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
PAN
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 (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 Register
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
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
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.
FAQs
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:
-PAN
-Aadhaar
-Form 26AS
-Bank Account Details
-Tax Payment Challan
-Original Return (if filed)
Hey @TeamQuicko
Thanks for the blog! Just one quick question - Why do we have to report a quarterly breakdown of Dividend Income under IFOS?
Thank you!
Hey @TanyaChopra
This quarterly breakdown of Dividend Income under IFOS will help to calculate and determine penalty u/s 234C for the delay in payment of Advance Tax.
Hope this helps!
I had received dividend recently but I had noticed that TDS had been deducted. any idea as to why has it happened and is there a way I can claim this TDS?
Hey @HarshitShah
After the introduction of Budget 2020, dividend income is now taxable in the hands of the shareholder; and is also subject to TDS at 10% in excess of INR 5000 u/s 194 & 194K. Foreign Dividend is taxable at slab rates. TDS is not applicable to such dividends. The taxpayer should report such income under the head IFOS in the ITR filed on the Income Tax Website.
Hope this helps!
Hey @HarishMehta
Yes, dividend income is now taxable from FY 2021-22 onwards and it has to be reported under the head of IFOS.
You can read more about it here:
Hi @Maulik_Padh,
You need to pay Income tax on the net taxable income, i.e. after subtracting deductions, expenses, etc.
If the net taxable income is negative i.e. if there is loss, you can carry it forward when filing the ITR
Here are some of the articles which might help
Hi @ameyj
The amount of TDS deducted shall reflect in your Form 26AS only and it will also reflect the name of the deductor.
Using the name of the deductor you can find out on which share you have received the dividend and you can also cross-check the same in your bank statement.
Yes, you are right, TDS is to be deducted when the dividend paid exceeds 5000 INR in a financial year. However, the 5,000 INR limit pertains to all the dividends an individual gets in a year, or the total dividend per shareholder that a company pays out in a year, is left to interpretation, and hence registrars and share transfer agents (RTA) are not taking any chances and are deducting TDS even on small amounts.
Hope this helps
Hi @ameyj
You can submit a grievance on Income Tax Portal mentioning the issue and also attach the 26AS.
The other option is to leave it as it is and clarify it when the tax department sends the notice.
Hi @TeamQuicko
Consider that I have 10 shares each of 10 different Indian companies. Each of the 10 companies are declaring a dividend of INR 100 before the FY ends. Now I will be recieving 1000 as dividend from each company, thereby a total of 10,000.
The 5,000 dividend limit, is it applicable to each company / total dividend recieved by me in a year. If it is applicable to each company, then I would not attract TDS of 10% for dividend.
Also pl clarify, how would the company B know that I have got shares of Company A,C,D,E so on…
@Saad_C @Laxmi_Navlani @Divya_Singhvi @Kaushal_Soni @AkashJhaveri can you help with this?