Question 1

How do I file a tax return for a proprietorship firm?

Accepted Answer

Get in touch with Vakilsearch. We will review the necessary financial documents, calculate your income, and file form ITR-3.

Question 2

When to file ITR 3 for proprietorship return filing?

Accepted Answer

ITR-3 should be filed by individuals and HUFs who have income from a proprietary business or profession. The deadline for filing ITR-3 for a proprietorship firm is generally July 31  of the assessment year (e.g. 31 July 2023, for the assessment year 2022-23).

Question 3

What are the annual compliances for a proprietorship firm?

Accepted Answer

Annual compliances for a proprietorship firm may include filing income tax returns, maintaining books of accounts, obtaining any necessary registrations or licences.

Question 4

Is it mandatory to file a proprietorship income tax return?

Accepted Answer

Yes, if the income of the proprietorship firm exceeds the specified threshold limits as per the Income Tax Act, 1961. It is mandatory to file an income tax return.

Question 5

Is it required to file taxes as a sole proprietor?

Accepted Answer

Yes, as a sole proprietor, you are required to file income tax returns if your total income exceeds the threshold limits specified by the Income Tax Act of 1961

Question 6

What is the proprietor's income?

Accepted Answer

The proprietor's income refers to the net profit or loss earned by the sole proprietorship firm during a specific financial year. It is calculated by deducting the business expenses from the business income.

Question 7

Can a proprietor file ITR-2?

Accepted Answer

No, ITR-2 is not applicable to sole proprietors. It is meant for individuals and HUFs having income from other sources, but not from a proprietary business or profession.

Question 8

What is the maximum turnover for a sole proprietorship?

Accepted Answer

There is no specific maximum turnover limit for a sole proprietorship firm. The turnover can vary based on the nature of the business, industry, and other factors.

Question 9

What are the advantages of sole proprietorship?

Accepted Answer

Advantages of sole proprietorship include ease of formation, complete control and decision-making authority, simplified tax reporting, flexibility in operations, and direct retention of profits.

Question 10

Why is sole proprietorship better than partnership?

Accepted Answer

Sole proprietorship offers advantages like ease of decision-making, fewer legal formalities, and sole ownership of profits, while partnerships involve shared responsibilities, decision-making, and profits, which may require additional agreements and coordination.

Question 11

What is the eligibility of proprietorship?

Accepted Answer

There are no specific eligibility criteria to establish a proprietorship firm. Any individual can start a proprietorship business by obtaining the necessary licences. Get in touch with experts to know more.

Question 12

Which ITR is applicable for small businesses?

Accepted Answer

The applicable ITR form for small businesses, including sole proprietorships, depends on the nature of their income and expenses. Here's a breakdown of the applicable ITR forms:

ITR-3: This form is applicable for individuals and Hindu Undivided Families (HUFs) having income from sources like salary, house property, capital gains, and other sources. Sole proprietorships with business income from a single source can use ITR-3.
ITR-4: This form is applicable for individuals and HUFs having income from sources like business or profession, salary, agriculture, capital gains, and other sources. Sole proprietorships with business income from multiple sources or income from business and other sources should use ITR-4.

Question 13

What is the turnover limit for sole proprietorship?

Accepted Answer

There is no specific turnover limit for sole proprietorships in India. However, certain registrations and obligations may depend on the turnover of the business. For instance, if the turnover of a sole proprietorship exceeds Rs. 20 lakhs, it is mandatory to register for Goods and Services Tax (GST).

Question 14

What are the types of sole proprietorships?

Accepted Answer

Sole proprietorships can be classified into different types based on the nature of their business activities:

Trading Sole Proprietorship: This type of sole proprietorship involves buying and selling goods.
Manufacturing Sole Proprietorship: This type of sole proprietorship involves the production and sale of goods.
Service Sole Proprietorship: This type of sole proprietorship provides services to customers.

Question 15

Is PAN required for sole proprietorship?

Accepted Answer

Yes, a Permanent Account Number (PAN) is mandatory for sole proprietorships in India. The PAN is required for various tax-related purposes, including filing income tax returns, obtaining business licenses, and opening bank accounts.

Question 16

Can I file my ITR myself online?

Accepted Answer

Yes, you can file your ITR online yourself. The Income Tax Department of India provides an e-filing portal where you can create an account, access ITR forms, and submit your return electronically. You can also use various tax preparation software or seek assistance from tax consultants for filing your ITR.

ITR Filing for Sole Proprietorship Firm

Recent Updates

FAQs on ITR Filing for Proprietorship Firm

Trusted by 400,000 clients and counting, including …