Filing Business Income Tax Returns Online: Starting a business and understanding how to file tax returns is crucial for running it smoothly. A business tax return is like a detailed report of your company’s earnings and expenses.
In India, filing business income tax returns just got easier with Accounts Profession. Our team of experts is here to assist businesses in filing their tax returns hassle-free. Whether your business is just starting out or already established, we’re here to simplify the process for you.
If you’re ready to make your business tax filing process smoother and stress-free, get in touch with us today!
Business Income Tax Returns: A Simple Explanation
A business tax return is like a big report card for businesses, showing how much money they made, and spent, and what taxes they owe. It’s a detailed form where businesses list their income, expenses, and important tax information. They have to do this every year.
This report is not just about income. It also includes other financial stuff like assets, loans taken or given, and money owed to or by the business.
Business Income Tax Return Filing in India
In India, both individuals and companies must file income tax returns if their total income exceeds Rs. 3 lakhs annually. Filing these returns is a yearly requirement and must be done within the specified deadline. There are different forms for filing taxes, tailored to different criteria applicable to various groups.
Filing business tax returns offers several advantages:
- Refund Claims: Accurate and timely filing can lead to potential refunds, improving cash flow.
- Loss Carry-forward: Business losses in one year can be carried forward and adjusted against future profits, reducing tax liabilities.
- Loan Approval: Up-to-date tax returns can serve as evidence of financial stability, increasing chances of loan approval.
- Transaction Proof: Tax returns provide solid evidence of financial transactions, useful for legal or contractual purposes.
- Legal Compliance: Filing returns ensures compliance with tax regulations, avoiding penalties.
- Transparency: Transparent financial records enhance credibility and trust among stakeholders.
- Audit Preparation: Filed returns provide accurate financial statements, preparing for potential tax audits.
- Business Growth: Accurate reporting aids in making informed decisions for business growth.
- Avoiding Notices: Timely filing reduces the likelihood of receiving notices from tax authorities.
- Tax Benefits: Filing on time enables businesses to avail various tax benefits and deductions legally, optimizing tax liabilities.
Who Needs to File a Business Income Tax Return?
Businesses operating in India must file their income tax returns according to Indian tax laws. The requirement to file depends on the business structure:
- Sole Proprietorship
- Partnership Firm
- Limited Liability Partnership (LLP)
- Companies – Private Limited Company, One Person Company
Types of Business Income Tax Return Filings
Tax Returns for Different Business Types:
- Filing Taxes for Partnership Firms
- Filing Taxes for Proprietorships
- Filing Taxes for Limited Liability Partnerships (LLPs)
- Filing Taxes for Companies
Filing Tax Returns for Proprietorships
If someone earns money from a business they run on their own, it’s called a proprietorship firm. In India, these businesses must file income tax returns every year. Since proprietorships are treated the same as their owners, filing taxes for a proprietorship is similar to filing taxes as an individual.
Criteria for Proprietorship Tax Return Filing
- Proprietors under 60 years old need to file tax returns if their total income is more than Rs. 2.5 lakhs.
- If they’re between 60 and 80 years old, they must file if their income exceeds Rs. 3 lakhs.
- Those over 80 years old must file if their income goes beyond Rs. 5 lakhs.
Proprietorship Income Tax Rate
Proprietorship businesses are taxed at the same rates as individuals, not at flat rates like LLPs or companies. Instead, they’re taxed based on income slabs. Below are the income tax rates for proprietorships for the assessment year 2023-24, applicable when the proprietor is under 60 years old.
Tax Rate for Proprietorships in the Assessment Year 2024-25| Financial Year 2023-24 under the Normal Tax Regime
Tax Rate for Proprietorships in the Assessment Year 2023-24| Financial Year 2022-23– Applicable when the Proprietor is under 60 Years Old
| Net Income Range | Rate of income-tax (%) |
|---|---|
| Up to Rs.2,50,000 | – |
| Rs.2,50,001 to Rs. 5,00,000 | 5 |
| Rs. 5,00,001 to Rs. 10,00,000 | 20 |
| Above Rs. 10,00,000 | 30 |
Tax Rate for Proprietorships in the Assessment Year 2023-24| Financial Year 2022-23– Applicable when the Proprietor’s Age is Between 60 and 80 Years
The tax rate mentioned is applicable to a Proprietor who turned 60 years old during the previous year but is still under 80 years old on the last day of that year.
