LLP Compliance Checklist – Audit and Annual Filings Under Various Laws
Once you complete your LLP incorporation, you need to comply with the requirement of the Limited Liability Partnership Act, 2008 as well as the taxation laws. Audits form an important part of the LLP compliance checklist. Audits and annual filings for LLP are required as per the following laws:
- Limited Liability Partnership Act, 2008
- Income Tax Act, 1961
- Goods and Services Tax Act, 2017
If you have obtained LLP registration, then it’s important for you to have an in-depth understanding of the annual return and audit requirements of the LLP.
Limited Liability Partnership Act, 2008
- Audit under LLP Act, 2008: LLPs shall be required to maintain proper books of accounts either on a cash or accrual basis. Further, LLPs whose annual turnover in any financial year exceeds Rs. 40 lakhs or whose contributions exceed Rs. 25 lakhs shall be required to get its accounts audited.
- Annual Return: As per Section 35, every LLP shall be required to furnish its annual return in Form-11. The annual return shall be furnished within 60 days after the end of the financial year.
- Statement of Accounts and Solvency: Every LLP shall be required to furnish a Statement of Accounts and Solvency in Form-8 within 30 days after the expiry of 6 months from the end of the financial year.
In case the LLP fails to maintain books of accounts, prepare the statement of accounts or solvency or comply with the requirements of the audit shall be liable to a fine which shall not be less than Rs. 25,000 but may extend to Rs. 5 lakhs. Further, every designated partner of the LLP shall be liable to a fine which shall not be less than Rs. 10,000 but may extend to Rs. 1 lakh.
Further, in case of failure to file the statement of accounts and solvency, the LLP and its designated partners shall be liable for a penalty of Rs. 100 per day during which the failure continues. However, the penalty shall not exceed Rs. 1 lakh for LLP and Rs. 50,000 for every designated partner.
Income Tax Act, 1961
Income Tax Audit: Income tax audits for LLP shall become applicable as per Section 44AB of the Income Tax Act, 1961 if it satisfies the following conditions:
(a) It carries on the business and the total sales, turnover or gross receipts exceed Rs. 1 crore in any previous year. However, in the case of a person who satisfies the following conditions, the limit applicable for audit shall be Rs. 10 crores instead of Rs. 1 crore:
- the aggregate of all amounts received including the amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed 5% of the said amount; and
- the aggregate of all payments made including the amount incurred for expenditure, in cash, during the previous year does not exceed 5% of the said payment,
(b) It carries on profession and the gross receipts exceed Rs. 50 lakhs in any previous year; or
(c) It carries on the business and the profits and gains from the business are deemed to be the profits and gains of under section 44AE / 44BB / 44BBB and it has claimed its income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or
(d) It carries on the profession and the profits and gains from the profession are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or
(e) It carries on the business and the provisions of section 44AD(4) are applicable in his case and his income exceeds the maximum amount which is not chargeable to income tax in any previous year.
Income Tax Return: Apart from the above tax audit applicable to LLP, every LLP shall be mandatorily required to file ITR irrespective of the amount of profit or loss incurred. The form applicable for LLP shall be ITR-5. Following are the due dates for filing the income tax return for LLPs:
LLP that is required to get its accounts audited under the Income-tax Act or under any other law
31st October of the assessment year
LLP that is required to furnish a report in Form No. 3CEB under Section 92E
30th November of the assessment year
In any other case
31st July of the assessment year
Goods and Services Tax Act, 2017
Apart from the regular GST returns, the GST law requires the LLP to ensure the following annual return related compliances:
- GSTR-9: Annual return in form GSTR-9 shall be filed by the person registered as a regular taxpayer under GST if their aggregate turnover during the financial year exceeds Rs. 2 crores. The due date for filing GSTR-9 is 31st December after the end of the financial year.
- GSTR-9C: Registered persons whose aggregate turnover during the financial year exceeds Rs. 5 crores shall be required to furnish a reconciliation statement in Form GSTR-9C on a self-certification basis along with the annual return. For those registered persons whose turnover is less than Rs. 5 crores, furnishing of GSTR-9C is optional.
In a Nutshell
Audits act as a watchdog for the government to ensure that all the provisions are followed by the businesses and professions in India. As LLPs are a blend of partnership firms and companies that limits the liabilities of the partners of the LLP, therefore, audits ensure that the position as indicated by the financial statements and records of the LLP are true and fair. Thus, if you have limited liability partnership registration, then ensure to comply with the above requirements.
Author : Dipen
Date : 02-Jul-2022