Which ITR to file for Proprietorship Firm?

Just like individuals, HUFs and companies are required to file income tax, proprietorship firms are also obligated to file income tax. In India, a sole proprietorship is not taxed as a different entity, the owner of the business files the taxes for the business just like an individual return. This article will help you understand various aspects related to filing ITR for a Proprietorship Firm

What are the Tax Rates for Proprietorship Firm?

Income Tax rates for proprietor’s who are less than 60 years old

Income Range  Current Income Tax Rates New Income Tax Rates
Up to INR 2,50,000 NIL NIL
INR 2,50,001 to INR 5,00,000 5% 5%
INR 5,00,001 to INR 7,50,000 20% 10%
INR 7,50,001 to INR 10,00,000 20% 15%
INR 10,00,001 to INR 12,50,000 30% 20%
INR 12,50,001 to INR 15,00,000 30% 25%
Above INR 15,00,000 30% 30%

Income Tax Rates for proprietor’s between the age of 60 and 80 years

Income Tax Slab Old Tax Rate Health and Education Cess
Income up to INR 3 lakh Nil Nil 
Income between INR 3 lakh and INR 5 lakh 5% 4% of Income Tax
Income between INR 5 lakh and INR 10 lakh 20% 4% of Income Tax
Income that exceeds INR 10 lakh* 30% 4% of Income Tax

Income Range New Income Tax Rates
Up to INR 2,50,000 NIL
INR 2,50,001 to INR 5,00,000  5%
INR 5,00,001 to INR 7,50,000 10%
INR 7,50,001 to INR 10,00,000 15%
INR 10,00,001 to INR 12,50,000 20%
INR 12,50,001 to INR 15,00,000 25%
Above INR 15,00,000 30%

Income Tax Rates for proprietor’s more than 80 years

Income Tax Slab Old Tax Rate Health and Education Cess
Income up to INR 5 lakh Nil Nil 
Income between INR 5 lakh and INR 10 lakh 20% 4% of Income Tax
Income that exceeds INR 10 lakh* 30% 4% of Income Tax

Income Range New Income Tax Rates
Up to INR 2,50,000 NIL
INR 2,50,001 to INR 5,00,000  5%
INR 5,00,001 to INR 7,50,000 10%
INR 7,50,001 to INR 10,00,000 15%
INR 10,00,001 to INR 12,50,000 20%
INR 12,50,001 to INR 15,00,000 25%
Above INR 15,00,000 30%
  • Surcharge applicable if total income is more than INR 50 lakh and up to INR 1 crore: 10% of income tax
  • Surcharge if total income exceeds INR 1 crore: 15% of income tax

Tax Audit for Proprietorship Firm

Tax Audit will be mandatory for a proprietorship firm if they fall under the following category:

  • If the turnover of the proprietorship firm is more than INR 1 crore in an assessment year
  • In the case of a professional, if the total receipts of the proprietorship exceed INR 50 lakh
  • If the proprietorship is under any presumptive tax scheme irrespective of the annual turnover, a tax audit is mandatory.
Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
Explore

Which ITR form to File for Proprietorship Firm?

Depending on the nature of the business, a proprietorship firm can file:

  • ITR 4: If the proprietorship firm falls under the presumptive taxation scheme

What are the Due Dates to File ITR for Proprietorship Firm?

The due dates for filing return for a proprietorship firm depend on tax audit applicability:

  • 31St July: For proprietorship firm where tax audit is not necessary
  • 30th September: For proprietorship firm where tax audit is necessary
  • 30th November: For proprietorship firm who have international transactions for business purpose
Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore
Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore

How to file ITR for Proprietorship Firm?

Proprietors have to file their income tax returns online via the e-filing portal. One needs to register on the e-filing portal to file ITR online, if this is already done then log in by entering the PAN number to file the return. After filling in all the necessary information, make sure to e-verify the return before submitting it to make sure there are no errors.

Which ITR to file for Partnership Firm?

As per the Income Tax Act, a partnership firm is ‘’Persons who have entered into a partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the firm name.’’ Just like individuals, HUFs and companies, partnership firms are also liable to pay income tax. This article will help you understand various aspects related to filing ITR for a Partnership Firm

Tax Rates for Partnership Firm

Partnership firms are liable to pay income tax at the rate of 30% on the total annual income. Apart from this, if the total income exceeds INR 1 crore, then the firm is also liable to pay a surcharge at the rate of 12%. The partnership firm must also pay education and secondary education cess in addition to income tax and surcharge.  The education and secondary education cess is 2% and 1% respectively.

A partnership firm, registered or unregistered is also suppose to pay alternate minimum tax which cannot be less than 18.5% of the adjusted total income.

Audit Requirement for Partnership Firm

A partnership firm will require an audit if they fall under the following category:

  • Carrying out a business and if total sales exceed INR 1 crore in the previous year.
  • Carrying on a profession and gross receipts in the profession exceed INR 50 lakhs in any previous year.

Income Tax Calculation for Partnership Firm

When calculating the total taxable income, the firm must also take into account certain deductions that they can claim while filing their return:

  • Remuneration or interest paid to the partners which are not in accordance with the terms of the partnership deed
  • If remuneration paid to partners is in accordance with the terms of the partnership deed but such transactions were made or were in relation to anything that pre-dates the partnership deed.
  • Salary, bonus, commission, or remuneration paid to non-working partners.

