the profits received by the partners shall be tax exempt.
Amendments:
The Finance Bill proposes the following new provisions & amendments to existing provisions in relation to LLP:
By virtue of clause 3(c) of the Finance Bill & section 2(23) (i), the term "partner" will include a partner of a LLP & the term "partnership" extends to include LLP.
By virtue of clause 53 of the Finance Bill, new clause (cd) under section 140, the Return of Income [ROI] of the LLP will be signed and verified by the designated partner.
In case of absence of designated partner or if the designated partner cannot sign the Return of Income, then the same shall be signed by any other partner.
By Clause 58 of the Finance Bill, section 167C makes every partner of a LLP jointly liable for the taxes to be paid by the LLP for a period during which he was a partner, unless the non-recovery of taxes is not due to gross neglect, misfeasance or breach of duty on his part.
LLPs are excluded from the provisions of presumptive taxation contained in the section 44AD of the Act
