All businesses operating in India are required to file income tax return each year. In addition to filing income tax return, a business may also be required to file TDS return and pay advance tax to stay compliant under the Income Tax Act. IndiaFilings is India’s largest tax services platform offering a range of services like incorporation, GST return filing, income tax filing and more. IndiaFilings can help file income tax return for your business and ensure it remains compliant under the Income Tax Act and Rules. The average time taken to file an income tax return for your business is 3 to 5 working days. Get a free consultation on business tax return filing by scheduling an appointment with an IndiaFilings Advisor.

Proprietorship

Any person having business or professional income of more than Rs.2.5 lakhs per year would be required to file income tax return each year. IndiaFilings offers income tax filing for professionals and proprietors from Rs.2899

Partnership

Partnership firms (registered or unregistered) are required to file income tax return in form ITR 5 each year. Partnership firms attract income tax at the rate of 30%. IndiaFilings offers income tax filing for partnership firms from Rs.5899

LLP

Limited Liability Partnership firms registered in India are required to file Income Tax Return in Form ITR-5 each year and MCA Annual Return. IndiaFilings offers comprehensive compliance management for LLPs starting from Rs.7899

Companies

All types of companies registered in India are required to file Income Tax Return in Form ITR-6 each year and MCA Annual Return. IndiaFilings offers comprehensive compliance management for companies starting from Rs.7899

Proprietorship Tax Return Filing

Any individual who has business income is said to be operating a proprietorship firm. Proprietorships operating in India are required to file income tax return each year. Since proprietorships are considered to be one and same as the proprietor, the income tax return filing procedure for a proprietorship is similar to individual income tax return filing.

Requirement for Filing Proprietorship Tax Return

All proprietors below the age of 60 years are required to file income tax return if total income exceeds Rs. 2.5 lakhs. In the case of proprietors over the age of 60 years but below 80 years, income tax filing is mandatory if total income exceeds Rs.3 lakhs. Proprietors over the age of 80 years and above are required to file income tax return if the total income exceeds Rs.5 lakhs.

Income Tax Rate for Proprietorship

The income tax rate for proprietorship is the same as the income tax rate for individuals. Unlike the income tax rate for LLP or Company which are flat rates, proprietorships are taxed on slab rates. The following is the income tax rate applicable for proprietorships for assessment year 2019-20, wherein the age of the proprietor is less than 60.

Tax Audit for Proprietorship

An audit would be required for a proprietorship firm if the total sales turnover is over Rs.1 crore during the financial year. In the case of a professional, audit would be required if total gross receipts is more than Rs.50 lakhs during the financial year under assessment.

Due Date for Filing Proprietorship Tax Return

The income tax return of a proprietorship that doesn’t require audit is due on 31st July. In case the income tax return of a proprietorship needs to be audited as per Income Tax Act, then the return would be due on 30th September.

Tax Return for Proprietorships

For the assessment year 2017-18 only, which relates to income earned in Financial Year 2016- 17, proprietorship firms would be required to file Form ITR-3 or Form ITR-4-Sugam. Form ITR-3 can be filed by a proprietor or a Hindu Undivided Family who is carrying out a proprietary business or profession. Form ITR-4-Sugam can be filed by a proprietor who would like to pay income tax under the presumptive taxation scheme.

Partnership Firm Tax Return Filing

All partnership firm are required file the income tax return, irrespective of amount of income or loss. Partnership firms are taxed as a separate legal entity under the Income Tax Act. Hence, the income tax rate applicable for partnership firms is similar to LLPs and Companies registered in India.

Requirement for Filing Partnership Firm Tax Return

All partnership firms are required to file income tax return each year, irrespective of income or loss. If there was no business activity, then a NIL income tax return must be filed before the due date for a partnership firm.

Income Tax Rate for Partnership Firms

Partnership firms are liable to pay income tax at the rate of 30% of total income. In addition to the income tax, a partnership firm is liable to pay income tax surcharge on the amount of income tax at the rate of 12%, when total income exceeds Rs.1 crores. In addition to the income tax and surcharge, a partnership firm must pay Health & Education cess. Health & Education Cess is applicable on the amount of income tax and the applicable surcharge at the rate of 4%.

Minimum Alternate Tax for Partnership Firms

Similar to income tax applicable for a company, partnership firms are subject to minimum alternate tax. A minimum alternate tax of 18.5% of adjusted total income is applicable. Hence, income tax payable by a partnership firm having profits cannot be less than 18.5 per cent (increased by income tax surcharge, education cess and secondary and higher education cess).