ITR Form for a Partnership Firm

Partnership firms for filing income tax returns have to file form ITR 5. Firms can file the return via Income Tax Department’s e-filing portal. One does not need to attach any supporting documents while filing ITR but if requested by the ITD, then they have to be submitted. It is not compulsory for a partnership firm to file an income tax return online if it does not require a tax audit. Moreover while filing the return, the partners must have a class 2 digital signature for the verification process.

It is important to not that ITR 5 is for filing the return for the partnership firm only and not for the partners, they have to file ITR 3.

Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore
Check which ITR Form to file?
Income Tax Return Forms to file depends on your Income Source, Residential Status, and other financial situation. Know which ITR Form you should file.
Explore

Tax Due Dates for Partnership Firm

The due dates for filing return for a proprietorship firm depend on tax audit applicability:

  • 31St July: For proprietorship firm where tax audit is not necessary
  • 30th September: For proprietorship firm where tax audit is necessary
  • 30th November: For proprietorship firm who have international transactions for business purpose

FAQs

Is a digital signature mandatory for ITR filing of partnership?

Yes, in case of online filing of ITR, the digital signature of the partners is mandatory.

Is it compulsory for a partnership firm to file ITR online?

If a tax audit is not necessary then it is not compulsory to file ITR online.

How to Download pre-filled JSON and File ITR Using JSON File on the New IT Portal for AY 2021-22?

What is JSON Utility?

Financial Year 2021-22 started with the Central Board of Direct Taxes introducing JSON Utilities for ITR filing. The Income Tax Department has decided to discontinue the current Excel and Java versions of the ITR Utilities from AY 2021-22. Currently, the JSON Offline Utility is enabled only for ITR 1 and ITR 4, the other ITRs will be added in the utility in the next releases. Follow this step-by-step procedure to download JSON from the Income Tax e-Filing Portal.

What Data is available in the Prefilled JSON?

The imported prefilled data can be edited to change basic information such as address, name, bank details, etc. However, you cannot change the PAN details. In such a case, you will have to edit the information of your PAN on the e-filing portal and then will have to again download the prefilled JSON file. Here is a list of the details present in the prefilled JSON file:

  • Prefill Taxpayer Information: includes assessee name, contact details, residential status, date of birth, taxpayer category, PAN and Aadhaar details. 
  • Prefill Bank Account: includes your pre-validated bank account
  • Prefill Income Details: includes incomes like salary, house property and other sources
  • Prefill Tax Credits: includes TDS/TCS, self assessment tax, advance tax
  • Prefill Bought Forward Losses: Includes house property, capital gains and business & profession losses reported when filing ITR within the due date in the  previous year.

Step by Step Guide to Download JSON Offline Utility

  1. Visit the Income Tax e-Filing Portal

    Go to the Income Tax e-Filing Portal, i.e, the IT Portal 2.0

  2. Downloads

    Now, click on the Downloads option from the dashboard

  3. Download the Common Utility

    Click on the option to download the common utility for ITR 1 to ITR 4.

  4. Open the ITR Utility Folder

    After the Zip Folder is downloaded, open the Utility from that folder and if you receive a message asking to ‘Run Anyway’ the programme, click on ‘Run Anyway’

  5. Utility will start installing

    After you select ‘Run Anyway’ your ITR Utility will start installing

  6. Now, click on Continue

    After you install the utility you land on the Homepage. Now Click on continue.

  7. File your ITR

    From here you will be able to file your Income Tax Return for AY 2021-22

Download Prefilled JSON

  • Login to the www.incometax.gov.in and click on e-File > Income Tax Returns > Download Pre-Filled Data
  • Next, enter the details such as assessment year and click on continue.
  • Select the mode of filing as offline. You will be asked to select the ITR type and Filing type. Choose the appropriate options and click on proceed.
  • Finally, click on the option to download the prefilled data.

You can attach this file in the income tax JSON utility you had downloaded to file your ITR.

How to File ITR Using JSON?

After preparing your ITR, you need to upload the prepared ITR JSON file using below mentioned steps:

  • Visit the Income Tax Portal and login using valid credentials.
  • Click on the e-File > Income Tax Returns > File Income Tax Return from the dashboard
  • In order to file the return using the JSON file, the taxpayer needs to select the mode of filing as offline.
  • Attach the JSON file
  • In case there are no errors, the next screen would show you the message “Successful Validation“. Next, click on the “Proceed to Validation” option.
  • Confirm the submission of the income tax return.
  • Finally, you would receive the success message displaying the successful submission of the ITR. You will also receive an email along with the acknowledgment number and the ITR-V on the registered email ID.

Submitting the ITR to the ITD is not the last step of the process. You still have to e-Verify your return within 120 days of the submission of your return.

FAQs

Is the facility to upload ITR at the e-filing portal enabled?

No, currenlty the facility to upload ITR at the e-filing portal is not enabled. Taxpayers can fill and save the file either within the utility or export the output json file to your system.

Can I make changes in my profile?

JSON Utility is enabled to import and pre-fill the data from the e-filing portal. You will be able to fill in the balance data and also edit the profile data other than PAN details in the utility, however, it is suggested to edit the same in your Profile at the e-filing website and regenerate prefill data.

What data does prefilled JSON contain?

Prefilled JSON contains data such as name, father’s name, bank account details, Aadhaar, address and contact details.