Liability of partners of limited liability partnership in liquidation
[Section-331 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Irrespective of anything contained in the Limited Liability Partnership Act, 2008, where any tax including penalty, interest, fees or any other sum payable under the Act is due, and cannot be recovered, from––
- (a) the limited liability partnership in respect of any income of any tax year; or
- (b) any other person in respect of any income of any tax year during which such other person was a limited liability partnership,
then, in such case, every such person who was a partner of such partnership at any time during the relevant tax year, shall be jointly and severally liable for the payment of such due amount, unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership.
FAQs on Section 331 of Income Tax Act, 2025
What is the main objective of Section 331 of the Income Tax Act, 2025?
Section 331 aims to ensure that tax dues from a limited liability partnership (LLP) in liquidation are recoverable from its partners if such dues cannot be collected from the LLP itself.
Does Section 331 override provisions of the Limited Liability Partnership Act, 2008?
Yes, Section 331 operates notwithstanding anything contained in the Limited Liability Partnership Act, 2008.
What types of amounts are covered under Section 331 for recovery?
Section 331 covers tax, penalty, interest, fees, or any other sum payable under the Income Tax Act, 2025.
When does the liability of a partner under Section 331 arise?
A partner becomes liable when the tax dues cannot be recovered from the LLP or from any other person during the relevant tax year when that person was an LLP.
Are all partners liable under Section 331?
Yes, every person who was a partner of the LLP at any time during the relevant tax year is liable, unless they can prove specific exceptions.
Is the liability of partners under this section joint or individual?
The liability is joint and several, meaning each partner is individually responsible for the entire amount if recovery from the LLP fails.
Can a partner avoid liability under Section 331?
Yes, a partner can avoid liability if they prove that non-recovery of the tax cannot be attributed to their gross neglect, misfeasance, or breach of duty in relation to the LLP’s affairs.
Does Section 331 apply only when the LLP is in liquidation?
Yes, the section applies in cases where the LLP is in liquidation and its dues under the Act cannot be recovered.
What is meant by ‘gross neglect’ in the context of Section 331?
Gross neglect refers to a significant failure by the partner to act with reasonable care in relation to the LLP’s tax responsibilities.
What happens if a partner cannot prove absence of gross neglect or misfeasance?
If the partner fails to prove this, they will be held jointly and severally liable for the unpaid tax amount.
What period does ‘relevant tax year’ refer to under this section?
It refers to the tax year during which the unpaid tax was incurred and the person was a partner of the LLP.
Does this section apply to former partners of an LLP?
Yes, it applies to any person who was a partner at any time during the relevant tax year, regardless of their current status.
Is the partner’s liability limited to their capital contribution?
No, under Section 331, the liability is not limited to capital contribution and extends to the full unpaid amount, jointly and severally.
Does this provision affect the limited liability status of LLP partners?
Yes, it overrides the limited liability protection in respect of tax dues when conditions of this section are met.
