How Sole Proprietorship Firm Income Tax Return Works

Sole Proprietorship Firm is one of the best & popular legal entity in India but when income tax season is coming in the month of July or Sept in every year, that time some entrepreneurs confuse about the How to file the income tax return as a Sole Proprietorship Firm in India. so in this guide, we learn about How How Sole Proprietorship Firm Income Tax Return Works.

if you don’t know about the Sole Proprietorship Firm Overview then suggest you check here about the Sole Proprietorship Firm in India.

Sole Proprietorship Firm Income Tax Return

In the case of Sole Proprietorship Firm Income Tax Return, a proprietor is a person who owns his business exclusively and he is the one who is entitled to keep all the profits and liable for all the loss in his business. You can carry on the business either on your own or by employing people to work for you.  So you are required to pay the taxes that you earn from the sole proprietorship. Although you are not required to file a separate business tax report but within your individual tax return. The additional costs of tax filing and accounting are saved.

The personal income rates will be applicable on sole proprietor and not the corporate tax rates. That means that he is not taxed as a spate legal entity like a company but the sole proprietor has to file their profit from a business on their personal tax returns. They are taxed as an individual and their net taxable income includes their business income after deducting related business expenses, deductions under income tax and other income if any. The income tax has to be calculated before the due date of filing of income tax return.

Requirements For Sole Proprietorship Firm Income Tax Return

Permanent Account number:

PAN is the must for all income tax matters. So you must have a PAN  and if not then you should obtain PAN. They don’t need a separate PAN for the business as it is not a separate legal entity like a company in the case of sole proprietorship firm income tax return. So you require the PAN of the owner of a sole proprietor.

Income tax return Form (ITR)

To file income tax return one must have to fill form according to your nature like Sole proprietorship, company, HUF, LLP etc. different forms are provided under Income tax for different forms of business. In a case of the sole proprietorship.

  • if your main business is plying, hiring or leasing goods carriage and you don’t own more than 10 goods carriage during the year at any time and you want to apply section 44AE i.e. Presumptive Taxes (taxes as per the Specified percentage of total turnover) then you have to fill ITR 4S for income tax return.
  • if your main business is plying, hiring or leasing goods carriage and you don’t own more than 10 goods carriage during the year at any time and you want to apply section 44AE i.e. Presumptive Taxes (taxes as per the Specified percentage of total turnover) then you have to fill ITR 4S for income tax return.
  • In a case of any other business, other than mentioned above, in the sole proprietorship, you can fill the form ITR 4 for filling the income tax.

Books of Accounts

Under section 44AA of Income Tax Act You have to maintain books of accounts of your business’s income in following situations:

  • If the business income exceeds Rs 1,20,000 or total sale, turnover or gross receipts thereof are in excess of 10,00,000 in any of the 3 years immediately preceding the PY.
  • If the business is newly set up and your income or turnover or total sales or gross receipts are likely to exceed the above-said amount.

If you do not exceed the above-given limit then you are not required to maintain books of account under section 44AA.

Income tax audit:

If your businesses have a turnover in excess of Rs 1 Crore during the Financial year then you have to get your books of account audited from a CA in practice. This audit report has to be filed along with the ITR before 30th September of the Assessment year for the financial year for which audits were done.

You also have to fill Form 3CB and 3CD which will be two reports as given by the CA who conducted your audit.

Due to the date of filing income tax return:

The due date is same as are for the Individual. The due date of filing ITR for the Assessment year 2013-14 and 2014-15 is 31st July. But if under section 44AB of income tax act the accounts are required to be audited then the due date for filing ITR will be 30th September of the assessment year.

Hope this article helpful for you to file the Income Tax Return as Sole Proprietorship Firm. if you have any query then you can ask from our Legal Experts via email at mail@myonlineca.in.