Compliance Requirements for Partnership Firms in India

Introduction

Any business entity registered in India, including partnership firms, is required to comply with regulations prescribed by the relevant authorities. These compliances generally include filing annual returns, maintaining accurate accounting records, complying with tax laws, and meeting other statutory obligations. Adhering to partnership firm compliance requirements ensures transparency, accountability, and lawful business operations, while protecting stakeholders’ interests and preserving the credibility of the firm. This article provides a detailed overview of the compliance requirements applicable to partnership firms in India.

What Is a Partnership Firm?

A partnership firm in India is a business arrangement in which two or more individuals come together to carry on a business with the objective of earning profits. The partners contribute capital, share responsibilities, risks, and profits in accordance with the terms laid out in the partnership deed.

This form of business is governed by the Indian Partnership Act, 1932, which defines the rights, duties, and liabilities of partners. Unlike companies, a partnership firm does not have a separate legal identity, and the partners are personally liable for the firm’s debts and obligations.

What Are the Compliances Involved in a Partnership Firm?

Partnership firms in India are required to comply with various periodic and annual statutory obligations, depending on their turnover, nature of business, and number of employees. The key compliances are outlined below:

1. Income Tax Return (ITR) Filing

Partnership firms are taxed at a flat rate of 30% on their total income. While the firm pays tax on its income, each partner’s share of profit or loss must be reported in their individual income tax returns, where it is taxed as per applicable slab rates.

This is the primary annual compliance for partnership firms. Firms can file their ITR using the following forms:

ITR-4: Applicable to firms with total income up to ₹50 lakh opting for the presumptive taxation scheme.
ITR-5: Mandatory for firms subject to a tax audit, generally where turnover exceeds ₹1 crore in the preceding financial year.

2. GST Return Filing

A partnership firm must register under Goods and Services Tax (GST) if its annual turnover exceeds ₹40 lakh (threshold subject to change).

Once registered, the firm must file regular GST returns, including:

GSTR-1: Details of outward supplies
GSTR-3B: Summary return with tax payment
GSTR-9: Annual return

Firms opting for the composition scheme are required to file GSTR-4 instead.

3. TDS Return Filing

Partnership firms acting as deductors and holding a valid Tax Deduction and Collection Account Number (TAN) must deduct Tax Deducted at Source (TDS) on specified payments exceeding prescribed limits. These payments may include rent, interest, professional fees, and contractor payments.

TDS deducted must be deposited within the stipulated timelines, and appropriate returns must be filed using relevant forms, such as:

Form 24Q: Salary payments
Form 26Q / 26QB: Non-salary payments and immovable property transactions

4. EPF Return Filing

Partnership firms employing more than 20 employees must register under the Employees’ Provident Fund (EPF) scheme. This requires periodic filing of EPF returns and timely contribution towards employees’ retirement benefits.

5. Accounting and Bookkeeping

Partnership firms are required to maintain proper books of accounts if:

Annual turnover or gross receipts exceed ₹25 lakh, or
Income from business exceeds ₹2.5 lakh in any of the preceding three financial years

Maintaining accurate records ensures compliance and facilitates audits and assessments.

6. Tax Audit

A partnership firm must undergo a tax audit conducted by a Chartered Accountant if its turnover exceeds ₹1 crore in the previous financial year.

This limit may be increased to ₹10 crore (subject to budget notifications) if cash receipts and payments do not exceed 5% of total transactions. A tax audit verifies financial accuracy and compliance with income tax laws.

7. Intimation of Changes to the Registrar of Firms

Any changes to the partnership firm must be reported to the Registrar of Firms within 90 days. These changes include:

Admission or retirement of partners
Changes in capital contribution
Amendments to the partnership deed
Change in firm name, address, or nature of business
Opening or closure of branches
Dissolution of the partnership firm

Consequences of Non-Compliance for a Partnership Firm

Failure to meet compliance requirements can lead to serious consequences, including:

Monetary Penalties: Fines imposed by regulatory authorities based on the severity of the default
Legal Action: Litigation initiated by authorities or affected parties
Loss of Reputation: Reduced trust among clients, vendors, and investors
Business Disruptions: Operational delays due to regulatory actions or legal proceedings
Cancellation of Licenses or Registrations: Loss of legal authority to conduct certain business activities
Court Injunctions: Legal restrictions preventing the firm from carrying out operations until compliance is restored
Criminal Liability: In cases of fraud or severe non-compliance, partners or responsible individuals may face fines or imprisonment

About the Author

Dakesh

Dakesh translates complex legal regulations into clear, actionable guidance, enabling entrepreneurs to remain compliant while building sustainable and scalable businesses.

January 10, 2026