Income tax return for partnership firms and LLPs (ITR-5)

Who files ITR-5?

ITR-5 is for persons other than individuals, HUFs, companies and those filing ITR-7. In practice it is the return for partnership firms, limited liability partnerships, associations of persons, bodies of individuals, artificial juridical persons, estates of deceased or insolvent persons, business trusts and investment funds.

Firms and LLPs must file every year, even with a loss or nil income. Income-tax treats an LLP like a firm, so the same rate and partner remuneration rules apply. For income from 1 April 2026, the obligation moves to section 263 of the Income-tax Act 2025, and the return form for tax year 2026-27 will be the one notified under the Income-tax Rules 2026.

Which due date applies?

The due date depends on whether the entity's accounts must be audited under income-tax or any other law. An LLP whose turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh must get its accounts audited under the LLP rules, which places it in the audit category even if no tax audit applies. A firm crossing the tax audit limits under section 44AB is also in that category.

For FY 2025-26, CBDT extended the audit category date from 31 October to 21 November 2026, and the tax audit report date to 21 October 2026. Firms with international transactions requiring Form 3CEB file by 30 November 2026. Non-audit firms and LLPs file by the earlier date in the due-date table for non-audit business returns, which for AY 2026-27 is listed as 31 August 2026.

Tax on firms and partner payments

Firms and LLPs pay tax at 30%, plus a 12% surcharge where income exceeds ₹1 crore, plus 4% health and education cess. They do not get the concessional regimes available to companies. Alternate minimum tax at 18.5% of adjusted total income can apply where certain profit-linked deductions are claimed.

Interest and remuneration paid to working partners are deductible within limits set by section 40(b) of the 1961 Act. Interest is capped at 12% a year. For remuneration, from AY 2025-26 the limit is the higher of ₹3 lakh or 90% of the first ₹6 lakh of book profit, plus 60% of the balance. From 1 April 2025, firms must deduct TDS at 10% on partner remuneration and interest above ₹20,000 a year.

What data do you need?

ITR-5 closely follows the structure of ITR-6, with full balance sheet and profit and loss schedules and a separate schedule for partners. Keep these ready, along with the partnership deed or LLP agreement in force during the year.

• Audited financial statements or final accounts
• Partner details: PAN, profit share, capital, interest and remuneration paid
• Tax audit report, if applicable, filed by the auditor
• Form 26AS and AIS for TDS, TCS and reported transactions
• Advance tax and self-assessment tax challans
• Brought forward losses and depreciation

Late filing, errors and consequences

A return filed after the due date attracts a fee of ₹5,000, reduced to ₹1,000 where total income is up to ₹5 lakh, and interest at 1% a month on unpaid tax. A belated return cannot carry forward business losses. Missing the belated date of 31 December 2026 leaves only an updated return at additional tax.

Common mistakes include partner remuneration beyond the deed or the section 40(b) limit, missing TDS on partner payments, wrong verification method, and mismatch between partners' returns and the firm's figures. Refogo's partner professionals can prepare and file ITR-5 for firms and LLPs for a fixed fee.

Step by step

1. 1Close the books

   Finalise accounts and get the statutory or tax audit completed where required.

2. 2Compute partner payments

   Check interest and remuneration against the deed and the section 40(b) limits.

3. 3Reconcile tax credits

   Match TDS and TCS with Form 26AS and AIS, and pay balance tax.

4. 4Prepare ITR-5

   Fill schedules for balance sheet, profit and loss and partner details.

5. 5Verify the return

   Verify with DSC where accounts are audited, otherwise with EVC by the authorised partner.