Income Tax Return for Sole Proprietorship, How to file Income Tax Return for Sole Proprietorship in India, ITR form for Sole Proprietorship, Ebizfiling

How to file Income Tax Return for Sole Proprietorship in India? And FAQs on Income Tax Return for Sole Proprietorship in India

Introduction

A proprietorship, like other incorporated firms such as partnerships and corporations, must pay tax on its earnings. In a legal sense, a proprietorship is treated the same as the owner himself, and the Income Tax Returns that must be submitted follow the same method as the proprietor’s own filings. As a result, the laws that control the payment of the proprietor’s income tax also apply to the proprietorship. In this article we will walk you through “How to file Income Tax Return for Sole Proprietorship in India?”

Information on ITR form for Sole Proprietorship

Two ITR (Income Tax Return) form for Sole Proprietorship needs to be filed:

  • ITR Form 3: The ITR 3 Form is used by a sole proprietor who is engaged in a proprietary business or profession.

  • ITR Form 4: ITR-4 Form is an income tax return form for taxpayers who have chosen the presumptive income scheme under Sections 44AD, 44ADA, and 44AE and have an annual income of less than Rs 50 lakh.

Due date for filing a Sole Proprietorship Income Tax Return

The deadline for filing a proprietorship’s Income Tax Return is determined by whether the business needs to be audited under the Income Tax Act of 1961 and whether it has engaged in any international activities.

  • The 31st of July is the last due date for proprietorships that do not require an audit to file their income tax filings.

  • Ownerships that are required to be audited must file their income tax forms by September 30th.

  • By the 30th of November, proprietorships that have conducted any overseas transactions or certain designated domestic companies must file their income tax filings.

How to file Income Tax Return for Sole Proprietorship in India?

Steps to File an Income Tax Return for a Proprietorship using eFiling:

  • Obtaining a PAN card is the first step. Every taxpayer receives this card from the Internal Revenue Service. It gives the cardholder a one-of-a-kind Permanent Account Number (PAN), which is required to pay taxes.

  • Because a proprietorship lacks a separate legal entity, the proprietor’s PAN must be used to pay taxes and file returns.

  • You must first register at the e-filing portal; if you are already registered, you must log in with your PAN.

  • Then go to the e-filing menu and choose ‘Income Tax Return.’

  • You must select the following options on this page: – Year of assessment – ITR form – Type of filing (original/revised) – In the submission mode, choose prepare and submit.

  • Continue by pressing the enter key. The new page is where you must carefully fill out all of the information requested.

  • Some information will be required, while others will be dependent on the applicability.

  • After you have completed all of the required fields, you will need to select a verification method. There are three options for filing: two for electronic filing and one for physical filing. – Choose e-verify to have the filing verified straight immediately. – E-verify later within 120 days, giving you time to update any required information. – Choose ‘I do not want to e-verify’ to proceed manually.

  • Select ‘Preview and Submit’ from the drop-down menu. You can preview the return before submitting it to double-check for problems.

  • You can validate the filing through OTP or EVC (Electronic Verification Code) after submitting it via the e-verify option. For successful verification, the OTP/EVC must be submitted within 60 seconds.

Related Read: Electronic Filing (E-Filing) Income Tax? And Advantages of electronic filing of Income Tax

Auditing for a Sole Proprietorship Firm

Depending on the annual turnover of the proprietorship, it may be necessary to audit the proprietorship. There are three different scenarios in which an audit is required:

  • During the assessment year, the turnover of the proprietorship firm conducting business exceeds Rs 1 crore. In the case of a professional proprietorship, an audit is required if the total receipts of the business exceed Rs 50 lakh.

  • An audit is required if a proprietorship is subject to any presumptive tax scheme, regardless of yearly turnover.

The Income Tax Act of 1961 establishes the rules to be followed during an audit. The proprietorship firm’s audit must be performed by a certified Chartered Accountant, according to that Act. The CA must ensure that all of the books of accounts are correctly kept and that the proprietorship firm has met all of the relevant compliances.

FAQs on Income Tax Return for Sole Proprietorship in India

1. Is it required to file taxes as a sole proprietor?

A Sole proprietor must record all business revenue and losses on his or her personal Income Tax Returns; the business is not taxed separately.

2. Is a proprietorship taxed twice or twice as much as a corporation?

Because sole proprietorships are not taxed entities, they are not separate from their owners, hence they are not subject to double taxation.

3. Is it possible to make changes to a tax return?

Yes, Any time throughout the assessment year or before the assessment is conducted, whichever comes first, a return of income can be updated. A return can be changed as many times as necessary as long as the deadline is met.

 

It is vital to remember that if the original return is filed beyond the due date given in section 139(1), it is referred to as a delayed return, and it cannot be changed.

4. What is the penalty for Non Filing of ITR (Income Tax Return)?

Non-filing of a proprietorship firm’s Income Tax Return is punishable under Section 234 F of the Income Tax Act. There is a penalty of up to Rs. 10,000 if you file your Income Tax Return after the deadline.

Conclusion

Simply explained, a sole proprietorship is a small, independent business that is owned and managed by one person. Furthermore, these are unregistered enterprises that are among the easiest to run. Because of their simplicity, single proprietorships are quite common in the unorganized business sector, especially among small merchants and traders. A sole proprietorship business is not taxed as a separate legal entity in India. Business owners, on the other hand, file their business taxes as part of their tax filings. However, after deducting business expenses, tax deductions, and other applicable revenue, a sole proprietor’s business income is added to his own income.

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Author: zarana-mehta

Zarana Mehta is an MBA in Finance from Gujarat Technology University. Though having a masters degree in Business Administration, her upbeat and optimistic approach for changes led her to pursue her passion i.e. Creative writing. She is currently working as Content Writer at Ebizfiling.

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