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.
Which ITR form to File for Proprietorship Firm?
Depending on the nature of the business, a proprietorship firm can file:
- ITR 3: If the proprietorship firm is run by a Hindu Undivided Family or other proprietors
- 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
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.
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?