Proprietorship Tax Return Filing
At Gubera Consultancy, we understand that tax obligations can be complex and time-consuming, especially for proprietorship businesses. That’s why we offer effortless tax return filing services to simplify the process for you.
If you’re ready to simplify your tax journey and ensure a brighter financial future, don’t hesitate to get in touch with us. Our friendly team is here to guide you through the process and answer any questions you may have.
Let Gubera Consultancy be your trusted partner in navigating your tax obligations. Contact us today to learn more about our effortless proprietorship tax return filing services and how we can help you optimize your tax strategy.
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Proprietorship Compliance in India
Running a sole proprietorship in India comes with a set of crucial financial and legal responsibilities. Compliance with various tax and regulatory requirements is essential to ensure your business’s smooth operation and growth. This includes filing income tax returns, TDS returns, GST returns, EPF returns, maintaining accurate accounting records, and sometimes undergoing a tax audit.
Importance of Compliance: Filing tax returns is an essential obligation for businesses operating as sole proprietorships in India. It not only ensures that you are fulfilling your legal responsibilities but also helps in building trust and credibility with your stakeholders. Compliance demonstrates your commitment to transparency and accountability, which can enhance your reputation and attract potential customers and investors.
Expert Assistance for Compliance: we understand the significance of compliance with Indian tax laws and the potential benefits that come with it. Our comprehensive services are designed to assist business owners in navigating the intricate compliance requirements. We offer expert assistance and a user-friendly platform, making the process efficient and hassle-free for sole proprietors.
Our team of experienced professionals is well-versed in the latest tax regulations and can guide you through the entire compliance process. Whether it’s filing your income tax returns, managing GST compliance, or maintaining accurate accounting records, we have the expertise to ensure that you meet all the necessary requirements.
Efficiency and Hassle-Free Experience: By using our services, you can save valuable time and effort that would otherwise be spent on understanding complex tax laws and completing compliance tasks. Our team of experts ensures that your compliance is handled efficiently, allowing you to focus on running and growing your business.
In addition to providing expert assistance and a user-friendly platform, we also offer timely reminders and notifications to keep you informed about upcoming compliance deadlines. This helps you stay on top of your obligations and avoid any penalties or legal issues.
Understanding Proprietorship Tax Obligations and Importance of Filing Income Tax Returns in India
A sole proprietorship in India is the most basic business setup, where a single individual owns and runs the business. In terms of taxes, proprietorships have the same responsibilities as their owners. A proprietorship is an extension of the owner, meaning the tax process is quite similar to what individuals go through. The income tax rules that apply to individual proprietors also apply to proprietorships.
Tax Obligations for Proprietorships: Proprietorships, much like partnerships and companies, are required to pay taxes based on their earnings. For tax purposes, proprietors and their businesses are viewed as single entities. The income tax filing process for proprietorships aligns with the tax returns of the proprietor. Since a proprietorship isn’t considered a distinct legal entity, it has no unique tax identification number. Instead, the proprietor’s permanent account number is used for filing returns on behalf of the proprietorship.
Importance of Filing Income Tax Returns for Proprietorships: Is it necessary for a proprietorship to file an Income Tax Return (ITR)? The answer is yes. Under the Income Tax Act in India, proprietorship firms must file income tax returns based on the age and income of the proprietor:
- Below 60 years: Proprietors below 60 years of age must file an income tax return if their total income exceeds Rs. 3 lakhs.
- Between 60 and 80 years: Proprietors aged between 60 and 80 must file an income tax return if their total income exceeds Rs. 3 lakhs.
- Above 80 years: Proprietors aged 80 years and above must file an income tax return if their income exceeds Rs. 5 lakhs.
Filing the ITR before the deadline is crucial because it allows business losses to be carried forward for future use. Additionally, certain deductions under sections like 10A, 10B, 80-IA, 80-IAB, 80-IB, and 80-IC can only be claimed if the proprietorship’s ITR has been filed on or before the due date.
