Page 193 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 8.3.3 Income Tax Rates for Partnership Firm A.Y. 2012-13, 2011-12, 2010-11
and 2009-10

Income Tax rates applicable on partnership firm are listed below. Basic rates were unchanged in

last four years however effective rates were reduced after removal of surcharge from fi rm tax.
Table 8.2: Income Tax Rates for Partnership Firm

FIRM 2009-10 2010-11 2011-12 2012-13
Tax Rate 30% 30% 30% 30%
Surcharge (if net income exceeds 1 Crore) 10% - - -
Edu. Cess & SHE Cess 3% 3% 3% 3%

Source: http://www.itaxindia.org/2011/10/income-tax-rates-for-partnership-fi rm.html

8.3.4 Advantages of a Partnership

Following are the advantages of a partnership:

1. Partnerships are relatively easy to establish; however time should be invested in developing
the partnership agreement.
2. With more than one owner, the ability to raise funds may be increased.

3. The profits from the business flow directly through to the partners’ personal tax return.

4. Prospective employees may be attracted to the business if given the incentive to become a
partner.

5. The business usually will benefit from partners who have complementary skills.
8.3.5 Disadvantages of a Partnership

Following are the disadvantages of a partnership:

1. Partners are jointly and individually liable for the actions of the other partners.
2. Profits must be shared with others.

3. Since decisions are shared, disagreements can occur.
4. Some employee benefits are not deductible from business income on tax returns.

5. The partnership may have a limited life; it may end upon the withdrawal or death of a
partner.

Self Assessment

Fill in the blanks:

9. Partnership firms are governed by the provisions of the …………………..
10. A …………………. is generally carried on through a partnership.

11. The partnership firm is taxed as a …………….. entity.

12. Under the Act, a partnership firm may be assessed either as a partnership firm or as an
………………….

188 LOVELY PROFESSIONAL UNIVERSITY