Firm

Firm – A firm is a business organization formed by two or more persons who come together to carry on a business, profession, or trade with the objective of earning profit. Such partnerships are governed by the Indian Partnership Act, 1932, or, in the case of Limited Liability Partnerships (LLPs), by the Limited Liability Partnership Act, 2008. For income tax purposes, a firm is treated as a separate taxable entity. The firm’s income earned during a Financial Year (FY) is evaluated and taxed in the corresponding Assessment Year (AY).

Example: Income earned by a firm during FY 2022–23 is assessed and taxed in AY 2023–24 under the Income Tax Act, 1961.