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Accounting & Compliance

LLP Compliance

LLP Compliance

₹ 5,899 – LLP Compliance

LLP Compliance

Our pricing is 100% transparent. One Person Company is popular among sole founders.

Annual return filing, income tax return filing, LEDGERS accounting software and compliance management for a LLP with a turnover of less than Rs.10 lakhs per annum.

About this item

  • 1 Year Accounting
  • Financial Statement Preparation
  • 1 Year Dedicated Accountant
  • 1 Year Income Tax Filing
  • 1 Year Dedicated Compliance Manager
  • 1 Year DIN KYC for upto 2 Designated Partners
  • 1 Year Annual Return filing

LLP Annual Filing

LLP or the Limited Partnership is a hybrid combination of a limited and partnership company. Minimum two partners are required to incorporate an LLP there is no such upper limit.

Limited Liability Partnerships are required to file the annual returns within 60 days from the end of the close of the financial year and account statement and solvency within 30 days from the end of six months of the closure of the financial year.

The financial year for the LLPs starts from the 1st of April to the 31st of March. The annual return for the LLPs is due on May 30th while the statement of accounts and solvency is due on the 30th of October of each financial year.

Besides the MCA annual return filing, the limited liability partnerships must also mandatorily file the income tax return every year.

IndiaFilings provides a comprehensive LLP compliance service that includes annual filing and LLP income tax return filing at a very affordable price point.

Income Tax Rate for LLP

The income tax rate applicable for LLPs registered in India is 30% of the total income. Besides the income tax, a surcharge is levied on the income of the tax payable at the rate of 12% when the total income is exceeding Rs.1 crore.

Health & Education Cess

Health and Education cess of 4% is applicable on the amount of income tax and the applicable surcharge.

Minimum Alternate Tax (MAT) 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 percent (increased by income tax surcharge, education cess, and secondary and higher education cess).

LLPs Involved in International Transaction

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 3oth November as the deadline for LLP tax filing.

Procedure for LLP Tax Filing

LLPs must file an income tax return using Form ITR 5. Form ITR 5 can be filed online through the income tax website using the digital signature of the designated partner. After filing an LLP tax return, the taxpayer should print two copies of Form ITR-V.

One copy of ITR-V, signed by the assessee should be sent by ordinary post to Post Bag No. 1, Electronic City Office, Bengaluru–560100 (Karnataka). The other copy can be retained by the assessee for his record.

LLP Tax Payment

LLP tax payment can be made in physical mode through designated banks or E-payment mode. LLPs that are required to get their accounts audited are required to pay tax through e-payment mode only. To pay tax at designated banks, Challan ITNS 280 as provided below must be provided with the tax payment.

LLP Accounts Maintenance

All the Limited Liability Partnership are required to maintain proper account banks on a cash basis or accrual basis. As Private Limited Companies are required to maintain books of accounts only on an accrual basis.

The LLPs have the option of maintaining the books of accounts on a cash basis as well. The books of accounts must be maintained at the registered office of the LLP and must contain all the information like:

  • Money received and spent
  • Assets and liabilities
  • Statement of COGS
  • Inventories and finished goods statement.

At the end of each financial year, the LLPs are required to prepare their financial statements within 6 months for filing with the ROC.

What are Statements of Accounts and Solvency?

All registered LLPs are required to maintain their books of accounts and fill the data regarding the profits incurred as well as other financial data relevant to business and submit it along with Form 8 every year.

Form 8 must be attested by the designated partners by duly signing it. It is also necessary to get it certified by a practicing chartered accountant or a practicing company secretary or a practicing cost accountant.

Failing to filer the statement of accounts and the solvency report within the specified duration will lead to a penalty of Rs. 100 per day.

Annual filing for Limited Liability Partnerships

The LLPs are required to elect the partners for maintaining proper books of accounts and filing the annual return with the Ministry of Corporate Affairs annually.

The book of accounts of the LLPs need not be audited except in case the annual turnover is more than Rs.40 lakh or if the contribution is more than Rs. 25 lakh. Hence, the process of annual filing is simpler for the LLPs. Some of the annual filings are mandatory even if the LLP has begun the business or not.

The due date for Income Tax Returns ( as extended)

The due date has been extended to 10th of January, 2021 from December 31st, 2020 and if tax audit is required for the LLP then the due date for IT returns for LLP has been extended till 15th February,2021 from 31st January, 2021.

