Tackling your proprietorship tax return filing like a pro requires proper planning, organisation, and understanding of tax laws and regulations. As a sole proprietor, you're responsible for reporting and paying taxes on the income earned by your business.
Proprietorship tax return filing like a pro in India is a legal requirement for sole proprietors who earn income through their businesses. The filing process involves reporting and paying taxes on the profits earned by the business during the financial year. The first step in the filing process is to obtain a PAN (Permanent Account Number) and register for GST (Goods and Services Tax), if applicable. Sole proprietors must also maintain accurate records of all income, expenses, and receipts related to their business throughout the financial year.
Proprietors in India can choose to file their taxes online through the Income Tax Department’s e-filing portal. Alternatively, they can also file their taxes through a tax professional or a tax filing service. As per the Income-tax rules and slab rates, proprietors are required to file their taxes as an individual return, similar to other individual taxpayers in the country. Additionally, the proprietorship tax is subject to deductions.
What is the Importance of Filing ITR for a Proprietorship Firm?
Filing ITR (Income Tax Return) is crucial for a proprietorship firm as it is a legal requirement to report and pay taxes on the profits earned during the financial year. Filing ITR also helps to establish transparency in business operations and maintain accurate financial records. It also serves as proof of income and can be used for obtaining loans, credit cards, or other financial services. Additionally, timely filing of ITR can help to avoid penalties or fines imposed by the tax authorities. Thus, filing ITR is essential for a proprietorship firm to remain compliant with tax laws and regulations and maintain a good financial reputation.
Proprietorship Tax Rate for FY 2023-24 (AY 2024-25)
This applies to proprietors who are of the age less than 60 years of age:
| Net Income Range | Rate of income-tax (%) |
| Up to ₹2,50,000 | – |
| ₹2,50,001 to ₹ 5,00,000 | 5 |
| ₹ 5,00,001 to ₹ 10,00,000 | 20 |
| Above ₹ 10,00,000 | 30 |
If Proprietor’s age is between 60 and 80 years:
| Net Income Range | Rate of income-tax (%) |
| Up to ₹ 3,00,000 | – |
| ₹ 3,00,001 to ₹ 5,00,000 | 5 |
| ₹ 5,00,001 to ₹ 10,00,000 | 20 |
| Above ₹ 10,00,000 | 30 |
If Proprietor’s age is above 80 years
| Net Income Range | Rate of income-tax |
| Up to ₹ 5,00,000 | – |
| ₹ 5,00,001 to ₹ 10,00,000 | 20 |
| Above ₹ 10,00,000 | 30 |
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Eligibility
The eligibility criteria for sole proprietorship tax filings in the financial year 2023-24 are as follows:
- The individual should be operating a business as a sole proprietor.
- The business should have earned income during the financial year.
- The individual should have a valid PAN (Permanent Account Number) and GST registration, if applicable.
- The total income earned by the individual should exceed the basic exemption limit set by the government.
- The individual should be a resident of India or a non-resident with income sourced in India.
How to File Income Tax Returns for a Proprietorship Firm
To file income tax returns for a proprietorship firm, follow these steps:
- Collect all the necessary financial documents and records, including income and expense statements, invoices, receipts, and bank statements.
- Determine the taxable income by deducting eligible expenses from the gross income earned during the financial year.
- Calculate the tax liability based on the applicable tax rates and deductions available to the proprietorship firm.
- Fill out the income tax return form (ITR) applicable to the proprietorship firm, which is ITR-3 for sole proprietors, and provide all the necessary details and information.
- Upload the filled form on the income tax department’s e-filing portal or submit a physical copy to the nearest income tax office.
- Verify the income tax return filing using one of the available methods, such as Aadhaar OTP, net banking, or a physical signature.
- Keep a copy of the filed income tax return form and all supporting documents for future reference.
Audit for Proprietorship
The need for auditing for a proprietorship depends on its annual turnover and can arise in the following situations:
- If the turnover of a proprietorship conducting business exceeds ₹1 crore during the assessment year.
- If the total receipts of a professional proprietorship exceed ₹50 lakhs.
- If a proprietorship is subject to any presumptive tax scheme, regardless of yearly turnover.
The Income Tax Act of 1961 mandates that a certified Chartered Accountant must perform the audit of a proprietorship firm. However, if a CA is not available, Vakilsearch can provide assistance with the auditing process.
Conclusion
In conclusion, tackling proprietorship tax return filing like a pro requires expertise and services that can help simplify the process and ensure compliance with all applicable tax laws and regulations. From maintaining accurate financial records to calculating tax liability and filing income tax returns accurately and on time, every step of the process requires attention to detail and knowledge of the latest tax rules and regulations. For the best expert advice and legal services, you can contact our Vakilsearch expertise.
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