What You Need to Know About Filing Your Business Tax Return
Tax return filing for businesses: what does it mean?
The purpose of a tax return is to record income, expenses, and other relevant tax information. A business tax return filing is the same as an income tax return with the addition of TDS for businesses, and it must be completed every year. A return also contains information about fixed assets, loans acquired, loans lent, creditors and debtors. It is also a statement of earnings and expenditures.
Tax returns allow taxpayers to calculate the tax payment schedule, their tax liability, and their refund if they overpaid. Although tax return filing policies and features differ from country to country, the timeframe is usually an annual one. When an individual or company has income equal to or greater than the government has exempted, they must file a business tax return annually. In addition to wages, interests, dividends, capital gains, and profits, income includes dividends and interest. A taxing authority receives this documentation and files it according to the guidelines.
Learn More About Filing Tax Returns
Here is a brief overview of tax returns in India before we move on to business tax.
Indian citizens with a Gross Total Income (GTI) of over Rs. 2.5 lakhs are required to file income tax (a number below 2.5 lakhs is exempt). Income tax returns must be filed annually within the specified deadline. Income tax return forms are available for various sections of the population based on different criteria. To have the income tax form processed by the Income Tax Department of India, it needs to be identified and filed. Filing your income tax returns has many benefits, some of which are listed below:
- Requests for refunds
- Losses that can be carried forward
- Serves as proof of loan eligibility
- Serves as proof in other compensation cases, etc.
The Complete Guide to Filing Business Tax Returns
This is basically a tax return filing that is applicable to businesses. It includes documentation for the business’ income and expenditures as well as the related taxes.
Business owners with a turnover exceeding Rs. 1 crore are required to undergo a tax audit. Professionals with a turnover of Rs. 50 lakhs are also required to undergo a tax audit. To verify the accuracy of the income details and deductions listed on the tax return filed (for the aforementioned categories), a tax audit is basically a look at the return filed. Business tax returns and accounts are audited by Chartered Accountants.
Tax audits can be performed on businesses with profits under 8% or 6%. Professionals with less than 50% receipts can get their tax audits done as well. In case of a loss in business, tax audits can be performed to carry over the loss.
Now let’s take a closer look at the entities that must file this return.
How Do I File My Business Tax Return?
It is compulsory for all qualified businesses to file tax returns under Indian tax laws. In addition to income tax returns, these businesses must also file a TDS return (Tax Deducted at Source) along with them. It is always better to pay taxes in advance so as to comply with the Income Tax Act. There are various tax filing service providers who help businesses file GST returns, among other things. An income tax return for a business usually takes about 3 to 5 working days to complete.
In terms of filing a business tax return, the following factors need to be taken into consideration:
- Businesses owned by sole proprietors
- Businesses that form partnerships
- Businesses organized as Limited Liability Partnerships
- A company
Keep these things in mind:
- Sole proprietorships must report both business incomes and personal incomes (like house rent, interest, and salary) on the same tax return.
- There must be a calculation of total incomes and if they exceed the basic taxable limit, before the deductions, then it is mandatory to file income tax returns regardless of profit or loss.
- An income before deductions of more than Rs. 2.5 lakhs is accounted for as business tax return income over Rs. 2.5 lakhs.An income before deductions of more than Rs. 2.5 lakhs is accounted for as business tax return income over Rs. 2.5 lakhs.
- In spite of loss or gain, or whether operations are undertaken, LLPs, companies, and firms are subject to a 30% tax rate.
The types of tax returns filed by businesses
Businesses are categorized according to the type of tax return filing they are required to file, that is, the structure and name of each business.
- This type of business requires the filing of an annual income tax return by only one owner. Firms are considered the same as proprietors, and therefore, the procedures for filing their tax returns are the same as those for filing individual income tax returns.
- The Income Tax Act taxed partnership firms as individual legal entities, unlike sole proprietorships. As a result, partnership firms are taxed as an individual legal entity under the Income Tax Act. Income tax returns are required of them regardless of profits or losses.
- Limited Liability Partnership tax return filing: This is an alternative corporate structure that offers the benefits of limited liability of a partnership business, while at the same time offering flexibility of a partnership. Tax purposes, this firm is a flow-through entity. It means that partners receive untaxed profits, but they are individually responsible for paying taxes. Companies with limited liability (a form of corporate business that also has limited liability) and limited liability partnerships are preferred over regular corporations. In addition to being taxed as an entity, these corporations also charge shareholders tax for distributions.
- A company’s tax return filing is divided into two categories, namely a domestic company and a foreign company. Domestic companies include companies that are registered with the Ministry of Corporate Affairs, such as private limited companies and one-person companies. An LLC, which is a limited liability company formed in one state and conducting business in another, is referred to as a foreign limited liability company.