Even if the LLP has not done any business for the current financial year, the LLP is required to file a Nil Income Tax returns with the tax authorities.

LLP form 8 Due date

LLP Form 8 is an annual filing is to be filed with ROC every year. Statement of account and solvency shall be filed with the registrar within 30 days from the end of 6 months of the financial year to which the statement relates. The due date for LLP annual filing is 30th October 2020.

This form includes a declaration on the solvency state of the LLP by the designated partners and also information related to the statement of assets and the liabilities and statement of income and the expenditure of the LLPs.

LLP Tax Audit

LLPs are required to get the accounts audited by a practicing chartered accountant if the annual turnover in any financial year exceeds Rs. 40 lakhs or if the contribution exceeds Rs. 25 lakh.

To avail exemption from audits, the LLP accounts must contain a statement by the partners to the effect that the partners acknowledge their responsibilities for complying with the requirements concerning accounting and preparation of financial statements.

Dedicated Advisor

Your LLP will be assigned a dedicated Compliance Manager who will be a single point of contact to help you maintain the compliance for your LLP. You can get in touch with your Compliance Manager at anytime and get assistance on matters related to your LLP’S compliance.

Accounting

All LLP are required to maintain accounts and prepare financial statements at the end of each financial year. Our Compliance Manager will help your LLP maintain accounts and will prepare the financial statement for your business at the end of financial year.

Form 11 Filing

We will prepare and file Form 11 for your LLP based on information provided by you. To file Form 11, we will require the contribution paid by each partner in the previous year.

Form 8 Filing

We will prepare and file Form 8 for your LLP based on information provided by you. To file Form 8, we will be responsible for preparation of the accounting and financial statements preparation for the company.

Income Tax Return

Income tax return for a LLP must be filed irrespective of income, profit or loss. Hence, even a LLP with no transactions are required to file income tax return each year. LLP income tax return will be due on 31st July if there is no tax audit requirement. If tax audit is required, the LLP income tax return will be due on 30th September.

RELATED GUIDES

Annual Compliance – LLP FAQ’s

1. What are the annual compliances for the LLPs?

07 December 2021

An LLP is supposed to file the LLP annual return in Form 11, the financial statement of the accounts and solvency, and the income tax return.

2. Is Form 8 mandatory for the LLPs?

07 December 2021

The LLP Form 8 or the statement of account and the solvency is to be filed every year by all the LLPs that are registered in India. It is filed with the MCA irrespective of the turnover.

3. What are the compliances for the partners in LLP?

07 December 2021

The Partners need to comply with the annual return filing with the MCA, filing the statement of accounts.

4. What is the compliance exemption for the LLPs?

08 December 2021

There are many privileges for the LLPs as compared to other companies there are exemptions from maintaining the minutes’ books, statutory register, annual general meeting as well as flexible rates.

5. Is a board meeting held for the LLPs?

08 December 2021

The Board meeting is conducted by the Board of Directors, here no BOD is involved in the LLPs instead the designated partners run the whole business and are also responsible for the compliance

6. Why is it necessary for the LLPs to comply with the ROC Compliance?

08 December 2021

The LLPs are corporate entities and are operated by the legal rules and the procedures that are the stated in LLP Act 2008. Irrespective of the turnover the LLPs have to file the annual returns giving details on the management on the financial performance. Any delay in the same attracts a heavy penalty.

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Accounting & Compliance

Company

Company

₹ 35400 – Company

Company

Our pricing is 100% transparent. One Person Company is popular among sole founders.

Auditor appointment, 1 year accounting, Financial statement preparation, MCA annual return filing, 1 year income tax return filing, 1 year dedicated compliance manager support and 1 Year Dedicated Accountant and LEDGERS accounting software for a company with a turnover of less than Rs.25 lakhs per annum.

About this item

  • Auditor Appointment
  • 1 Year Accounting
  • Financial Statement Preparation
  • 1 Year Dedicated Accountant
  • 1 Year Income Tax Filing
  • 1 Year Dedicated Compliance Manager

Annual Compliances for Private Limited Company

The term compliance describes the ability to comply with orders, set of rules, or requests.

A private limited company that has been incorporated in India must ensure the compliances concerning the Companies Act, 2013 are adequately met.

The Companies Act, 2013 regulates the appointment, qualification, remuneration, and retirement of the Company’s Directors and other aspects such as conducting board meetings and shareholder meetings.

