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India: Domestic Corporate Taxation

Taxation of a Limited Liability Partnership

LLPs, like Indian companies, are taxed on the previous year's income. Thus, income in the 2012/2013 financial year is assessed to tax in the 2013/2014 year, at a rate of 30% plus 7.5% surcharge and education 'cess', for a total of 32.445% (2012/13).

LLPs with taxable income below INR10m are exempt from the surcharge.

The Direct Taxes Code, would put in place a flat 30% rate of corporate income tax for LLPs. The Direct Taxes Code was due to be introdued in April 2012. It was then delayed for at least a year, and put off yet again in early 2013. The situation is therefore highly uncertain.

The salaries and expenses of members of the LLP are allowed as deductions from income before taxation, subject to certain limits, but are taxed in the hands of the members.

Profit remaining after tax is distributed to members in proportion to their contributions or according to the LLP Agreement and is not taxed further. In this respect, the LLP has a tax advantage over the regular limited company, whose dividends are subject to withholding tax.



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