LLP income tax and GST problems and how to fix them
LLPs are taxed as firms, and most tax problems come from the partnership rules: remuneration and interest that are not authorised, limits that are exceeded, and TDS that is now required on partner payments. These are the questions partners and accountants ask us most.
8 problems solvedFor LLP partners, CAs, CSs and accountantsLast reviewed: 5 October 2026
The assessing officer disallowed part or all of the remuneration paid to partners.
Why it happens
The LLP agreement did not authorise remuneration, or did not specify the amount or the method of calculation.
Remuneration was paid to a non-working partner.
It exceeded the limit on book profit. From assessment year 2025-26 the limit is the higher of ₹3 lakh or 90% of the first ₹6 lakh of book profit, plus 60% of the balance.
How to fix it
Check the agreement clause and the computation of book profit.
Correct the agreement prospectively by a supplementary agreement and Form 3.
Respond to the assessment with the agreement and computation where the payment was within the rules.
Avoid it next time
Write the remuneration formula into the LLP agreement and compute it on book profit every year.
Is TDS required on remuneration and interest paid to partners?
What you see
The accountant asks whether TDS applies to partner salary, bonus, commission or interest.
Why it happens
From 1 April 2025, a firm, including an LLP, must deduct TDS at 10% on salary, remuneration, commission, bonus or interest paid to a partner when the total for the year exceeds ₹20,000.
How to fix it
Deduct TDS at the time of credit or payment, whichever is earlier, and deposit it on time.
File the quarterly TDS returns and issue certificates to partners.
Avoid it next time
Set up partner payments in payroll or accounting with TDS from April each year.
Law: Section 194T, Income-tax Act 1961 (inserted by the Finance (No. 2) Act 2024), carried into the Income-tax Act 2025Income tax for LLP →#
For partners
Why does our LLP pay more tax than a company?
What you see
The partners compare the LLP's tax with a company's concessional rate.
Why it happens
An LLP is taxed at 30% plus surcharge (where income exceeds ₹1 crore) and cess. The concessional regime available to companies is not available to LLPs.
On the other hand, profit shared with partners is exempt in their hands, and remuneration and interest within limits are deductible.
How to fix it
Plan partner remuneration and interest on capital within the permitted limits.
Compare the total tax on the LLP and partners, not only the entity rate.
Avoid it next time
Model taxes for both structures before choosing an LLP or a company.
The LLP's GST application received a query or was rejected.
Why it happens
The authorised signatory's authority (a partners' resolution) is missing.
The principal place of business proof is old or does not match, or Aadhaar authentication of the authorised signatory or partners failed.
How to fix it
Attach the partners' resolution naming the authorised signatory.
Attach a recent utility bill, the rent agreement or owner's consent, exactly matching the address entered.
Complete Aadhaar or biometric authentication for the authorised signatory and the partners named in the application, and reply to any query (Form REG-03) in Form REG-04 within seven working days.
Avoid it next time
Use the same address documents that were accepted for the LLP's registered office, if it is the same place.
The LLP's tax computation shows alternate minimum tax (AMT) higher than normal tax.
Why it happens
An LLP that claims certain deductions (such as the 80-IAC startup deduction) pays AMT at 18.5% (plus surcharge and cess) of adjusted total income if that is higher than normal tax.
How to fix it
Compute AMT alongside normal tax, and pay the higher.
Check whether AMT paid can be carried forward as a credit under the current law before relying on it, and get the required accountant's report.
Avoid it next time
Model AMT before claiming tax holidays.
Law: Sections 115JC to 115JF, Income-tax Act 1961, carried into the Income-tax Act 2025Tax rate for LLP in India →#
Stuck on one of these right now? Send us the SRN, the notice or a screenshot of the error. We will tell you the fix and the deadline, and file it for you if you want.