The RoC compliance for registered Private Limited Companies is necessary. Irrespective of the total turnover or the capital amount, the company must comply with the annual compliance requirement.

All companies registered in India like a private limited company, one person company, limited company, and section 8 company need to maintain the annual compliances like annual returns and income tax return each year. Though Company Registration happens to be the most popular form of starting a business, various compliances need to be followed once the business is Incorporated.

Managing the business’s everyday operations while complying with the difficult corporate laws can be a task for the entrepreneur. So, it is always better to take the professionals’ help and understand the legal requirement to ensure timely fulfillment of these compliances to waive off the penalties or fines.

Here, we will look at some of the Common compliances that a private limited company has to ensure mandatorily.

What are compliances to be maintained by the Private Limited Company?

The compliance requirement for Private Limited Company has changed drastically over the years. Following is the summary of the private limited company compliance due dates in 2021.

ComplianceDescription
Commencement of business ( within 180 days)For companies registered in India after November 2019, having a share capital, it is necessary to obtain a commencement if business certificate before commencing any business or exercising the borrowing powers. The commencement of business certificate must be obtained within 180 days of incorporating a Company.
In case the individual fails to obtain this certificate, there is a penalty of Rs. 50,000 for the company Rs. 1000 per day for the directors for each day of default.
Auditor Appointment (Within 30 days)All registered Indian Companies must appoint a Statutory auditor within 30 days of incorporation. If the company fails to appoint an auditor, the company won’t be allowed to commence business. Also, there is a penalty of Rs. 300 per month.
Income Tax ReturnIncome tax returns need to be filed on or before 30th September 2021 for the Financial year 2020-21.
MCA Form AOC-4The registered private limited companies must file MCA Form AOC-4 on or before 30th November 2021 for the FY2020-21. Failure to file AOC-4 will attract a penalty of Rs. 200 per day of default or delay.
MCA Form MGT-7It is necessary to file MCA form MGT-7 on or before 31st December 2021 for FY2020-21. Failure to file MGT-7 attracts a penalty of Rs.200 Per day of default or delay.
DIN eKYCAll the directors of the company must be filed for the DIN eKYC or DIR-3 eKYC. In DIR-3 eKYC, the Director must provide a unique personal mobile number and a personal email address. There’s a penalty of Rs. 5000 in case of failure to file DIN eKYC.
Hold Annual General MeetingFor a private limited company, it is mandatory to hold an annual general meeting once a year. Companies are required to keep their AGM within six months from closing the Financial year.
Director’s reportPreparation of the Directors report will be done with all the information required under Section 134.

Statutory Audit Compliances

The statutory audit compliances are carried to determine whether an organization provides accurate details of the financial position by examining the bank balances, bookkeeping records, and financial transactions.

  • A statutory auditor of the company is appointed.
  • The auditors of the company will finalize annual accounts.

Annual ROC Filings

The Private Limited Companies must file the annual accounts and returns disclosing the details of its shareholders, directors, etc., to the companies’ registrar.

As a part of the annual filing, the following forms are to be filed with the ROC:

Form MGT-7 (Annual returns) must be filed within 60 days of holding the annual general meeting.

Form AOC-4 (Financial statements) is to be filed by a private limited company within 30 days with the balance sheet and the statement of profit and loss account and Director report.

Annual General Meeting

It is necessary to hold a meeting of the shareholders once every year within six months from the financial year’s closing.

AGMs are held for approval of financial statements, declaration of dividends, appointment or re-appointment of auditors, commission, remuneration of directors, etc.

The meeting is held during business hours on a day that is not a public holiday. It shall occur at the registration of the company or the city, village, or town in which the registered office is situated.

Board Meeting

It is mandatory to conduct the first meeting of the Board of Directors of a company within 30 days of incorporation of the company.

There should be four board meetings held every three months in which a minimum of 2 directors or 1/3 rd of the total number of directors, whichever is greater, are required to be present.

Further, the meeting’s discussion needs to be drafted and recorded in the minutes of the meeting and maintained at the company’s registered office.

A notice should be intimidated seven days in advance about the date and the purpose of the meeting.

Directors Report

The Director has to disclose details about his directorship in other companies every year. This can be done by giving a declaration in writing to the company every year.

Income Tax Compliances

  • Quarterly payment of the advance tax
  • Filing of the Income Tax returns
  • Tax audit (mandatory in case the turnover or gross receipts of a business exceeds Rs. One crore in the previous year relevant to the assessment year.
  • Filing of the Tax Audit report.

