Business Tax Return Filings

Filing Income Tax Returns for Proprietorships

If you have business income, you are essentially operating a proprietorship firm. In India, proprietorships are obligated to file income tax returns annually. Since proprietorships are treated as extensions of their proprietors, the tax return filing process for a proprietorship mirrors that of individual income tax filing.

Requirement for Filing Proprietorship Tax Return

Requirements for Proprietorship Tax Return Filing For proprietors under 60 years of age, filing income tax returns is mandatory if the total income exceeds Rs. 2.5 lakhs. Proprietors aged 60 to 80 must file income tax returns if their total income exceeds Rs. 3 lakhs, while those over 80 years old are required to file if their total income surpasses Rs. 5 lakhs.

Income Tax Rate for Proprietorship

Income Tax Rates for Proprietorships The income tax rates for proprietorships align with those for individuals. Unlike flat rates for LLPs or companies, proprietorships are taxed on slab rates. Here are the income tax rates applicable to proprietorships for the assessment year 2023-24, when the proprietor’s age is less than 60.

Proprietorship Tax Rate AY 2024-25| FY 2023-24 under Normal Tax Regime

Proprietorship Tax Rate AY 2023-24| FY 2022-23– Proprietor’s age is less than 60 years

Proprietorship Tax Rate AY 2023-24| FY 2022-23–The Proprietor’s age is between 60 and 80 years

The following tax rate applies to a Proprietor who turns 60 during the previous year but is younger than 80 on the last day of the previous year:

Proprietorship Tax Rate AY 2023-24| FY 2022-23–Proprietor’s age is above 80 years

Rates of surcharge

In respect of a Proprietor, the rate of surcharge for the Assessment Year 2023-24 is tabulated here:

Rates of surcharge – For Assessment Year 2023-24 under alternate tax regime

The surcharge rate for individuals who choose an alternative tax regime under Section 115BAC as of the Assessment Year 2023-24 will be 25%, a reduction from the previous rate of 37%.

Tax Audit for Proprietorship

A proprietorship firm is subject to audit if its total sales turnover exceeds Rs. 1 crore in the financial year. For professionals, an audit becomes mandatory if their total gross receipts surpass Rs. 50 lakhs during the assessed financial year.

Due Date for Filing Proprietorship Tax Return

If a proprietorship doesn’t require an audit as per the Income Tax Act, the deadline for filing its income tax return is July 31. However, if the proprietorship’s accounts need to be audited, the deadline for filing the income tax return is extended to September 30.

ITR Form for Proprietorships Return Filings

Proprietorship firms are mandated to file either Form ITR-3 or Form ITR-4-Sugam. Form ITR-3 is applicable for filing by a proprietor or a Hindu Undivided Family engaged in a proprietary business or profession. On the other hand, Form ITR-4-Sugam is suitable for filing by a proprietor opting to pay income tax under the presumptive taxation scheme.

Partnership Firm Tax Return Filing

All partnership firms are required to file income tax returns, irrespective of whether they have income or incur losses. Partnership firms are considered a separate legal entity for tax purposes under the Income Tax Act. Consequently, the income tax rate applicable to partnership firms is similar to that of Limited Liability Partnerships (LLPs) and companies registered in India.

Requirement for Filing Partnership Firm Tax Return

Indeed, every partnership firm is obligated to file income tax returns annually, regardless of whether the firm has generated income or incurred losses. In instances where there is no business activity, it is still necessary for the partnership firm to submit a NIL income tax return before the specified due date.

Income Tax Rate for Partnership Firms

Partnership firms are required to remit income tax at a rate of 30% on their total income. Moreover, if the total income surpasses Rs. 1 crore, the firm is subject to an income tax surcharge at a rate of 12% on the income tax amount. Additionally, a Health and Education Cess, amounting to 4%, is levied on the total income tax and the applicable surcharge for partnership firms.

Minimum Alternate Tax for Partnership Firms

Similar to the income tax regime applicable to companies, partnership firms are also subject to Minimum Alternate Tax (MAT). The MAT for partnership firms stands at 18.5% of the adjusted total income. Consequently, the income tax payable by a partnership firm on its profits cannot be lower than 18.5%, which is then increased by the applicable income tax surcharge, education cess, and secondary and higher education cess.

Tax Audit for Partnership Firm:

Partnership firms engaged in business activities with a total sales turnover exceeding Rs. 1 crore are obligated to undergo tax audits. Similarly, partnership firms involved in professional services wherein gross receipts exceed Rs. 50 lakhs in the preceding year are also required to undergo tax audits. Additionally, other specific conditions may necessitate a tax audit for a partnership firm.

