Proprietorship Tax Return Filing

ITR Filing for Sole Proprietorship Firm – An Overview

Filing an Income Tax Return (ITR) for a sole proprietorship firm involves reporting the business’s income, expenses, and profits to the tax authorities. As a sole proprietor, you and your business are considered as one entity for tax purposes, and your personal and business incomes are not separate.

The process entails determining the applicable ITR form based on the nature and turnover of the business, maintaining proper accounting records, computing business income, claiming deductions, reporting other incomes, and filing the ITR online. If the turnover exceeds the specified threshold, a tax audit may be required. It is crucial to verify and submit the ITR within the designated period, and maintaining records is essential. Seeking guidance from a tax professional ensures compliance with tax laws and maximizes tax benefits.

Documents Required for Sole Proprietorship ITR Filing

As a sole proprietor, the following documents are required for ITR filing for Proprietorship Firm:

• PAN card
• Aadhar card
• Bank account details
• Form 16, 16A and 26AS
• Advance tax payment challan

Old Income Tax Regime Slabs for Proprietorship Businesses, Professionals Below 60 Years

As a sole proprietor, the following documents are required for ITR filing for Proprietorship Firm:

Old Income Tax Regime Slabs for Senior Citizens Who Are Sole Proprietors Or Are Professionals

Old Income Tax Regime Slabs for Super Senior Citizens Who Are Sole Proprietors or Are Professionals

New Income Tax Regime Slabs for Sole Proprietorships and Professionals

Income Tax Slabs Applicable Under the New Income Tax Regime

Income Tax Slab for Domestic Companies for FY 2022-23

Total Income ₹1 Crores to ₹10 Crores Above ₹10 Crores Surcharge Rate 7%

Audit of Proprietorship

Sometimes an audit of the proprietorship is necessary, depending on the annual turnover of the business. There are three situations in which an audit is necessary:

• Over ₹1 crore was made throughout the assessment year by the proprietorship firm in operation
• If a professional proprietorship’s total annual receipts reach ₹50 lakh, an audit must be conducted
• Regardless of the annual turnover, an audit is necessary if a proprietorship is subject to any presumptive tax scheme.

Steps to Follow for eFiling an Income Tax Return for a Proprietorship

Step 1: Get in touch with our tax experts

Get on call with our tax experts and resolve all your queries

Step 2: Provide all the documents

Provide all the required financial documents to our tax experts.

Step 3: Get clear tax insights

Our in-house CA’s will resolve your queries and calculate your tax liability. We will provide clear insights on how to reduce your tax liabilities.

Step 4: Our experts will file your taxes

Our team will file your taxes on time and help you avoid penalties.

How to File an Income Tax Return for a Proprietorship

So long as they are not exempt, proprietorships are obligated by law to file tax returns each year. As previously indicated, the proprietor pays the proprietorship’s income tax. By using the proprietor’s electronic signature, the tax return can be submitted electronically or physically. Depending on the type of proprietorship, two distinct forms must be submitted:

Form ITR-3: If the proprietorship is run by a Hindu Undivided family or another owner, you must file income tax using this form.

Form ITR-4 Sugam: Due to the fact that proprietorships covered by presumed tax schemes utilize this form, it differs from the previous one. This is done to lessen the regulatory load on small firms.

As was previously indicated, a proprietorship’s income tax is the same as the proprietor’s, which means that the proprietor’s personal income is increased by the commercial income of the proprietorship. As a result, the proprietor’s personal taxes are added to the corporate taxes. The individual is still qualified for all tax breaks available to individuals and Hindu Undivided Families (HUF), as applicable. We handle tax filing in simple steps.

Deadline For Filing An Income Tax Return for a Proprietorship

• Owners must file their income tax returns by July 31st if there isn’t going to be an audit
• The deadline for filing income tax returns for proprietorships that must be audited is September 30
• The deadline for filing income tax returns for proprietorships that have engaged in any overseas activities or certain designated domestic organizations is November 30.

Presumptive Income Tax Scheme

The Presumptive Income Tax Scheme is a simplified taxation scheme in India, primarily designed to reduce the compliance burden for small businesses and professionals. Under this scheme, eligible taxpayers can declare their income at a prescribed rate, and the tax liability is calculated based on this presumptive income rather than actual income and expenses.

Key features of the Presumptive Income Tax Scheme:

1 Eligibility: The scheme is available for individual taxpayers, Hindu Undivided Families (HUFs), and partnership firms (excluding Limited Liability Partnerships) whose total turnover or gross receipts from the business do not exceed ₹2 crores in a financial year.

2. Presumptive Income Rate: The scheme provides for a presumptive income rate, which is a certain percentage of the total turnover or gross receipts, depending on the type of business or profession. For example, for most businesses, the presumptive income rate is 8% of the total turnover, while for professionals, it is 50% of the total receipts.

3. No Need for Accounting Records: Taxpayers opting for the Presumptive Income Tax Scheme are not required to maintain detailed accounting records of their business transactions. They only need to maintain records of gross receipts.

4. Deductions: Taxpayers under this scheme cannot claim deductions for business expenses or depreciation. The presumptive income rate is considered to be inclusive of all expenses.

5. Advance Tax: Taxpayers under this scheme are not required to pay advance tax in quarterly instalments. The entire tax liability can be paid at the time of filing the income tax return.

6. Combining Income Sources: If a taxpayer has income from eligible businesses or professions and income from other sources (like rental income or capital gains), they can choose to avail the Presumptive Income Tax Scheme for eligible businesses while reporting other incomes separately under regular income tax provisions.

7. Validity: Once a taxpayer opts for the Presumptive Income Tax Scheme for a particular financial year, they can continue to avail of the scheme for the next five consecutive years, provided they meet the eligibility criteria.

Consult the relevant country’s tax laws to understand the exact provisions of the Presumptive Income Tax Scheme.