Other event-based Compliances

Besides the annual filings, there are various other compliances that need to be compiled with on occurrence of any event in the company.

Here are specific instances of such events:

  • Change in the authorized capital or the paid-up capital of the company.
  • Allotment of new shares or transfer new shares
  • giving loans to other companies
  • giving loans to directors
  • Appointment of managing or whole-time Director and their payment
  • when a bank account is opened or closed, or there is a change in the signatories of a bank account.
  • if there is an appointment or change of the statutory auditors of the company

It is necessary to file different forms with the registrar for all such events within a specific period. In case of missing out on this, additional fees or penalties might be levied. Hence, it is necessary to meet such compliances on time.

Non-compliance

In case if a company fails to comply with the rules and the regulations of the Companies Act, then the company and its members who default shall be punishable with a dine for the period of which the default is continuing.

In case there is a delay in annual filing, additional fees are required to be paid. Hence, it is always better to fulfill the compliances on time.

Dedicated Advisor

Your company will be assigned a dedicated Compliance Manager who will be a single point of contact to help you maintain the compliance for your company. You can get in touch with your Compliance Manager at anytime and get assistance on matters related to your Company’s compliance.

Accounting

All companies are required to maintain accounts and prepare financial statements at the end of each financial year. Our Compliance Manager will help your company maintain accounts and will prepare the financial statement for your business at the end of financial year.

Secretarial Services

Companies are required to conduct a minimum of four board meetings, an annual general meeting, Directors Report and Annual Report each financial year. Our Compliance Manager will help you prepare minutes of board meetings and create all secretarial reports.

MCA Annual Return Filing

Annual General Meeting should be held by a company within 6 months from the end of that financial year. And MCA annual return must be filed on or before September 30th. Our Compliance Manager will prepare all the documents and file your company’s MCA annual return.

Income Tax Return Filing

Income tax return of a company must be filed irrespective of income, profit or loss. Hence, even dormant companies with no transactions are required to file income tax return each year. Our Compliance Manager will prepare all the documents and file your company’s income tax return.

RELATED GUIDES

Annual Compliance – Company FAQ’s

1. Which Form is to be filed for the appointment of the statutory auditor?

08 December 2021

Form ADT-1 is filed for appointing or replacing the Statutory Auditor.

2. Which form is to be attached to the Companies Director Report?

08 December 2021

MGT-9 is attached to the company’s director report, which is an extract of MGT -7

3. Are audited Financial statements mandatory while annual filing of the Private Limited Companies?

08 December 2021

Audited financial statements are necessary for every company from its incorporation. The company must file the audited statements only.

4. Does the appointment of the statutory auditor fall under annual compliance?

08 December 2021

A company can appoint a statutory auditor either for five consecutive years or till the conclusion of the next Annual general meeting. Therefore, an appointment of the statutory auditor cannot be considered as a part of annual compliance.

5. What are the compliances of a Private Limited Company?

08 December 2021

A company is required to maintain the compliances once the company is incorporated. The auditor is to be appointed within 30 days. Additionally, there is income tax filing and annual return filing that is to be done every year.

6. Is it necessary to conduct AGM?

08 December 2021

The annual general meeting (AGM) is held for the management and the shareholders to interact with each other. The Companies Act,2013 makes it compulsory to hold meetings to discuss the yearly results and appoint auditors.

7. Is it mandatory to get a Private Limited Company audited?

07 December 2021

The statutory audit as the name suggests is a mandatory audit for all companies. All the entities that are unregistered under the Companies Act as Private or Public Limited Companies need to get the books of accounts audited every year.

8. How to file the annual returns of the Company?

08 December 2021

The companies incorporated under the Companies Act,1956 are required to file the following documents with the ROC The balance sheet in form 23AC which is to be filed by all the companies Profit and loss account in form 23ACA which is to be file by all the companies.

9. Is audit report mandatory for all the private limited companies?

08 December 2021

The Private Limited Companies are required to file the annual accounts and the returns that disclose the details of the shareholder and the directors to the ROC.

10. When is annual return to be filed after the AGM?

15 November 2021

After the AGM all the private limited companies are required to file the annual return within 60 days of holding the annual general meeting.

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Accounting & Compliance

Partnership

Partnership

₹ 5,899 – Partnership

Partnership

Our pricing is 100% transparent. One Person Company is popular among sole founders.

