ITR-5: Who Should File It? 7 Myths, Busted

ITR-5 is the return that partnership firms and LLPs file every year, and it attracts more confusion than almost any other form. Let's clear things up, one myth at a time.

First, the one-paragraph answer

ITR-5 is the income tax return for entities that are not individuals, HUFs, companies or trusts filing ITR-7. In practice that means:

1. Partnership firms (registered or not)
2. Limited Liability Partnerships (LLPs)
3. Associations of Persons (AOPs) and Bodies of Individuals (BOIs)
4. Artificial juridical persons, local authorities, cooperative societies
5. Estates of deceased or insolvent persons, business trusts and investment funds

If your MSME runs as a firm or LLP, ITR-5 is your form.

Myth 1: "Our LLP had no business this year, so we don't need to file."

Busted. An LLP or firm must file ITR-5 every year, even with zero income, a loss or no transactions at all. Not filing invites notices and penalties, and makes life harder when you finally want to close or convert the entity.

Also, ITR-5 is an income tax return. Your LLP's ROC filings (Form 8 and Form 11) are separate, and both are due. See LLP annual filing.

Myth 2: "Partners file ITR-5 for their share of profit."

Busted. The firm files ITR-5. Each partner files their own return (usually ITR-3) showing:

1. Their share of profit (exempt in their hands, since the firm has already paid tax on it), and
2. Remuneration and interest received from the firm (taxable as business income in their hands)

Two returns, two different taxpayers.

Myth 3: "We can pay partners whatever salary we like and deduct it."

Busted. The firm can deduct partner remuneration only if the partnership deed authorises it, and only up to a limit based on book profit. From AY 2025-26 the limits are:

Interest on partners' capital is deductible only up to 12% simple interest per year, again only if the deed allows it.

Anything above these limits is disallowed and taxed in the firm's hands. Is your deed silent on remuneration? Fix it before year-end.

Myth 4: "Payments to partners don't need TDS."

Busted, and this one is new. From 1 April 2025, Section 194T requires firms and LLPs to deduct 10% TDS on salary, remuneration, commission, bonus and interest paid to partners, once total payments to a partner exceed ₹20,000 in a year.

Many small firms missed this in their first year. Check your books. Read our 194T explainer.

Myth 5: "Firms pay tax at slab rates like individuals."

Busted. Firms and LLPs pay a flat 30% on taxable income, plus:

1. Surcharge of 12% if income exceeds ₹1 crore
2. Health & education cess of 4%

There's no basic exemption limit. And if the firm claims certain deductions, Alternative Minimum Tax (AMT) at 18.5% of adjusted total income can apply.

Myth 6: "The due date is 31 July for everyone."

Busted. The ITR-5 due date depends on whether your accounts need an audit:

The government sometimes extends these dates, so check CBDT announcements each year. Our ITR due-date guide tracks the latest.

Myth 7: "Anyone can e-verify ITR-5 with an OTP."

Partly busted. If the firm's accounts are audited under Section 44AB, the return must be signed with a Digital Signature Certificate (DSC) of the authorised partner. Non-audit cases can usually e-verify with EVC/Aadhaar OTP.

No DSC yet? Get one here. It takes a little time to issue, so don't leave it to the last week.

Bonus: what's changing with the new Income-tax Act?

The Income-tax Act, 2025 takes effect from 1 April 2026, and section numbers are renumbered going forward. Returns filed in 2026 for FY 2025-26 still follow the 1961 Act rules described above. From FY 2026-27, check with your accountant how the new provisions map to these rules.

ITR-5 documents checklist

1. ☐ PAN of firm/LLP and partners
2. ☐ Partnership deed / LLP agreement (with remuneration and interest clauses)
3. ☐ Profit & loss account and balance sheet
4. ☐ Tax audit report (Form 3CA/3CB + 3CD), if applicable
5. ☐ Bank statements and GST returns (reconciled)
6. ☐ TDS/TCS certificates and Form 26AS / AIS
7. ☐ Partners' capital accounts, remuneration and interest workings
8. ☐ Advance tax challans
9. ☐ DSC of the authorised partner (audit cases)

Quick FAQs

Can a proprietorship file ITR-5? No. A proprietor files ITR-3 or ITR-4 as an individual.

Which ITR does a private limited company file? ITR-6. See ITR-6 filing.

Is ITR-5 filed online only? Yes, on the income tax e-filing portal.

Let us take ITR-5 off your plate

StartupFlora prepares and files ITR-5 for firms and LLPs, from partner remuneration workings to audit coordination and DSC filing. Book a consultation.

General information only, not tax advice. Tax rates, limits and due dates change, so verify with the Income Tax Department or a qualified professional.