Any Income earned from the Business and Profession of a taxpayer is taxed under the head “Income from Business and Profession“. Business is an occupation that is carried by a person with the intent of earning profits. Any income earned from that is considered as Business Income. A profession is a job requiring specialized knowledge, skill, or thought. Any income earned from that is called Professional income.
Document Checklist for Business and Profession Income
Income Tax Department (ITD) issues Permanent Account Number (PAN). It is an alphanumeric ID of a taxpayer who is liable to pay taxes. PAN enables the department to link all transactions of the “Person” with his “Income”. Hence it is the most essential document while filing ITR.
Aadhaar (Aadhaar Card) a 12 digit unique identification number issued by the UIDAI (Unique Identification Authority of India). It is mandatory for Resident Individuals to provide details of Aadhaar while filing ITR.
Books of accounts
A balance sheet is a financial statement that reports a company’s assets, liabilities and shareholders’ equity for a particular year. While profit & loss statement/Income-Expense statement discloses incomes and gains that are credited and expenses and losses that are debited in order to show the net profit or loss for a given period of time. Supporting documents are also required in case of any extra expenses incurred that has been mentioned in the P&L/I&E Statement.
Bank account statement
Bank Statement with details of business transaction is an essential document to prepare ITR. Details of incomes and expenses can also be derived using the Bank Statement to prepare financial statements such as Balance Sheet and P&L Account.
Cash transactions reported in the Cash Register is used to prepare the Income Tax Return of the business. It is important to disclose information such as Cash Balance as on 31st March, details of cash payments for expenses etc
Form 26AS is a consolidated Tax Credit Statement which provides the following details to a taxpayer.
- Details of taxes deducted from the taxpayer’s income.
- Details of taxes collected from taxpayer’s payments.
- Advance Taxes, Self Assessment Taxes and Regular Assessment Taxes paid by the taxpayers.
- Details of the refund received during the year.
- Details of any high-value transactions (for eg. Shares, Mutual Funds, etc.).
It is very important to check Form 26AS before e-filing the Income Tax Return because no one would want their tax credits to be unclaimed.
Investment proofs such as Donation Receipts, Fixed Deposit Statement, Rent Agreement, etc are required to claim eligible deductions under Chapter VI-A while filing ITR of a business or profession.
Tax Audit is applicable if your turnover from the business is more than 1 Cr. and the net profit of a business in less than 6%. Or if your gross receipts from the profession are more than 50 lakhs or net receipts are less than 50%. In this case, the Audit Report also has to be included while filing ITR.
Balance sheet and Profit and loss statement are required to filed in ITR for business and professional income. A balance sheet is a financial statement that reports a company’s assets, liabilities and shareholders’ equity for a particular year. Profit and loss statement is used by businesses to record their incomes and gains credited and expenses and losses debited.
In the case of proprietor having a business income, he can file either ITR-3 or ITR-4. ITR-3 for business income and trading income. ITR-4 for business under presumptive taxation scheme. Moreover, Partnership Firm and LLP carrying business need to file ITR-5 and Companies have to file ITR-6.
Firstly, If your income falls under the taxable bracket you have to file your ITR without fail. Secondly, If you missed the deadline to file the ITR you can still file it but you may attract penalties. Moreover, If you don’t pay your taxes on time then if you are claiming any refunds they will get delayed. You will get lesser time to revise your ITR. and Lastly, You will have to pay interest on the taxable amount if you delay filing your ITR.
If your age is below 60 years and your income is more than rupees 2.5 lakh p.a then you are eligible to file your ITR.
Following are the documents required to file ITR:
-Bank Account Details
-Tax Payment Challan
-Original Return (if filed)