Simplified Guide to Filing Proprietorship Tax Returns

Paying Taxes as a Proprietor

Like other business types like partnerships or corporations, proprietorships must pay taxes on their earnings. For tax purposes, a proprietorship is seen as the same entity as the owner. This means the tax rules that apply to the owner also apply to the proprietorship.

For instance, if you are a senior citizen, the same tax benefits apply to your business:

• If you're 60 or older, you don’t pay income tax if your income is under Rs 3 lakh.
• If you're 80 or older, you’re exempt if your income is below Rs 5 lakh.

Latest Update: Senior citizens can submit a Form 12BBA to banks to avoid filing an income tax return if their only income comes from pensions and bank interest.

When Does a Proprietorship Need an Audit?

A proprietorship might need an audit based on its turnover. Here’s when an audit is necessary:

1. Business turnover exceeds Rs 1 crore.
2. If it’s a professional business, total receipts exceed Rs 50 lakh.
3. If it's under a presumptive tax scheme, an audit is needed regardless of turnover.

Audits must comply with the Income Tax Act of 1961 and be conducted by a certified Chartered Accountant.

Filing an Income Tax Return for a Proprietorship

Proprietorships must file tax returns annually unless exempted. The process is similar to filing personal taxes. You can file online using an electronic signature. There are two forms, depending on your business type:

• Form ITR-3: For businesses run by a Hindu Undivided Family or any other proprietor.
• Form ITR-4 Sugam: For businesses under presumptive tax schemes to ease compliance.

Steps for eFiling a Proprietorship Tax Return

1. Obtain a PAN Card: This is your unique taxpayer ID for paying taxes.
2. Register on the e-filing portal or log in using your PAN.
3. Select ‘Income Tax Return’ under the e-filing menu.
4. Fill Out the Details:

• Choose the assessment year.
• Select the correct ITR form and filing type.
• Submit either through e-filing or manually.

5. Verification:

• E-verify now to confirm immediately.
• E-verify later within 120 days if you need more time.
• Manual submission if you don’t want to e-verify.

6. Preview and Submit your return, ensuring all details are correct.

Deadlines for Filing

• No audit needed: File by July 31.
• Audit required: File by September 30.
• International transactions involved: File by November 30.

This guide aims to simplify the process of filing tax returns for proprietorships, ensuring compliance without unnecessary complexity.