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PROPRITERSHIP FIRM

What are the Annual filing for Proprietorship Firm?

Proprietorship is the easiest way to commence a business, with the lowest level of compliance. Annual filings of returns for proprietors include finalizing of accounts and filing ITR and related compliance.

Audit of Proprietorship

Based on the annual turnover of proprietorship firm, it may be required that the proprietorship be audited. There are three circumstances when an audit would be required :
1. For the Service sector, there will be a Tax Audit if the annual turnover is of Rs. 50 lakhs or above
2. Other than Service Providers, there will be a Tax Audit if the annual turnover is above Rs. 2 Cr.
3. If proprietorship firm is under any presumptive tax scheme, an audit is required regardless of the turnover.

As per the Income Tax Act, 1961 the audit of the proprietorship firm has to be done by CA. CA needs to make sure that every booking of accounts are properly maintained and CA also needs to check if proprietorship firm has complied with all necessary compliance. The income tax return can be filed either physically or online on the e-filing portal by using the electronic signature of proprietor.

For filing, there are 2 different types of Forms i.e. Form ITR-3 and Form ITR-4 Sugam. The forms are to be filed based on the type and nature of proprietorship.

Due Date for the annual filing of proprietorship firm:

The due date to file the annual filing of a Proprietorship firm is July 31st in case no audit is required and 30 Sept if audit is required.


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Advantages

    In Proprietorship business the firm and the proprietor are the same, i.e., the tax slab that is specified for any individual's income is applicable to income from the business. This tax rate is quite low compared to other business structures.

Disadvantages

While there are many tax benefits to sole proprietorship, a main drawback is that the owner must pay self-employment taxes. Also, some tax benefits may not be deductible, such as health insurance premiums for employees.

FAQs Section

    You would be imposed with a penalty of Rs. 200 per day if you file the ITR late.
    No. A proprietorship firm is not considered as a separate legal entity.
    No, An audit is not required for a proprietorship firm. However, a tax audit may be required based on the turnover.
    The proprietorship firm has to comply with income tax regulations, GST regulations, TDS regulations, and ESI regulations.
    Yes, the annual income of the proprietor is considered as the annual income of the proprietorship firm.
    The due date to file the annual filing of a Proprietorship firm is 31st July in case of no audit requirements and 30 Sept if the audit is required.
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