Due Date for Filing Partnership Firm Tax Return:

For most partnership firms, the income tax return is due on July 31 of the assessment year. However, partnership firms that are required to undergo audits under the Income Tax Act must file their income tax returns before the extended deadline of September 30.

ITR Form for Partnership Firm Return Filing:

Partnership firms are mandated to file their income tax returns using Form ITR-5. Similar to other income tax forms, ITR-5 is an attachment-less form, eliminating the need to submit any documents or statements along with the partnership firm’s tax return. Nevertheless, it is imperative for the taxpayer to maintain all records related to the business and produce them before tax authorities upon request.

LLP Tax Return Filing:

All Limited Liability Partnerships (LLPs) are required to file income tax returns, irrespective of the income or loss incurred. LLPs, being distinct legal entities, are subject to separate taxation from the individual partners of the LLP. The income tax rate applicable to LLPs is akin to that of companies registered in India.

Requirement for Filing LLP Tax Return

Indeed, all Limited Liability Partnerships (LLPs) are obligated to file income tax returns annually, regardless of whether they have generated income or incurred losses. Even in cases of no business activity, it is mandatory for an LLP to submit a NIL income tax return before the specified due date

Income Tax Rate for LLPs:

The income tax rate applicable to Limited Liability Partnerships (LLPs) registered in India is 30% of the total income. Additionally, a surcharge is imposed on the income tax payable at 12% when the total income exceeds Rs. 1 crore. Furthermore, a Health and Education Cess at 4% applies to the income tax and surcharge of an LLP.

Minimum Alternate Tax for LLP:

Similar to the income tax framework for companies, LLPs are also subject to Minimum Alternate Tax (MAT). The MAT rate for LLPs is set at 18.5% of the adjusted total income. Consequently, the income tax payable by an LLP cannot be less than 18.5%, and this is increased by the income tax surcharge, education cess, and secondary and higher education cess.

Tax Audit for LLP:

LLPs with a turnover exceeding Rs. 40 lakh or a contribution exceeding Rs. 25 lakh are required to undergo audits by a practicing Chartered Accountant. Additionally, LLPs involved in international transactions with associated enterprises or engaged in specified domestic transactions must file Form 3CEB, which needs certification by a Chartered Accountant. The deadline for LLPs required to file Form 3CEB is November 30.

Due Date for Filing LLP Tax Return:

The deadline for LLP tax filing in India is July 31. However, LLPs obligated to undergo a tax audit have until September 30 to file their income tax returns.

ITR Form for LLP Return Filing:

LLPs are required to file income tax returns using Form ITR 5, which must be submitted online using the digital signature of one of the designated partners of the LLP.

Company Tax Return Filing:

All companies registered in India, whether classified as domestic or foreign, must file income tax returns each year. Domestic companies include those registered with the Ministry of Corporate Affairs, such as Private Limited, Personal, or Limited Companies.

Requirement for Filing Company Tax Return:

Every company registered in India must file income tax returns annually, irrespective of income, profit, or loss. Consequently, even dormant companies with no transactions are obligated to file income tax returns each year.

Income Tax Rate for Company:

For the Assessment Year 2024-25, domestic companies with a total turnover of less than Rs. 400 crores in the financial year 2020-21 are subject to an income tax rate of 25% of the total income. Companies with a turnover exceeding Rs. 400 crores in the same period are taxed at a rate of 30%. Additionally, companies are required to pay a surcharge and Health and Education Cess at 7% on the income tax and surcharge amount.

Minimum Alternate Tax for Company:

All companies are obligated to pay Minimum Alternate Tax (MAT) at a rate of 15% of book profit, plus surcharge and education cess, if the company’s tax liability is less than 15% of the book profit.

Tax Audit for Company:

Companies are mandated to undergo an annual audit by a Chartered Accountant, regardless of their turnover or whether they incur a profit or loss.

Due Date for Filing Company Tax Return:

All companies registered in India must file income tax returns on or before September 30. Companies incorporated between January and March can file MCA annual returns after 18 months in the first year. However, the same exemption is not applicable under the Income Tax Act. Therefore, even companies registered from January to March must file income tax returns on or before September 30 of the same calendar year.

ITR Form For Company Tax Filings

Companies registered in India and operating a business for profit must file Form ITR 6. Hence, private limited companies, limited companies, and one-person companies would be required to file Form ITR6.

Key Points to Consider When Filing a Business Tax Return