Proprietorship Compliance
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Running a Sole Proprietorship in India entails adhering to essential financial and legal obligations. Ensuring compliance with tax and regulatory requirements is crucial for seamless business operations and growth. This includes filing Income Tax Returns, TDS Returns, GST Returns, EPF Returns, maintaining accurate accounting records, and, in specific cases, undergoing a Tax Audit.
At RMC Auditors, we understand the complexities of these compliance requirements. Our expert team and user-friendly services are tailored to help sole proprietors navigate the intricate compliance landscape with efficiency and ease, enabling you to focus on growing your business.
What is Professional Tax?
A sole proprietorship in India is the simplest form of business entity, where a single individual owns and manages the business. The business and the owner are considered the same entity for tax purposes.
Income Tax Return Filing for Proprietorships
For tax purposes, proprietorships are treated as an extension of their owners. As a result, the income tax rules that apply to individual taxpayers also apply to proprietorships. Since a proprietorship is not a distinct legal entity, the owner’s PAN (Permanent Account Number) is used for filing tax returns.
Is it Necessary for Proprietorships to File Income Tax Returns?
Yes, proprietorships are required to file income tax returns based on the owner’s age and income:
- Below 60 Years: Income tax filing is mandatory if the total income exceeds ₹3 lakh.
- Between 60 and 80 Years: Filing is required if income exceeds ₹3 lakh.
- Above 80 Years: Filing is required if income exceeds ₹5 lakh.
Timely filing of returns allows businesses to carry forward losses and claim specific deductions under sections such as 10A, 10B, 80-IA, 80-IAB, 80-IB, and 80-IC.
Income Tax Slabs for Proprietorship Firms (FY 2023-24)
| Age Group | Net Income Range (₹) | Rate of Income Tax (%) |
|---|---|---|
|
Below 60 |
Up to 2,50,000 2,50,001 to 5,00,000 5,00,001 to 10,00,000 |
– 5 20 |
|
60-80
|
Up to 3,00,000 3,00,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 |
– 5 20 30 |
|
Above 80 |
Up to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 |
– 20 30 |
Alternate Tax Regime for Proprietors (Section 115BAC)
Under the alternate tax regime, proprietors can benefit from reduced tax rates by forgoing certain exemptions and deductions. The revised income tax rates under this regime include:
Net Income Range (₹) | FY 2023-24 Rate (%) |
Up to 2,50,000 | – |
3,00,001 to 5,00,000 | 5 |
5,00,001 to 7,50,000 | 10 |
7,50,001 to 10,00,000 | 15 |
10,00,001 to 15,00,000 | 20 |
Above 15,00,000 | 30 |
Presumptive Taxation Scheme for Proprietorships
Proprietors with annual turnover up to ₹2 crore can opt for the Presumptive Taxation Scheme under Section 44AD. This scheme simplifies compliance by eliminating the need for maintaining detailed books of accounts and allows taxation at a minimum rate.
Compliance Deadlines
- No Audit Required: File ITR by July 31.
- Audit Required: File ITR by September 30.
- International Transactions or Specific Entities: File ITR by November 30.
Additional Compliance Requirements
- TDS Return Filing: Mandatory for proprietors with a valid TAN. Forms include:
- Form 24Q: TDS on Salary
- Form 26Q: TDS on other payments
- Form 27Q: TDS for non-residents
- Form 26QB: TDS on property transactions
- GST Return Filing: Proprietors with annual turnover exceeding ₹20 lakh must register under GST and file GSTR-1 and GSTR-3B.
- EPF Return Filing: Mandatory for proprietors employing more than 20 individuals.
- Accounting and Bookkeeping: Required if turnover exceeds ₹25 lakh or income exceeds ₹2.5 lakh in the preceding three years.
- Audit Requirements:
- Turnover above ₹5 crore.
- Professional receipts exceeding ₹50 lakh.
- Opting out of presumptive tax schemes.
Why Choose RMC Auditors?
At RMC Auditors, we specialize in simplifying compliance for sole proprietorships. Our services include:
- Income Tax Filing: Accurate and timely filing to ensure compliance with tax regulations.
- TDS Returns: Seamless filing of TDS returns for salary, property transactions, and other payments.
- GST Compliance: End-to-end GST registration and return filing services.
- EPF Compliance: Assistance with employee provident fund returns for proprietors with staff.
- Accounting and Audit Services: Maintaining accurate financial records and conducting audits as required by law.
By partnering with RMC Auditors, you can focus on growing your business while we ensure your compliance needs are met.
Ready to streamline your proprietorship compliance? Contact RMC Auditors today and let us help you achieve financial and legal peace of mind!
For expert guidance on company incorporation and regulatory compliance, contact us today RMCAuditors is here to help! Text us on whatsApp or call us today .
FAQ's
Yes, under the Income Tax Act of India, sole proprietors are required to file taxes based on their income. Since a proprietorship is not a separate legal entity, the owner's personal PAN is used for tax filing, and the business's income is treated as the owner's income.
- Determine Applicable ITR Form:
- Use ITR-3 for regular income from business/profession.
- Use ITR-4 Sugam if opting for the Presumptive Taxation Scheme (under Section 44AD or Section 44ADA).
- Gather Required Documents:
- PAN, Aadhaar, Bank Details.
- Form 16, 16A, and 26AS.
- Profit & Loss Statement, Balance Sheet (if applicable).
- Online Filing:
- Log in to the Income Tax e-filing portal.
- Fill in the details, upload forms, verify, and submit.
Offline Filing (for eligible taxpayers): Submit the physical forms to the Income Tax Department.
File ITR-3 if the proprietorship earns income through:
- A business or profession.
- Interest, rent, or capital gains (beyond presumptive taxation limits).
Due Dates:
- July 31st: If no audit is required.
- September 30th: If an audit is mandatory.
ITR-4 is filed when the proprietor opts for the Presumptive Taxation Scheme under:
- Section 44AD: Business income.
- Section 44ADA: Professional income.
This simplifies tax filing by allowing income to be calculated as a percentage of turnover (e.g., 8% for businesses without digital transactions, 6% for those with digital payments).
No, a proprietorship is taxed only once. The income of the business is considered the personal income of the proprietor and taxed accordingly. There is no corporate tax or separate taxation for the business entity
- Deductions: Claim business expenses such as rent, utilities, salaries, and professional fees.
- Depreciation: Deduct depreciation on assets used for business.
- Presumptive Taxation Scheme: Simplifies compliance and reduces tax liability for small businesses.
- No Double Taxation: Income is taxed only once as personal income.
- HRA/Section 80C: Proprietors can claim personal deductions like HRA and investments under Section 80C.
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