ICAI Advocates for Concessional Tax Regime for Partnership Firms
By: Admin
Date: January 6, 2025
Categories: ICAI | News
Reading Time: 4 Min
The Institute of Chartered Accountants of India (ICAI) has put forth a recommendation for a special concessional tax regime tailored for partnership firms, including limited liability partnerships (LLPs). This is part of its comprehensive suggestions for the review of the Income-tax Act, 1961, as announced in the July 2024 Budget.
Current Taxation for Partnership Firms
Partnership firms, including LLPs, are currently taxed at the following rates:
- Income Tax Rate: 30%
- Surcharge: 12% if taxable income exceeds ₹1 crore
Given these relatively high rates, ICAI has proposed reforms to reduce the tax burden and foster a more favorable environment for such entities.
Key Recommendations from ICAI
To simplify tax laws, reduce litigation, and ease compliance, the ICAI has made the following suggestions:
1. Simplified Taxation for Partnership Firms
ICAI recommends introducing a special concessional tax regime to alleviate the tax burden on partnership firms and LLPs.
2. Simplification of Charitable Trusts’ Taxation
The ICAI has proposed a streamlined registration and taxation process for charitable trusts to encourage better compliance and governance.
3. E-Ledger System for TDS/TCS
To enhance transparency, ICAI suggests implementing year-wise E-ledgers for TDS/TCS and advance tax payments. These ledgers would allow taxpayers to adjust credits against their income tax dues.
4. Time Extension for Belated Returns
ICAI has recommended extending the deadline for filing belated returns by three months, making March 31 the final date of the assessment year.
5. Measures to Reduce Litigation
To address tax-related disputes, ICAI suggests the following:
- Aligning TDS and TCS rates to minimize discrepancies
- Periodically reviewing case disposals by assessing officers
- Implementing an effective grievance redressal mechanism
Suggestions for Budget 2025-26
ICAI’s pre-budget memorandum emphasizes the need for tax reforms that align with India’s broader economic goals:
Tax Reforms for Economic Growth
ICAI advocates tax benefits to encourage climate change mitigation strategies, thereby promoting environmental sustainability.
Simplified Capital Gains Tax Regime
It calls for further simplifications under sections 54 to 54F of the Income Tax Act, which govern capital gains tax exemptions.
Encouraging Women Property Ownership
To incentivize property ownership by women, ICAI recommends removing restrictive provisions under Section 27 and Section 64(1)(iv)/(vi).
Government’s Efforts to Review the Income-tax Act
In line with the Finance Minister’s Budget 2024 announcement, the Central Board of Direct Taxes (CBDT) has formed a committee to review and simplify the Income-tax Act. This initiative aims to make tax laws more concise, clear, and taxpayer-friendly.
As a result of these reforms, the government expects to create a fair and efficient tax regime, reducing disputes, enhancing compliance, and bolstering taxpayer confidence.
