ITR Filing for Proprietorship Firm - An Overview

Just like other incorporated firms such as partnerships and LLPs, proprietors also must pay tax on their earnings. As per the law proprietorship and the proprietor are considered as a single entity and are subjected to income tax returns. As a result, the laws that control the payment of the proprietor's income tax also apply to the proprietorship.

However, the income tax rates of the registered companies are fixed based on flat rates. On the other hand, a single proprietorship will not be taxed as a different legal entity. All the business owners should file their taxes as an individual return like other individual taxpayers of the country. Based on the Income-tax rules and the slab rates the proprietorship tax is also subjected to the deduction.

Eligibility Criteria for Proprietorship Tax Return Filing

• If the total income exceeds ₹3 lakhs, all owners under the age of 60 are required to file an income tax return under the Income Tax Act
• If the income exceeds ₹3 lakhs, owners above the age of 60 must file income tax
• If the total income exceeds ₹3 lakhs, proprietors under the age of 80 must pay income tax
• If the income exceeds ₹5 lakhs, proprietors above the age of 80 are required to file proprietorship tax returns.

On meeting certain conditions, Sections 10A, 10B, 80-IA, 80-IAB, 80-IB, and 80-IC will provide deductions.

Documents Required for Income Tax Return Filing

As a sole proprietor, the following documents are required for ITR filing:

• PAN card
• Aadhar card
• Bank account details
• Form 16, 16A and 26AS
• Advance tax payment challan

How to Complete Proprietorship Tax Return Filing

The income tax of the proprietorship is the proprietor's income tax and it is crucial to be filed every year without fail. The E-sign of the proprietor will be used to file the income tax return. Based on the type of proprietorship you will have to submit two different forms. Initially, you will have to submit all the required documents including your PAN card to our experts

• ITR 3 Form: If the proprietorship is run by a hindu undivided family (HUF) or any other owner
• ITR 4 Form: This one is used by proprietorship that are subject to presumptive tax schemes. Filing this form will reduce the burden of compliance for small businesses and still provide you with the deductions of HUFs.

Subsequently, our experts will register it in the official portals. The assessment year and ITR filing type will be chosen based on the scenario. You will be provided the required confirmation after completing the process.

Due Date for ITR of Proprietorship Firm

Losses in the business, if any, can be carried forward if the proprietor files an income tax return before the deadline.

• Income tax return filing wherein the audit is not necessary 31 July of every year
• Income tax return filing wherein the audit is necessary on 31 October of every year.

Audit for Proprietorship

Depending on the annual turnover of the proprietorship, auditing may be necessary under the following scenarios.

• During the assessment year, the turnover of the proprietorship firm conducting business exceeds ₹1 crore
• In the case of a professional proprietorship, an audit is required if the total receipts of the business exceed ₹50 lakh
• An audit is required whenever a proprietorship is subject to any presumptive tax scheme, regardless of yearly turnover.

As per the Income Tax Act of 1961 the proprietorship firm's audit must be performed by a certified Chartered Accountant. Don't worry if you don't have a CA at your disposal, Actolegal will cover you with that!