Tax Audit for Partnership Firm

Partnership firms carrying on business with a total sales of over Rs.1 crore are required to obtain tax audit. Similarly, partnership firms, carrying on a profession wherein gross receipts in profession exceed Rs.50 lakhs in the previous year are required to obtain tax audit. In addition, there are other conditions applicable which could make an audit mandatory for a partnership firm.

Due Date for Filing Partnership Firm Tax Return

The income tax return due date for most partnership firms is July 31 of the assessment year. Partnership firms required to get its accounts audited under the income tax Act must file the income tax return before the September 30th deadline.

Tax Return for Partnership Firms

Partnership firms are required to file income tax return in form ITR 5. Like all other income tax forms, ITR 5 is an attachment less form and there is no requirement for submitting any documents or statements along with a partnership firm tax return. However, the taxpayer must save all records pertaining to the business and produce the same before tax authorities when requested.

LLP Tax Return Filing

All LLPs are required file the income tax return, irrespective of amount of income or loss. LLPs are a separate legal entity and are taxed separately from the Partners of the LLP. The income tax rate applicable for LLPs is similar companies registered in India.

Requirement for Filing LLP Tax Return

All LLPs are required to file income tax return each year, irrespective of income or loss. If there was no business activity, then a NIL income tax return must be filed before the due date.

Income Tax Rate for LLPs

The income tax rate applicable for LLP registered in India is a flat 30% on the total income. In addition to the income tax, a surcharge is levied on the income tax payable at the rate of 12% when the total income exceeds Rs.1 crore. In addition to income tax surcharge, a Health & Education cess at 4% is also applicable on the income tax and surcharge of a LLP.

Minimum Alternate Tax for LLP

Similar to income tax applicable for a company, LLP is also subject to minimum alternate tax. A minimum alternate tax of 18.5% of adjusted total income is applicable for LLP. Hence, income tax payable by LLP cannot be less than 18.5 per cent (increased by income tax surcharge, education cess and secondary and higher education cess).

Tax Audit for LLP

LLP whose turnover exceeded Rs. 40 Lakh or whose contribution exceeded Rs. 25 Lakh are required to get their accounts audited by a practising Chartered Accountant. In addition, LLPs that entered into an international transaction with associated enterprises or undertook certain Specified Domestic Transactions are required to file Form 3CEB. Form 3CEB must be certified by a Chartered Accountant. LLPs required to file Form 3CEB have 30th November as the deadline for LLP tax filing.

Due Date for Filing LLP Tax Return

The deadline for LLP tax filing in India is July 31st. LLPs that are required to obtain a tax audit have 30th September as deadline for filing income tax return.

Tax Return for Partnership Firms

LLPs must file income tax return using Form ITR 5. Form ITR 5 must be filed online using the digital signature of one of the designated partner of the LLP.

Company Tax Return Filing

All companies registered in India are required to file income tax returns each year. Under the Income Tax Act, company tax return filing falls under two categories, namely domestic company or foreign company. Companies registered with the Ministry of Corporate Affairs like Private Limited Company, One Person Company or Limited Company are classified as a domestic company.

Requirement for Filing Company Tax Return

All companies registered in India are required to file income tax returns each year, irrespective of income, profit or loss. Hence, even dormant companies with no transactions are required to file income tax return each year.

Income Tax Rate for Company

For assessment year 2019-20, Income tax rate of 25% of total income is applicable for domestic companies having total turnover of less than Rs.250 crores in the year 2016-17. For companies having a turnover of more than Rs.250 crores in the year 2016-17, income tax rate of 30% is applicable. In addition to the income tax, companies are required to pay surcharge and Health & Education Cess at 4% on income tax and surcharge.

Minimum Alternate Tax for Company

All companies are required to pay minimum alternate tax at the rate of 18.5% of book profit plus surchage and education cess, if the tax liability of the company is less than 18.5% of book profit.

Tax Audit for Company

The accounts of a company must be audited each year by a Chartered Accountant, irrespective of turnover or profit/loss.

Due Date for Filing Company Tax Return

All companies registered in India are required to file income tax return on or before the 30th of September. Companies incorporated between January – March can file MCA annual return after 18 months in the first year. However, the same type of exemption is not available under the Income Tax Act. Hence, even companies registered from January – March must file income tax return on or before 30th September of the same calendar year.

Tax Return for Company

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.

