Limited Liability Partnership, a kind of partnership done when two or more people come together and invest in Profit Sharing Company but are liable for any loss only up to the amount of share invested. LLP is a mixture of a partnership and a company; it has its own legal identity and can have assets and liabilities in its own name, the liability incurred by shareholders is limited to the extent of investment made by them. Often a person who starts any business has to be aware of the tax rules and the registration procedure. No entity can safeguard oneself from taxation rules and procedure, same goes for LLP. LLP is liable to pay tax but has some benefits in comparison to other business entities like a company.
Alternate Minimum Tax is liable for the LLPs. A LLP has to register and pay AMT as and when the due date comes.
Calculation of AMT is done in a proper manner in Limited Liability Partnership to avoid any kind of confusion and tax evasion.
Step 1: Calculate the gross total income of the LLP under normal provisions of the Income Tax Act.
Step 2: check and deduct the amount which is derived from the incomes which are exempted from tax.
Step 3: Calculate the income after deducting exempted incomes and then claim deductions from section 80IA, 80IAB, 80IB, 80ID, 80IE and 80JJA.
Step 4: If the LLP is under Special economic zone then claims a deduction from section 10AA.
Step 5: After claiming all the deductions, calculate the total net income which is liable for the tax calculation.
Step 6: Once the net income is calculated, apply AMT rate- 18.5%+ Education Cess- 3%, totalling it to approximately 19.05%.
Step 7: In case of any credit, one can claim credit on AMT for subsequent 10assessment years.