A Just like other incorporated firms, such as partnerships and corporations, proprietorships are subject to tax on their earnings. The proprietorship is treated in the same way as the owner himself, and the same method is used to file his Income Tax Return. Due to this, income tax laws also apply to proprietorships. Here’s how to file your income tax return for a sole proprietorship in India.
How to fill out an ITR form for a sole proprietorship
A sole proprietorship is required to file two ITRs (Income Tax Returns):
- In the case of a sole proprietor engaged in a proprietary business or profession, the ITR 3 Form must be used.
- An ITR-4 Form is an income tax return form for taxpayers with an annual income less than Rs 50 lakh who have chosen the presumptive income scheme under Sections 44AD, 44ADA, and 44AE.
A sole proprietorship’s income tax return is due on this date
Business owners must file their income tax returns by the deadline determined by whether they are audited under the Income Tax Act of 1961 or if their business has international operations.
- If you do not require an audit, you have until the 31st of July to file your income tax filings.
- The deadline for filing income tax forms for audited corporations is September 30th.
- Tax filings are due by the 30th of November for proprietorships that conducted overseas transactions or for certain designated domestic companies.
If you are a sole proprietor in India, how do you file your income tax return?
E-filing a Proprietorship Income Tax Return:
- To pay taxes, every taxpayer needs a Permanent Account Number (PAN). PAN cards are issued by the Internal Revenue Service and give the cardholder an exclusive account number.
- In the absence of a separate legal entity, the proprietor’s PAN must be used to pay taxes and file returns.
- If you are already registered, you must use your PAN to log in to the e-filing portal.
- Select ‘Income Tax Return’ under the e-filing menu.
- On this page, you must choose the following options: – Year of assessment – ITR form – Type of filing (original/revised) – In the submission mode, choose prepare and submit.
- After pressing enter, you will be taken to a new page where you must carefully fill in all the required information sole proprietorship tax return
- Applicability will determine which information is required.
- If you choose the e-verify option, you will have the filing verified within one business day. – Choose the paper-verify option to have your filing verified within two business days. immediately. – E-verify later within 120 days, giving you time to Update any required information. – Choose ‘I don’t want to verify to proceed manually.
- You can preview your return before submitting it to ensure there are no errors.
- A successful verification can only be achieved by submitting an OTP or EVC (Electronic Verification Code) within 60 seconds of submitting the e-verify option.
Sole Proprietorship Audits
It may be necessary to audit the proprietorship depending on its annual turnover. There are three scenarios in which an audit is required:
- During the assessment year, the business turnover of the proprietorship firm exceeds Rs 1 crore. For professional proprietorships, an audit is required if receipts exceed Rs 50 lakh.
- An audit is required regardless of the turnover of a proprietorship that is subject to any presumptive tax scheme.
As stipulated by the Income Tax Act of 1961, audits of proprietorship firms must be conducted by Chartered Accountants. In addition to making sure the proprietorship firm meets all the relevant compliances, the CA must ensure that all of the books of accounts are kept correctly.
FAQs on Income Tax Returns for Indian Sole Proprietors
- Should I file taxes as a sole proprietor?
A Business’s revenue and losses must be reported on the sole proprietor’s personal income tax return; the business is not taxed separately.
- Are proprietorships taxed twice or twice as much as corporations?
Since sole proprietorships are not taxed entities, their owners are not separate, so they do not pay double taxes.
- Changes can be made to a tax return, is that possible?
Any time during the assessment year or before the assessment is conducted, whichever comes first, the return of income can be updated. The return can be updated as many times as necessary.
A delayed return is one that is filed beyond the due date and cannot be amended if it is filed beyond section 139(1).