1 year Accounting, Financial statement preparation, 1 year Income Tax Return Filing, 1 year Dedicated Compliance Manager support and 1 Year Dedicated Accountant and LEDGERS accounting software for a company with a turnover upto 15 lakhs per annum.

About this item

  • 1 Year Accounting
  • Financial Statement Preparation
  • 1 Year Dedicated Accountant
  • 1 Year Income Tax Filing
  • 1 Year Annual Return Filing

Partnership Firm Tax Return Filing

A partnership firm is a type of entity where more than one person is carrying out business under one entity. Partnerships firms in India are of two types – Registered partnership firms and unregistered partnership firms.

Registering a Partnership is the right choice for small enterprises as the formation is straightforward and there are minimal regulatory compliances.

The Partnership Act has been in existence in India since 1932, making partnerships one of the oldest types of business entities in India. A partnership firm can even be registered after it is formed. There are as such no penalties for non Registration of a Partnership firm.

But unregistered Partnership firms are denied certain rights under section 69 of the Partnership Act that majorly deals with the effects of non Registration of Partnership firms.

The income tax defines a Partnership firm as “Persons who have entered into a partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”. Hence, a firm that does not have a registration certificate from the registrar is an unregistered Partnership firm.

What is the tax rate for a partnership firm?

A partnership firm is required to file a partnership firm income tax return under the Income Tax Act,1961. Partnership firms are liable to pay income tax at the rate of 30% of total income. Besides, a partnership firm is liable to pay an income tax surcharge of 12% if the total income exceeds Rs.1 crores.

Additional to the income tax and surcharge a partnership firm must pay the education cess and the secondary higher education cess.

Education Cess is applicable on the amount of the income tax and the applicable surcharge at the rate of 2%. Secondary and higher education cess is applicable on the amount of the income tax and the applicable surcharge at the rate of 1%.

Alternative minimum tax

Similar to a private limited company or LLP, partnership firms are also required to pay alternate minimum tax at the rate of 18.5% of “adjusted total income”. Alternate minimum tax would be increased by the applicable surcharge, education cess, and secondary and higher education cess.

What are the allowed deductibles?

While calculating the payable income tax an individual must check the available deductible income

  • Remunerations or interest paid to the partners of the firm is not under the terms of the partnership.
  • Salaries, bonuses, remunerations, commissions paid to the non-working partners of the firm.
  • If remuneration paid to partners is following the terms of the partnership deed but such transactions were made or were concerning anything that pre-dates the partnership deed.

For Partnership income tax return filing should be done through Form ITR-5. This form ITR-5 is used to partnership firm income tax returns and not the tax returns for the partners.

Like all other income tax forms, ITR 5 is an attachment-less form and there is no requirement to submit any documents or statements along with the partnership firm tax returns. However, the taxpayers must save the records about business and produce the same before the tax authorities when requested.

ITR-5 can be filed online with the income tax department’s online portal. The documents need to be submitted only when they are asked for. While filing the Partnership firm tax returns the partners must have class 2 digital signatures for verification of the filing process.

Procedure for filing Income tax returns of a partnership firm.

The income tax return of a partnership firm can be filed online through the income tax website or manually. If the income tax return is filed online then a class 2 digital signature will be required for the partner of the firm. Also, online income tax return filing is mandatory for partnership firms required to obtain an audit.

In case of manual filing, the assessee must print out two copies of Form ITR-V. One copy of ITR-V signed by the assessee has to be sent by ordinary post to Post Bag No. 1, Electronic City Office, Bengaluru–560100 (Karnataka). The other copy should be retained by the assessee for his/her record.

Partnership firms that satisfy any of the conditions below would be required to get accounts audited:

  • Carrying on business and total sales exceed Rs.1 crore in the previous year.
  • Carrying on a profession and gross receipts in profession exceed Rs.50 lakhs in any previous year.
  • Besides, there are other conditions applicable that could make an audit mandatory for a partnership firm.

If a partnership firm entered into international transactions or specified domestic transactions a report must be furnished in Form No. 3CEB under section 92E. For partnership firms required to furnish Form 3CEB, the deadline for filing a tax return is 30th November.

The due date for filing the partnership tax return filing is dependent on whether the firm is required to be audited or not. When the firm is not required to be audited the income tax returns should be filed by 31st July. When the firm is not required to be audited then the firm has to file its income tax returns by 30th September.

