All of us know that filing an ITR is our moral responsibility as a citizen of India but do you know the Disadvantages of not filing a Proprietorship ITR? Read on to know about it!
ITR for Proprietor is a type of income tax return filed by an individual who is the sole proprietor of a business. The term ‘sole proprietor means that you are the only owner and operator of your business. You are responsible for filing this return even if you have employees or partners working with you. In other words, when it comes to filing this type of income tax return, all assets and liabilities belong to the sole proprietor.
The proprietors are supposed to file their ITR every financial year before the due date and pay the taxes they are liable to pay. If the business owner misses the due date, they might have to pay a penalty of up to ₹5000. In this article, you will read about the process of filing an ITR and the Disadvantages of not filing a ITR for Proprietor.
What is ITR for Proprietorship?
ITR for Proprietor is a tax deduction available to individuals who are the sole proprietors of a business. The individual must be self-employed and not an employee, partner, or director of another company. The self-employment income earned by the individual can be used to claim this deduction.
ITR for Proprietor is a personal income tax return filed by an individual who owns the business. The main difference between proprietorship and partnership is that in the case of Proprietorship, the owner of the business has to be identified as such on his/her ITR.
How to file ITR for Proprietorship?
Every Proprietorship has to file its income tax returns and it can be done physically or via the e-filing portal. To file ITR for proprietorship firm, two types of forms are used,
- Form ITR-3 is used if the proprietorship is owned by a Hindu undivided family or any other Proprietor.
- Form ITR-4 Sugam is used when the proprietorship falls under any type of tax scheme. This is usually for small businesses so that they can flourish and they have less burden upon them.
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The steps that you must follow to file the ITR via the online portal are mentioned below.
- If you haven’t already registered yourself on the e-filing portal, register yourself as soon as possible.
- Make sure that as a proprietorship owner you have a PAN card that you can use to log into the e-filing portal.
- Go to the menu and select the option of the income tax return.
- A page will appear before you in which you have to select the assessment year, ITR form, and filing type.
- Go to the next page and fill out all the details required.
- Once you have filled out all the details choose the verification method it can be e-verification or physical filing.
- Choose the option of e-verification so that the verification is done right away and you also have the option to correct the information within 120 days of the verification process.
- After this check for any errors and select the preview and submit button.
- After submitting the application you will get an OTP, enter this OTP on the portal to complete the verification process.
Do your aware of Which ITR Form Must Be Filed By Sole Proprietorship Businesses?
Disadvantages of not Filing ITR for Proprietor
You already read about ITR and how to file ITR as a proprietor. But do you know that there are multiple Disadvantages of not filing Proprietorship ITR or filing after the due date that is given?
Let’s have a look at the consequences or disadvantages of not filing a ITR for Proprietor.
- If a proprietorship has to go through any kind of loss whether speculative or non-speculative long-term or short-term, they are eligible for tax exemption under Section 80 of the Income Tax Act.
- Section 235(A), 235(B), and 235 (C) of the Income Tax Act mention that if a proprietorship does not file the ITR before the due date they have to pay a penalty of ₹5000 to the Income Tax Department.
- Even if a proprietorship has not yet exceeded the limit that is eligible to pay Income Tax, they must file their income tax returns to stay on the good side of the Income Tax Department.
- Filing Income Tax Returns gives complete detail of your income to the government which will give you peace of mind and you will not face any legal problems in the future.
- Filing ITR also makes the registration of properties easier. Therefore, if you do not file your income tax return it would be difficult in the future if you want to register the proprietorship in someone else’s name.
- If the ITR for Proprietor is filled properly every financial year it is easier for the owner of the proprietorship to get loans.
The process of filing ITR for Proprietor might seem like it is voluntary but there can be some serious consequences if a company or a proprietorship does not file their ITR for proprietor. If you need help in filing Income Tax Returns you can contact Vakilsearch and take help from the team of legal consultants and Advisors.
Vakilsearch has an expert team of legal advisors who will help you in filling your Income Tax Returns and also tell you the exemptions that you are eligible for. You can go to the website and enter your contact details so that legal consultants can contact you and solve all your queries.
Conclusion
When a single person owns a business it is called a Proprietorship. Like any other business or individual who earns it is necessary for a proprietorship to file their income tax returns. There is a limit of income above which a proprietorship is liable to pay taxes to the Income Tax Department. But even if the proprietorship has not reached the limit they must file ITR for Proprietor so that the government is aware of the earnings.
If you need help with filing Income Tax Returns you can go to Vakilsearch and enter your name along with the contact details. Soon a legal consultant from the team of experts will contact you and solve all your queries. They will also help you in the application process of ITR for proprietor filing and tell you about different types of tax exemptions you might be eligible for.
Did you know?
The Penalty for late filing of ITR was ₹10,000 till the financial year 2019-20. It was recently reduced to half, that is ₹5000.
