Partnership firms are incorporated by two or more persons who agree to come together and carry out a business and share the profits and losses carried on by any one of them or all of them. The legal identity of the partnership firm is not separate from its members thus the partners are personally liable for discharging the liabilities of the partnership firm. Further, in India the partnership firms are registered under the Partnership Act 1932.
Annual compliances mean conforming to a rule, policy or law and submitting certain reports annually. The annual compliance requirements of the partnership firm are very less as compared to other forms of companies like private limited, public companies and limited liability partnership.
Compliances for Partnership Firm
- Common Compliance- There are certain common compliance requirement which every partnership firm is required to fulfill within the specified period of time. Failing to comply with any of the provisions may cause trouble for the partnership firm and the partners. The various common compliance requirements for partnership firms are as follows-
- Every registered partnership firm shall file form-1 within 1 year to establish the registration of firm.
- In case of the change in Firm Name or Principal Place or Nature of Business, Form II shall be filed within a time limit of 90 days.
- Any information of Closing and Opening of Branches in Form III with a time limit of 90 days.
- Information regarding the Change in Name/Address of Partner in Form IV with a time limit of 90 days.
- Any change in Constitution or Dissolution of firm in Form V with a time limit of 90 days
- In case a minor becomes major and elects to become or not to become the partner then information of such event shall be filed in Form VI with a time limit of 90 days.
- Tax Compliances- Every partnership firm is required to obtain a permanent account number and Tax Deduction Account Number registration from the Income Tax Department or the relevant Authorities once it is registered.
- Filing of income returns- Every partnership firm is required to file its income tax returns annually irrespective of the amount of loss or revenue. The partnership firm is required to file returns electronically with or without attaching a digital signature certificate.
However when the annual turnover of partnership exceeds rupees one lakhs then such firm is required to get its accounts audited. Further, if the accounts of the partnership firm are audited then the returns shall be furnished with DSC attached.
After taking a close look at the compliance requirement of partnership firm it can be concluded that the compliance requirement of the partnership firm is not very stringent. However in order to ensure more efficient working of partnership firms more Compliances can be implemented in light of Wealth Tax, 1957, Excise Duties, Customs Act, 1962, Service Tax and Local taxes, Labor Laws such as Provident Fund Act, 1952, Employees State Insurance, 1948, Minimum Wages Act, 1948, and Factories Act, 1948 can be included for compliance purposes of partnership firm.