Charge of tax in case of a firm
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
In the case of a firm which is assessable as a firm, tax shall be charged on its total income at the rate as specified in the Finance Act of the relevant year.
FAQs on Section 324 of Income Tax Act 2025
What is Section 324 of the Income Tax Act, 2025 about?
Section 324 deals with the charge of tax in the case of a firm that is assessable as a firm.
From when does Section 324 come into effect?
Section 324 comes into effect from 1st April, 2026.
Who is liable to pay tax under Section 324?
The firm itself is liable to pay tax on its total income if it is assessed as a firm under the Income Tax Act, 2025.
At what rate is tax charged on a firm under Section 324?
Tax is charged at the rate specified in the Finance Act of the relevant year.
Does Section 324 specify the tax rate applicable to firms?
No, Section 324 states that the tax will be charged at the rate mentioned in the relevant Finance Act, not in the section itself.
Is Section 324 applicable to all firms?
Section 324 is applicable only to those firms which are assessable as firms under the Act.
Does Section 324 apply to limited liability partnerships (LLPs)?
Only if the LLP is assessable as a firm under the provisions of the Income Tax Act, 2025.
Is income of the firm taxed in the hands of the partners under Section 324?
Section 324 only specifies that tax is to be charged on the firm’s total income. It does not deal with the taxation of partners.
Does Section 324 provide any deductions or exemptions?
No, Section 324 only specifies the charge of tax. Deductions and exemptions would be governed by other provisions of the Act.
Will the tax rate under Section 324 change every year?
Yes, the rate can change each year depending on what is specified in the relevant Finance Act.
Is a partnership firm required to file a return of income under Section 324?
Section 324 does not deal with return filing. Return filing requirements are covered under other sections of the Income Tax Act, 2025.
What is meant by “firm which is assessable as a firm”?
It refers to a partnership firm that meets the conditions specified under the Act to be treated as a taxable entity separate from its partners.
Does Section 324 apply to firms having only losses?
Yes, Section 324 applies to all firms that are assessable as firms, regardless of whether they have income or loss. However, actual tax liability may be impacted by the loss.
Is there any surcharge or cess mentioned in Section 324?
No, Section 324 only refers to tax being charged at rates specified in the Finance Act. Surcharge and cess, if any, would be part of that Finance Act.