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Proprietorship Tax Return Filing and its compliances

Ownership businesses like LLPs and Indian-registered companies must maintain compliance. Read on to know about Proprietorship ITR compliances.

Sole Proprietorship Registration must also pay tax on its income, just like other incorporated businesses like Partnerships Firm Registration and LLP Registration. According to the legislation, a proprietorship is treated as a single entity and is required to file income tax returns. As a result, the proprietorship is subject to the same legal requirements that govern the payment of the proprietor’s income tax.

A sole proprietorship won’t be taxed as a separate legal entity, on the other hand. All business owners should file their taxes as individual returns, just like the rest of the nation’s individual taxpayers. The proprietorship tax is likewise subject to the deduction based on the income-tax rules and the slab rates.

Vakilsearch is the best choice if you’re seeking a one-stop shop to file your proprietorship income tax reports.

In this blog, we will discuss the Proprietorship ITR Compliances.

Proprietorship Annual Compliance

LLPs and companies registered in India must file income tax reports, much as proprietorship businesses. The filing of a proprietorship firm’s income tax return is the same as that of the proprietor since proprietorship firms are regarded as the proprietor.

All proprietors under the age of 60 are required by the Income Tax Act to file an income tax return if their total income exceeds ₹2.5 lakhs. If the total revenue exceeds ₹3 lakhs, owners who are older than 60 but under 80 must file an income tax return. 

If an owner’s total income exceeds ₹5 lakh, they are required to file income tax returns if they are 80 years of age or older.

For more information, you can contact Vakilsearch, their team will resolve all your queries.

Tax Audit for Proprietorship Firm

If a proprietorship firm’s annual total sales revenue exceeds ₹1 crore, an audit will be necessary. An audit would also be required if the total gross receipts for the assessment year exceeded ₹50 lakhs.

Additionally, regardless of turnover, an audit would be necessary for any proprietorship firm subject to the presumptive taxation scheme if the income declared is less than the considered profits and gains under the scheme.

Due Date for Proprietorship Firm Tax Return

A proprietorship that doesn’t need an audit must file its income tax return by July 31. If the Income Tax Act calls for an audit of the return, the proprietorship’s income tax return is due on September 30th. Form ITR-3 or Form ITR-4-Sugam must be filed by sole proprietorship businesses.

Form ITR-3 can be submitted by an owner or by a Hindu Undivided Family engaged in a proprietary trade or profession. The Form ITR-4-Sugam must be submitted by the proprietor if they want to pay income tax under the presumptive taxation plan.

By assuming a specific profit margin on the entire income of the business or profession, a presumptive taxation scheme is intended to lessen the compliance burden for small firms.

How to File an Income Tax Return Online for a Proprietorship in the Following Steps

  • You need a PAN card in order to start. The Income Tax Department provides each taxpayer with this card. In order to pay taxes, the card’s owner needs a certain Permanent Account Number (PAN), which is provided by the card.
  • Due to the lack of a distinct legal entity for the proprietorship, income taxes must be paid using the proprietor’s PAN and income tax returns must be filed using the proprietor’s PAN.
  • If you haven’t already enrolled, you must use your PAN to log in to the e-filing portal.
  • In the future, choose “Income Tax Return” from the e-filing option.
  • The following options must be chosen on this page: Assessment year > ITR form > Filing type (original or updated)> and Prepare and Submit in the Submission Mode
  • Click on continue. You must carefully fill out all the information requested on the new page.
  • Certain information must be filled, while others depend on their applicability.
  • You must select the verification method after you have completed all the necessary fields. There are three options: e-verify, which will immediately validate the file; e-verify later within 120 days, which provides you time to correct any necessary information within 120 days; and ‘I don’t want to verify to continue manually.
  • At this point, click the “Preview and Submit” button. Here, you have the opportunity to review the return before submitting it in order to look for any last-minute errors.
  • You have two options for filing verification after submission in the e-verify option: OTP or EVC. For successful verification, the OTP or EVC must be entered within 60 seconds.

Income Tax Slab Rate Updated With New Tax Regime for FY 2021–22 (Ay 2022-23)

The advantages of filing IT returns are:

Income Tax Slab New Regime Income Tax Slab Rates FY 2021-22 (Applicable for All peoples & HUF)
₹0- ₹2.5 lakh NIL
₹2.5 lakh – ₹3.00 lakh 5% (tax rebate u/s 87a is available)
₹3.00 lakh – ₹ 5.00 lakh
₹5.00 lakh- ₹7.5 lakh 10%
₹7.5 lakh – ₹10.00 lakh 15%
₹10.00 lakhs – ₹12.50 lakh 20%
₹12.5 lakhs – ₹15.00 lakh 25%
> ₹15 lakh 30%


We hope that after reading this article one has understood the Proprietorship ITR compliances. Return filing can occasionally be a hassle. Especially if you are a working professional, Vakilsearh can assist you in finding a solution to this issue. Their experts can help you with any legal situation because of their years of experience.

Did you know?

The latest date to submit an ITR for the fiscal year 2022–23 (AY 2024–23) is July 31, 2023, per the income tax legislation.

1. How can I submit my tax return as a sole proprietorship business?

For proprietorship income tax returns, forms ITR3 and ITR4 must be submitted. You can submit them online by contacting Vakilsearch as well.

2. Is submitting a proprietorship income tax return required?

Yes, all business owners who are under 60 years old and have an annual income of more than ₹2.5 lakh rupees are required under the Income Tax Act to submit income tax forms.

3. Who can file returns proprietorship through ITR2?

Residents who owe more than ₹50 lakh in income taxes must file in Form ITR2. And is typically filed by those who own multiple residential properties. Consequently, a taxpayer who receives revenue from a business cannot use ITR2.

4. Is proprietorship required to audit?

If the sales or turnover exceeds ₹1 crore, an audit of the tax income is required. Since the Proprietorship forms for Individual Income Tax Act taxes, auditing is now required.

5. What is the sole proprietorship tax calculation?

Technically, sole proprietors are responsible for paying the entire tax amount on their own. 15.3% is the average self-employment tax rate, of which 12.4% goes to social security up to a certain annual income and 2.95% goes to Medicare with no income cap.

6. What is the proprietor's annual income?

The proprietor's income is the combined revenue that proprietors and business owners make.

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