Proprietorship Tax Return Filing & Its Compliance

Proprietorship Tax Return Filing by Vijendra & Co.

When it comes to running a sole proprietorship in India, fulfilling legal and financial obligations is as crucial as growing your business. Proprietorship Tax Return Filing is one of the most essential annual compliance requirements for sole proprietors, ensuring the business operates within the legal framework set by Indian tax authorities. At Vijendra & Co., we help simplify and manage the entire tax filing and compliance process for proprietors, ensuring that all statutory regulations are met efficiently.

A proprietorship: what is it?

In India, a proprietorship or sole proprietorship is among the most basic company forms. It is owned and operated by a single person who bears all accountability for all debts and commercial gains. Although easy to form and operate, a proprietorship must comply with various tax and regulatory filings annually, including Proprietorship Tax Return Filing, TDS, GST, and EPF returns.

Understanding Proprietorship Compliance

Proprietorship Compliance includes fulfilling all the legal obligations that a sole proprietor must adhere to. These generally encompass:

Income Tax Return Filing for Proprietorship
Filing TDS returns, GST returns, and EPF returns.
Accounting and Bookkeeping
Proprietorship Firm Audit (if applicable)

Penalties and unwelcome legal issues may result from noncompliance. At Vijendra & Co., we specialize in end-to-end compliance services, helping you stay worry-free and focused on your core business.

Filing a Proprietary Income Tax Return

In India, all firms, even sole proprietorships, are required by law to file income tax returns. Income Tax Return Filing for Proprietorship must be done annually, and the return is filed in the name of the proprietor, as a proprietorship is not a separate legal entity. The Business income is taxed according to individual tax slabs and coupled with the individual's other income, such as salary, rental income, interest, etc.

Is it Necessary for Proprietorship to File ITR?

Indeed, filing a proprietorship tax return is required if the owner's total income exceeds the Income Tax Act's basic exemption threshold. Even if the income is below the exemption limit, it is advisable to file ITR for record-keeping, loan applications, and future references. Filing ITR also becomes necessary for claiming refunds and carrying forward losses.

Income Tax Slab for Proprietorship Firms

Since proprietorship income is treated as personal income of the owner, the Income Tax Slab for Proprietorship Firms follows the individual tax slab rates. For FY 2024-25 (AY 2025-26), the tax slabs under the Old Tax Regime are as follows:

Up to ?2.5 lakh: Nil
?2.5 lakh – ?5 lakh: 5%
?5 lakh – ?10 lakh: 20%
Above ?10 lakh: 30%

Higher exemption limitations are available to older citizens and super senior citizens.

Tax Rates under Section 115BAC for Proprietors Choosing an Alternative Tax Regime

Under Section 115BAC, individuals including sole proprietors can opt for the Alternate Tax Regime with reduced tax rates, but without claiming various exemptions and deductions. The tax rates under this regime for FY 2024-25 are:

?0 – ?3 lakh: Nil
?3 lakh – ?6 lakh: 5%
?6 lakh – ?9 lakh: 10%
?9 lakh – ?12 lakh: 15%
?12 lakh – ?15 lakh: 20%
Above ?15 lakh: 30%

Surcharge rates under the regular tax regime

Individuals who earn more than ?50 lakh are subject to a surcharge on their income tax amount.

The Rates of Surcharge under the Normal Tax Regime are:

For incomes between ?50 lakh and ?1 crore, 10%
15% for earnings between one crore and two crore rupees
A quarter of earnings between ?2 crore and ?5 crore
37% for income above ?5 crore

Rates of Surcharge under Alternate Tax Regime

The Rates of Surcharge under Alternate Tax Regime are capped at 25%. This cap ensures that the maximum effective tax rate does not exceed a certain threshold, making the new tax regime attractive for high-income earners.

Presumptive Taxation Scheme for Proprietorship

Under Presumptive Taxation Scheme for Proprietorship, eligible small businesses with turnover up to ?2 crore can declare income at 8% of turnover (or 6% in case of digital receipts) under Section 44AD. This simplifies compliance as it eliminates the need for detailed books of accounts and audits.

Similarly, professionals with gross receipts up to ?50 lakh can opt for presumptive taxation under Section 44ADA, declaring 50% of receipts as income.

Deadline for Proprietorship Tax Return Filing

The Deadline for Proprietorship Tax Return Filing for FY 2024-25 is generally 31st July 2025, if audit is not applicable. The deadline for proprietorships that need an audit under the Income Tax Act is October 31, 2025. It is crucial to file on time to avoid interest and penalties.

Required Documents for Proprietorship Income Tax Return Filing

For accurate and timely filing, the following Required Documents for Proprietorship Income Tax Return Filing should be kept ready:

Owner's PAN and Aadhaar
Bank statements
Financial statements (balance sheet and profit and loss)
Asset and liability information
GST returns, if any
TDS certificates (Form 16A/26AS)
Books of accounts
Previous year’s ITR copy
Challans for tax payments, if any

How to File a Proprietary Income Tax Return

The following forms are used to file a proprietorship's income tax return:

ITR-3 Form

This form is applicable when the proprietor earns income from a proprietary business or profession and does not opt for presumptive taxation. It requires detailed disclosure of profit, assets, liabilities, and other financial information.

Form ITR-4 Sugam

Form ITR-4 Sugam is intended for those who choose to use Sections 44AD, 44ADA, or 44AE's presumptive taxation structure. It is simpler and more concise than ITR-3, focusing on turnover and presumed profits.

TDS Return Filing for Proprietorship

Filing a TDS return becomes necessary if a proprietor is obligated to deduct tax at the source. The Income Tax Act imposes penalties for late or non-filing. Vijendra & Co. offers comprehensive TDS compliance services including deduction, deposit, and return filing.

GST Return Filing for Proprietorship

Depending on their revenue and chosen plan, proprietorships registered under GST are required to submit monthly, quarterly, or annual filings. GSTR-1, GSTR-3B, and GSTR-9 are all part of filing a GST return, and they must be completed correctly to prevent fines and notifications.

EPF Return Filing for Proprietorship

If a proprietor has employees and is registered under EPFO, EPF Return Filing is compulsory. Monthly ECR (Electronic Challan cum Return) filings are required to stay compliant under EPF Act regulations.

Accounting and Bookkeeping for Proprietorship

Maintaining proper Accounting and Bookkeeping is essential for tax compliance, business decision-making, and audit purposes. Vijendra & Co. offers professional accounting services including ledger maintenance, cash flow tracking, and financial reporting.

Proprietorship Firm Audit

A Proprietorship Firm Audit becomes necessary under Section 44AB of the Income Tax Act if:

Gross receipts in a profession surpass ?50 lakh;
Turnover in a firm surpasses ?1 crore (?10 crore if cash receipts do not exceed 5%).

We provide detailed audit support, ensuring timely audit reports and filing of tax returns.

Streamline Proprietorship Compliance with CS Vijendra & Co.

Compliance doesn't have to be complex. With a professional team that understands the nuances of sole proprietorship regulations, Vijendra & Co. helps streamline all aspects of compliance – from Proprietorship Tax Return Filing, GST, and TDS to audits and accounting. Our expertise ensures you remain compliant and stress-free while focusing on your business growth.