However, the cost of compliance is lesser as compared to the companies. Unlike companies, partnerships need not conduct meetings or maintain a register. Hence, it should be noted non – compliance can be costlier than meeting compliances.

step:1 After the firm pays the tax, no tax will be payable by the partners on the share of income from the firm.

step:2 Interest amount or remuneration etc. received by a partner will be taxed as ‘Business or Professional Income’, excluding the amount disallowed in the hands of the firm being more than limits laid down in S. 40(b) and from A.Y. 2004-05 amount disallowed in the event of any failure as mentioned in S. 144 or non-compliance of S. 184.

step:3 The partner’s share (including a minor admitted for the benefit of the firm), in the income of the firm is not included in computing his total income i.e. his share in the total income of the firm shall be exempt from tax under section 10(2A) of the Act.

RELATED GUIDES

Annual Compliance – Partnership Firm FAQ’s

1. Are Partnership firms required to carry out auditing?

08 December 2021

Partnership firms are not required to make an audited financial statement each year. The tax audit may be necessary based on the turnover and other criteria.

2. What are the compliances for Partnership firms?

08 December 2021

The compliance for partnership firms mainly includes the income tax return filing unlike the corporate entities like the LLP and the company as they have to make income tax return filings as well as the annual return filing.

3. What documents are required for Partnership firm return filing?

08 December 2021

For filing the returns of a Partnership firm Invoices of sales and the purchases during a year, expenses invoice, bank statements of the partners, TDS return filed copy, GST returns filing copy is required.

4. What is the importance of a Partnership deed?

08 December 2021

The partnership deed contains all the Terms and conditions of the Partnership. It regulates the rights and the duties of each partner making the partnership deed a very crucial document.

5. Is a Partnership firm a separate legal entity?

08 December 2021

The partnership firm and the partners of this firm are considered to be the same. In the case of the partnership firms, the liability of the partners is also unlimited and all the partners are jointly responsible for the liabilities of the firm.

6. Is it necessary for the Partnership firm to file the income tax returns?

08 December 2021

Irrespective of the turnover and the profit or losses made by the partners, the partnership is required to file income tax returns.

7. Can a partnership deed be transferred?

08 December 2021

There are certain limitations on the transfer of ownership of a partnership. A partner cannot transfer the partnership without the consent of all the partners.

8. Can a partnership firm be converted into an LLP or a company?

08 December 2021

Yes, it is possible to convert a partnership firm into a company or an LLP. The process of conversion is very cumbersome. Hence, the entrepreneur should consider starting an LLP or a company instead of opting for a Partnership.

Categories
Accounting & Compliance

Proprietorship

Proprietorship

₹ 5,899 – Proprietorship

Proprietorship

Our pricing is 100% transparent. One Person Company is popular among sole founders.

1 year Accounting, Financial statement preparation, 1 year Income Tax Return Filing, 1 year Dedicated Compliance Manager support, 1 Year Dedicated Accountant and LEDGERS accounting software for a company with a turnover upto 25 lakhs per annum.

About this item

  • 1 Year Accounting
  • Financial Statement Preparation
  • 1 Year Dedicated Accountant
  • 1 Year Income Tax Filing
  • 1 Year Annual Return Filing

Proprietorship Return Filing

Proprietorship firms file the Proprietor income tax return just like the LLPs and the Companies registered in India. In the legal sense, the proprietorship and the proprietor are considered to be one. Hence, the income tax return filing of the proprietor and the proprietorship are the same.

As a sole proprietorship is not taxed as a different legal entity, the business owners file their business taxes like their individual returns. Like any other individual taxpayer, a proprietorship firm is also entitled to a proprietorship tax deduction as per the prevailing Income tax rules and depending on the slab rates applicable to his income.

Whereas the income tax rates for the registered companies are assessed on flat rates.

As the proprietorship firms are small and independent businesses owned by a single person. These unregistered businesses are one of the easiest to manage.

A new tax regime has been announced where the individuals can pay taxes as per the new slabs subject to certain conditions from FY2020-2021 onwards.

Income rangeRate of tax
0-2,50,000NIL
2,50,001-5,00,0005%
5,00,001-7,50,00010%
7,50,001- 10,00,00015%
10,00,00-12,50,00020%
12,50,000- 15,00,00025%
Above 15,00,00030%

Tax slab rates for sole proprietorship income tax return filing wherein the proprietor’s age is above 60 years but less than 80 years at any time during the previous year.

