partnership

Dear John,

Registration is not important but what is necesary is the deed.

Below is the extract from an article which can be reached by clicking on this link  https://business.gov.in/manage_business/taxation_partnerships.php

Under the Act, a partnership firm may be assessed either as a partnership firm or as an association of persons(AOP). If the firm satisfies the following conditions, it will be assessed as a partnership firm, otherwise it will be assessed as an AOP:-

• The firm is evidenced by an instrument i.e. there is a written partnership deed.
   
• The individual shares of the partners are very clearly specified in the deed.
   
• A certified copy of partnership deed must accompany the return of income of the firm of the previous year in which the partnership was formed.
   
• If during a previous year, a change takes place in the constitution of the firm or in the profit sharing ratio of the partners, a certified copy of the revised partnership deed shall be submitted along with the return of income of the previous years in question.
   
• There should not be any failure on the part of the firm while attending to notices given by the Income Tax Officer for completion of the assessment of the firm.

It is more beneficial to be assessed as a partnership firm than as an AOP, since a partnership firm can claim the following additional deductions which the AOP cannot claim :-

• Interest paid to partners, provided such interest is authorised by the partnership deed.
   
• Any salary, bonus, commission, or remuneration (by whatever name called) to a partner will be allowed as a deduction if it is paid to a working partner who is an individual. The remuneration paid to such a partner must be authorised by the partnership deed and the amount of remuneration must not exceed the given limits