India: Domestic Corporate Taxation
Taxation of a Limited Liability Partnership
This page was last updated on 13 Dec 2018.
Limited liability partnerships (LLPs), like Indian companies, are taxed on the previous year's income. Hence income in the 2016-2017 financial year is assessed for tax in 2017-2018. The rate is 30%, plus a 12% surcharge on the base tax rate and health and education 'cess' of 4%, for a total of 34.8%.
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 introduced in April 2012. Since then, it has been delayed several times and has still not been implemented. 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.