Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
30% flat
Profits are taxed at 30% + surcharge + cess, regardless of amount. Confirm current rate.
Partner share exempt, remuneration deductible
Profit share is tax-free for partners; remuneration/interest within Section 40(b) limits is deductible to the LLP.
The rate, the partner side and the AMT angle
An LLP is taxed as a firm: a flat 30% on its total income, plus surcharge (where income crosses the threshold) and 4% cess — it doesn’t get the individual slabs, nor the lower 22% or 15% concessional company rates. Against that, three deductions help. Remuneration to working partners and interest on partners’ capital are deductible to the LLP within the Section 40(b) limits (and are then taxable in the partners’ hands as business income). The profit share itself, paid out of taxed profits, is exempt in the partners’ hands, so it isn’t taxed twice. Watch the Alternate Minimum Tax: an LLP claiming certain deductions can fall under AMT at 18.5% of adjusted total income, with a credit to carry forward. There’s no dividend-style tax on distributing profits, which is a genuine simplicity over a company. Planning the split between partner remuneration and interest (deductible, taxed in partners’ hands at their slabs) and retained profit (taxed at 30% in the LLP) is where most of the LLP tax planning sits. Confirm the current rate, surcharge thresholds and AMT position, since these are revised by Finance Acts.