Income Tax Slab Rate for Proprietorship Firms
The income tax landscape for proprietorship firms has witnessed significant changes in the 2023-2024 budgets. The revised income tax regime has introduced an enhanced tax rebate threshold of Rs. 3 lakh for both salaried individuals and taxpayers. Moreover, the tax rebates for individual and salaried taxpayers have been elevated from Rs. 5 lakh to Rs. 7 lakh under this updated income tax framework.
Proprietor’s Age and Income Tax Rates
Below are the income tax rates for different age groups of proprietors:
Below 60 years:
- Up to Rs. 2,50,000: No income tax
- Rs. 2,50,001 to Rs. 5,00,000: 5% income tax
- Rs. 5,00,001 to Rs. 10,00,000: 20% income tax
- Above Rs. 10,00,000: 30% income tax
60-80 years:
- Up to Rs. 3,00,000: No income tax
- Rs. 3,00,001 to Rs. 5,00,000: 5% income tax
- Rs. 5,00,001 to Rs. 10,00,000: 20% income tax
- Above Rs. 10,00,000: 30% income tax
Above 80 years:
- Up to Rs. 5,00,000: No income tax
- Rs. 5,00,001 to Rs. 10,00,000: 20% income tax
- Above Rs. 10,00,000: 30% income tax
Tax Rates for Proprietors Opting for an Alternate Tax Regime
An alternative tax regime for proprietors was introduced by Finance Act 2020 as Section 115BAC. Assesses must give up specified exemptions and deductions to take advantage of this tax regime. The income tax rates for a proprietor who opts for the alternate tax regime are as follows:
| Net Income Range | Rate of Income Tax (%) (FY 2022-23) | Rate of Income Tax (%) (FY 2023-24) |
|---|---|---|
| Up to Rs. 2,50,000 | – | – |
| Rs. 2,50,001 to Rs. 3,00,000 | 5 | – |
| Rs. 3,00,001 to Rs. 5,00,000 | 5 | 5 |
| Rs. 5,00,001 to Rs. 6,00,000 | 10 | 5 |
| Rs. 6,00,001 to Rs. 7,50,000 | 10 | 10 |
| Rs. 7,50,001 to Rs. 9,00,000 | 15 | 10 |
| Rs. 9,00,001 to Rs. 10,00,000 | 15 | 15 |
| Rs. 10,00,001 to Rs. 12,00,000 | 20 | 15 |
| Rs. 12,00,001 to Rs. 12,50,000 | 20 | 20 |
| Rs. 12,50,001 to Rs. 15,00,000 | 25 | 20 |
| Above Rs. 15,00,000 | 30 | 30 |
Rates of Surcharge
In addition to the income tax amount calculated, individuals must pay surcharge and cess based on the above-mentioned tax slabs. The rate of surcharge for a proprietor for the assessment year 2024-25 is as follows:
| Nature of Income | Range of Total Income | Up to Rs. 50 lakhs (%) | Rs. 50 lakhs to Rs. 1 crore (%) | Rs. 1 crore to Rs. 2 crores (%) | Rs. 2 crores to Rs. 5 crores (%) | More than Rs. 5 crores (%) |
|---|---|---|---|---|---|---|
| Short-term capital gain as per Section 111A or Section 115AD | Nil | 10 | 15 | 15 | 15 | |
| Long-term capital gain covered under Section 112A or Section 115AD, or Section 112 | Nil | 10 | 15 | 15 | 15 | |
| Dividend income not being dividend income chargeable to tax at the special rate under Sections 115A, Section 115AB, Section 115AC, Section 115ACA | Nil | 10 | 15 | 15 | 15 | |
| Unexplained income chargeable to tax under Section 115BBE | 25 | 25 | 25 | 25 | 25 | |
| Any other income | Nil | 10 | 15 | 25 | 37 |
Presumptive Taxation Scheme for Proprietorship
The presumptive taxation scheme for proprietorship is a provision in the Income Tax Act designed to ease the tax burden on small taxpayers in India. Its purpose is to enable small businesses to operate without heavy compliance obligations. Businesses that opt for this scheme can calculate their income based on an estimated basis using Section 44AD. This scheme allows taxpayers to pay taxes at a minimum rate and eliminates the requirement to maintain detailed accounting records.