As the proprietor and the business are one and the same, a proprietorship cannot have other partners or shareholders. Further, there is no limited liability protection for the proprietor from the business activities conducted in the sole proprietorship. Hence, this type of business entity is best suited for every small businesses with no more than 5 employees.

Who is a sole proprietor?

A sole proprietor is the sole owner of the proprietorship business. Hence, a business will be carried forward by making new bank account for the business and GST registration will be done by using PAN and Aadhar of the proprietor. The proprietor is completely responsible for all the assets and liabilities of the business.

How to check proprietorship status?

In India, we don’t have to register sole proprietorship. Hence, there is no platform to check the status of a sole proprietorship. However, if a proprietor has applied for GST registration, the GST registration and filing status of the proprietorship can be checked on the GST Portal to confirm the existence of the proprietorship.

Proprietorship legal entity status and recognition

There is no separate recognition of proprietorship as a separate legal entity. Hence, the business owner and the proprietorship are considered one and the same for all legal and official purposes.

Sole Proprietorship Registrations & Licenses

To run a proprietorship business in India, the proprietor will have to obtain PAN and Aadhar. The proprietor must obtain GST registration, UDYAM registration and open a bank current account. In some states, the proprietor will also have to obtain Shops & Establishment Act registration.

In addition to the basic requirements above, additional licence and permits may be required depending on the industry, state, and local regulations.

Advantages of Proprietorship

Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process – as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.

Lower compliance: As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.

Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.

Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.

Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.

Disadvantages of Sole Proprietorship

Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for profit sharing or shareholding.

Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.

Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.

Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.

Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.

Registering a Proprietorship Online through IndiaFilings

You can easily register a proprietorship online through IndiaFilings. To register a proprietorship, only the PAN & Aadhaar card of the business owner is required. We can help you obtain the following registrations in less than 15 days:

• GST Registration
• UDYAM Registration
• Zero-Balance Business Current Account with LEDGERS Accounting Software

Once, you have registered for the proprietorship registration on IndiaFilings, please follow the steps below and upload the following documents by logging into LEDGERS.

• Step 1: Login to LEDGERS using the email address for payment.
• Step 2: Go to Services Tab & Select Proprietorship Engagement
• Step 3: Upload your PAN & Aadhar Card Copy
• Step 4: An IndiaFilings Registration Expert will file the registration application with GST Department, MSME Department and Bank for Current Account.
• Step 5: Access to LEDGERS Accounting Software is provided for GST invoicing, GST filing and other services.

PAN Card for Proprietorship Firm

A proprietorship is not a separate business entity. Hence, there is no procedure to obtain proprietorship PAN card. The PAN card of the business owner is used for the proprietorship.

Obtaining GST Registration for Proprietorship

GST registration for a proprietorship will be obtained by IndiaFilings as a part of the service. The following documents are required for GST registration:

• Permanent Account Number (PAN) of Proprietor
• Digital Signature Certificate of the Authorized Signatory
• Consent by Proprietor for obtaining GST Registration
• Photograph of Proprietor and Authorized Signatory
• Bank Account Details: A scanned copy of a cancelled cheque with the business entity’s name, bank account number, MICR, IFSC, and branch information.
• Declaration / Authorization to Authorized Signatory
• For commercial purposes, the rent / lease agreement should be in the name of the proprietor.
• Additional documents such as Aadhaar Card, Driving Licence, Passport, or Voter ID in the name of the Owner with the complete address of the premises should also be provided if the address on the ownership document (Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill) is incomplete.

Obtaining UDYAM Registration for Proprietorship

Udyam Registration can be obtained online to avail various benefits available for small and medium sized businesses. Once the GST registration is obtained, the IndiaFilings team would help obtain UDYAM registration by submitting Aadhaar card, PAN card and GST certificate to Government.

Bank Account for Proprietorship

The bank current account for a proprietorship will be opened in the name of the business owner using his/her PAN. The business owner will have to submit proof for doing business. Any two of the following documents can be submitted to create a current account instead of savings account in the name of proprietorship:

• GST registration certificate
• Shop & Establishment Act license
• License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities,
• Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening a bank account etc.

Obtaining Shops & Establishment Act License for Proprietorship

From state to state, the process for acquiring a Shop and Establishment registration certificate changes. It is available both online and offline. In most states, Shop and Establishment Act registration can be obtained within 2-3 weeks.

Timelines for Sole Proprietorship Registration

A sole proprietorship can normally be registered in India through IndiaFilings in less than 15 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.

Proprietorship Business Activities

A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.

Compliances for Proprietorship

The following are some of the compliances that are applicable for a sole proprietorship:

Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.

Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.

In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.