Income SlabIncome Tax Rate
Up to Rs. 3,00,000NIL
Rs.3,00,000 to 5,00,0005% of the total income above Rs.3,00,000
Rs.5,00,000 to 10,00,000Rs. 10,000+20 % of the total income above Rs.5,00,000
Above Rs. 10,00,000Rs. 1,10,000+30% of the total income above Rs. 10,00,0000

Tax slabs for proprietorship firms where the age of the proprietor is above 80 years

Income SlabIncome Tax Rate
Up to Rs. 5,00,000NIL
Rs. 5,00,000 to 10,00,00020% of the total income above Rs.5,00,000
Above Rs.10,00,000Rs.1,00,000 +30% of the total income above Rs.10,00,000

Tax slab for sole proprietorship firms where the proprietor is a non-resident individual ( Irrespective of the proprietor’s age).

Income SlabIncome Tax Rate
Up to Rs. 2,50,000NIL
Rs. 2,50,000 to 5,00,0005% of the total income above 2,50,000
Rs. 5,00,000 to 10,000,000Rs.12,500 + 20% of the total income above Rs. 5,00,000
Above Rs. 10,00,000Rs. 1,12, 500 + 30 of the total income above Rs. 10,00,000

A surcharge is payable over and above the income tax calculated as per the income tax rate provided above.

Income slabSurcharge Rates
Total Income above Rs. 50 Lakh but then Rs. 1 crore10% of the income tax
Total Income above Rs. 1 crore15% of the income tax

Proprietorship tax returns are to be filed every year unless there is an exemption. As mentioned before, the proprietor and the proprietorship firms are considered as one single person. Two forms are to be filed depending on the nature of the proprietorship.

Form ITR-3

This form should be used to file Income tax if the proprietorship firm is run by a Hindu Undivided Family (HUF) or by any proprietor.

Form ITR-4

The proprietorship firm uses this form for proprietorship tax filing under a presumptive tax scheme. This is done to reduce the burden of compliance of small businesses.

The business income of the person has been added to the payment of the proprietor himself. This way, the business taxes become the personal taxes of the proprietor. The proprietor is still entitled to all tax deductions offered to individuals or Hindu Undivided Family.

Under the Income Tax Act, all proprietors below the age of 60 are required to file an Income tax return if the total income is more than Rs. 3 Lakhs.

In the case of proprietors over the age of 60 years are required to file income, but below 80 years, then income tax filing is mandatory if the total income exceeds Rs. Three lakhs.

Proprietors over the age of 80 years and above must file the proprietorship tax returns if the income exceeds Rs. 5 lakhs.

If the proprietor files an income tax return before the deadline, losses, if any, in the business would be allowed to be carried forward. The deduction under sections 10A, 10B, 80-IA, 80-IAB, 80-IB, and 80-IC cannot be permitted unless the proprietorship income tax return has been filed on or before the due date.

ParticularsDue date
Income tax return filing wherein the audit is not necessary31st July
Income tax return filing wherein the audit is necessary31st October

A presumptive taxation scheme is a provision within the Income Tax At that provides relief to the small taxpayers. The Government of India aimed at allowing the small businesses to carry on the trade without being burdened by the excessive compliance-related requirements.

Entities enrolled under the presumptive taxation scheme can compute income on an estimated basis under Section 44AD. The presumptive taxation scheme allows the taxpayers to pay tax at a minimum rate. Also, the entities enrolled under the scheme need not maintain books of accounts. A presumptive taxation scheme is an effective medium that taxpayers can use to reduce the compliance-related burden.

Depending upon the annual turnover of the proprietorship, an audit is necessary to be carried. Under these three conditions, an audit would be required:

  • If the turnover of the proprietorship firm carrying business is exceeding Rs.1 crore during the financial year.
  • In a professional case, an audit is required if total gross receipts are exceeding Rs—50 lakh.
  • If the proprietorship is under any presumptive tax scheme regardless of the annual turnover, an audit is required.

For the audit to be carried on, the rules are set out under the Income Tax Act, 1961. The audit is to be done by a certified Chartered Accountant. The CA has to ensure that all the books of accounts are correctly maintained and complied with all the compliances.

Ready Finance is the largest online business and tax compliance platform that helps Entrepreneurs and Families with various registration, tax filing, accounting and government services.

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