Deadline for Proprietorship Tax Return Filing
The deadline for filing an income tax return for a proprietorship in India varies depending on certain factors outlined in the Income Tax Act of 1961:
- No audit required: If your proprietorship does not need an audit, the income tax return must be filed by July 31st.
- Audit required: If your proprietorship requires an audit, the deadline for filing the income tax return is September 30th.
- International transactions or specific entities: The deadline for filing the income tax return is November 30th for proprietorships engaged in international transactions or specific domestic entities.
A Guide to Filing Income Tax Returns for Proprietorships
Required Documents for Proprietorship Income Tax Return Filing
If you’re a sole proprietor looking to file an Income Tax Return (ITR) for your proprietorship firm, make sure you have the following essential documents ready:
- PAN card
- Bank account details
- Aadhar card
- Advance tax payment challan
- Form 16, 16A, and 26AS
Filing an Income Tax Return for a Proprietorship
When it comes to filing ITR for proprietorships, it’s important to note that these businesses are typically required to file annually unless exempted. The income tax of a proprietorship is treated as the owner’s personal income.
Depending on the nature of your proprietorship, you will use one of two forms:
- Form ITR-3: This form is used to file income tax for proprietorships run by a Hindu Undivided Family (HUF) or any other proprietor.
- Form ITR-4 Sugam: Specifically designed for proprietorships under presumptive tax schemes, Form ITR-4 aims to reduce the compliance burden on small businesses.
It’s important to note that the income tax of a proprietorship is considered the same as that of the proprietor. This means that the business income is added to the proprietor’s personal income, making the business taxes equivalent to those of the proprietor. The proprietor remains eligible for all tax deductions applicable to individuals or Hindu Undivided Families (HUF), as relevant.
TDS Return Filing
TDS returns are mandatory for proprietors with a valid TAN. The type of TDS return to be filed depends on the purpose of deduction, including:
- Form 24Q: For TDS on salary
- Form 27Q: For TDS involving non-resident foreign companies
- Form 26QB: For TDS on property transfers
- Form 26Q: For TDS in other cases
GST Return Filing
Proprietors must register their sole proprietorship for GST if their business turnover exceeds Rs. 20 lakhs. Under GST, they must file GSTR-1 and GSTR-3B returns, which detail outward and inward supplies of taxable goods and services, along with tax payments. The chosen GST scheme determines the frequency of filing.
EPF Return Filing
EPF (Employees’ Provident Fund) registration is required for proprietors employing more than 20 individuals. This mandates the filing of EPF returns.
Accounting and Bookkeeping
Sole proprietors must maintain proper books of accounts if their sales/turnover/gross receipts exceed Rs. 25,00,000 or if their business income exceeds Rs. 2,50,000 in any of the preceding three years.
Proprietorship Firm Audit
The audit of a proprietorship depends on its annual turnover and specific circumstances. Here are three scenarios that require an audit:
- Turnover exceeds Rs. 5 crore: If a proprietorship’s annual turnover crosses Rs. 5 crore during the assessment year, it must be audited. This rule applies to businesses involved in trade or commerce.
- Professional proprietorship with receipts over Rs. 50 lakh: An audit is necessary for professional proprietorships like consultancies or service-based businesses if their total receipts go beyond Rs. 50 lakh.
- Proprietorship under presumptive tax scheme: Regardless of the annual turnover, it requires an audit if a proprietorship falls under any presumptive tax scheme.
The regulations for auditing a proprietorship are outlined in the Income Tax Act of 1961, stating that a certified Chartered Accountant (CA) must conduct the audit. This audit ensures that the financial information of the proprietorship is accurate and complies with the law.