| Net Income Range | Rate of income-tax (%) |
|---|---|
| Up to Rs. 3,00,000 | – |
| Rs. 3,00,001 to Rs. 5,00,000 | 5 |
| Rs. 5,00,001 to Rs. 10,00,000 | 20 |
| Above Rs. 10,00,000 | 30 |
Tax Rate for Proprietorships in the Assessment Year 2023-24| Financial Year 2022-23– When the Proprietor is Over 80 Years Old
| Net Income Range | Rate of income-tax (%) |
|---|---|
| up to Rs. 5,00,000 | – |
| Rs. 5,00,001 to Rs. 10,00,000 | 20 |
| Above Rs. 10,00,000 | 30 |
Surcharge Rates
Surcharge Rate for Proprietors for the Assessment Year 2023-24
| Range of Income | Surcharge Rate |
|---|---|
| Rs. 50 Lakhs to Rs. 1 Crore | 10% |
| Rs. 1 Crore to Rs. 2 Crores | 15% |
| Rs. 2 Crores to Rs. 5 Crores | 25% |
| Above Rs. 5 Crore | 37% |
Tax Filing Guidelines for Different Business Entities
Surcharge Rates for Alternate Tax Regime (AY 2023-24)
In case a Proprietor opts for the alternate tax regime under section 115BAC, the surcharge rate is 25% instead of 37%.
Tax Audit Requirements for Proprietorship
A tax audit for proprietorship firms is necessary if total sales turnover exceeds Rs.1 crore during the financial year. For professionals, audit is required if gross receipts exceed Rs.50 lakhs.
Deadline for Proprietorship Tax Return
For proprietorships not needing audit, the income tax return is due by July 31. If audit is required, the return is due by September 30.
ITR Forms for Proprietorships
Proprietorship firms file Form ITR-3 or Form ITR-4-Sugam. Form ITR-3 is for proprietors or Hindu Undivided Families in business, while Form ITR-4-Sugam is for presumptive taxation.
Tax Obligations for Partnership Firms
Partnership firms must file returns regardless of income or loss. The tax rate is 30% of total income, with surcharge and Health & Education Cess applicable.
Mandatory Tax Audit for Partnership Firms
Partnership firms with sales over Rs.1 crore or gross receipts over Rs.50 lakhs (in certain cases) require tax audits.
Deadline for Partnership Firm Tax Return
Most partnership firms must file by July 31, while audited firms have until September 30.
Tax Procedures for LLPs
All LLPs must file tax returns regardless of income. The tax rate is 30%, with surcharge and Health & Education Cess applicable.
LLP Tax Audit Requirements
LLPs with turnover exceeding Rs.40 lakh or contribution exceeding Rs.25 lakh need audits.
Deadline for LLP Tax Return
LLP tax filing deadline is July 31, or September 30 for audited firms.
Company Tax Filing Regulations
All companies must file returns yearly. The tax rate varies based on turnover.
Key Considerations for Business Tax Filing
Businesses must compute total income, and gross total income exceeding Rs. 3 lakhs necessitates filing.
Accounts Profession Assistance for Tax Filing
Accounts Profession simplifies tax filing with a user-friendly platform and expert guidance. We ensure timely and accurate submissions, helping businesses navigate tax complexities effortlessly.
Simplify Your Business Tax Filing
Reach out to Accounts Profession today for stress-free tax filing solutions.
Frequently Asked Questions (FAQ’s)
What is the deadline for filing a company tax return?
Businesses undergoing audit can file their returns by October 31 of the assessment year. For taxpayers involved in international or specified domestic transactions requiring Form No. 3CEB, the deadline is November 30.
Which Income Tax Return (ITR) form should be used by a company?
The type of Income Tax Return (ITR) a company should file depends on its classification:
Form ITR-4: Used for firms, excluding LLPs, with a total income up to Rs. 50 lakhs under Sections 44AD, 44ADA, 44AE.
Form ITR-5: Applicable for LLPs and partnerships, except ITR 7.
File ITR-6: Utilized by companies not claiming exemption under Section 11.
File ITR-7: For companies mandated to file returns under Sections 139(4A), 139(4B), 139(4C), and 139(4D).
What happens if a company does not file ITR?
If a company fails to submit its Income Tax Return (ITR) for business income, it could encounter the following repercussions:
Penalty: The company might incur a penalty for non-filing of its ITR. According to section 234F of the IT Act, a fine of Rs. 10,000 may be imposed for failing to file tax returns.
Interest: Alongside the penalty, the company may also face interest charges on the outstanding tax amount. Delay in ITR filing could lead to interest being charged under Section 234A of the Income Tax Act 1961.
Prosecution: In severe instances, the company could face legal action for non-compliance, potentially resulting in imprisonment for up to 7 years and/or fines.
Disqualification of Directors: The company’s directors might be disqualified from serving as directors in any company for a period of up to 5 years.
Loss of Eligibility for Government Contracts: Failure to file its ITR could lead to disqualification from bidding for government contracts or accessing government facilities.