Business Tax Return Filings

Setting up a business and understanding the complexities of filing returns is essential to running a business. A business tax return is an income tax return filing applicable to companies. It serves as a comprehensive record of the business's earnings and expenses.

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What is a business tax return?

A business tax return refers to an income tax return for businesses. A business tax return is a comprehensive report that outlines a business's income, expenses, and pertinent tax details, all presented in a designated form. It entails the submission of income tax returns for businesses, with the added requirement of reporting Tax Deducted at Source (TDS). This process must be carried out annually.

This return serves as a financial statement detailing earnings. It outlays and is a documentation of additional financial components like fixed assets, loans obtained, loans extended, debtors, and creditors within the business.

Income Tax Return Filing in India

Both Indian citizens and companies are required to file income tax returns if their Gross Total Income (GTI) exceeds Rs. 3 lakhs (amounts below three lakhs are exempted). These income tax returns must be submitted annually within the specified deadline. Various income tax return forms are available, tailored to different criteria applicable to multiple groups of individuals and businesses. It is essential to identify the appropriate arrangements and submit them to the Income Tax Department of India for processing.

Filing income tax returns offers several advantages for businesses, some of which are outlined below:

• Refund Claims: Accurate and timely filing can lead to potential refunds, which can be beneficial for improving cash flow within the business.
• Carry-forward of Losses: Losses incurred in one financial year can be carried forward and adjusted against future profits, reducing tax liabilities.
• Loan Applications: Having proper and up-to-date income tax returns can serve as evidence of financial stability, increasing the chances of obtaining loans or credit from financial institutions.
• Evidence for Transactions: Filed tax returns can provide solid proof of the business's financial transactions and activities, which can be helpful for legal or contractual purposes.
• Compliance with Law: Filing tax returns ensures compliance with tax regulations, helping businesses avoid penalties or legal issues.
• Transparency: Transparent financial records through tax returns can enhance the business's credibility, fostering trust among customers, partners, and stakeholders.
• Audit Preparedness: Filed returns provide a basis for accurate financial statements, preparing the business for potential tax audits.
• Business Growth: Accurate financial reporting through tax returns can assist in making informed business decisions, aiding in growth and expansion strategies.
• Avoiding Notices: Timely and accurate filing reduces the likelihood of receiving notices or queries from tax authorities.
• Availing Tax Benefits: Filing returns on time enables businesses to avail themselves of various tax benefits and deductions legally, optimizing their tax liabilities.

Who Should File a Business Tax Return?

Filing a tax return is mandatory for all eligible businesses operating within the framework of Indian tax regulations. The need to file a business tax return is contingent upon the structure of the business:

• Sole Proprietorship
• Partnership Firm
• Limited Liability Partnership (LLP)
• Companies – Private Limited Company, One Person Company

Types of Business Tax Return Filing

The different categories for filing Business Tax Returns are determined based on the types of business entities allowed to submit them. These categories correspond to other business structures and their respective designations.

• Partnership Firm Tax Return Filing
• Proprietorship Tax Return Filing
• Limited Liability Partnership Tax Return Filing
• Company Tax Return Filing

Proprietorship Tax Return Filing

Any individual with business income is said to be operating a proprietorship firm. Proprietorships operating in India are required to file income tax returns each year. Since proprietorships are considered the same as proprietors, a proprietorship's income tax return filing procedure is similar to individual income tax return filing.

Requirement for Filing Proprietorship Tax Return

All proprietors below 60 years are required to file income tax returns if total income exceeds Rs. 2.5 lakhs. For proprietors over 60 years but below 80 years, income tax filing is mandatory if total income exceeds Rs.3 lakhs. Proprietors over 80 years and above must file income tax returns if the total income exceeds Rs.5 lakhs.

Income Tax Rate for Proprietorship

The income tax rate for proprietorship is the same as the income tax rate for individuals. Unlike the income tax rate for LLP or Company, which are flat rates, proprietorships are taxed on slab rates. The following is the income tax rate applicable for proprietorships for the assessment year 2023-24, wherein the Proprietor's age is less than 60.

Proprietorship Tax Rate AY 2024-25| FY 2023-24 under Normal Tax Regime

Proprietorship Tax Rate AY 2023-24| FY 2022-23– Proprietor's age is less than 60 years

Proprietorship Tax Rate AY 2023-24| FY 2022-23–The Proprietor's age is between 60 and 80 years

The following tax rate applies to a Proprietor who turns 60 during the previous year but is younger than 80 on the last day of the previous year:

Proprietorship Tax Rate AY 2023-24| FY 2022-23–Proprietor's age is above 80 years

Rates of surcharge

In respect of a Proprietor, the rate of surcharge for the Assessment Year 2023-24 is tabulated here:

Rates of surcharge – For Assessment Year 2023-24 under alternate tax regime

The rate of surcharge in case of the Proprietor opting for an alternate tax regime as per section 115BAC will be 25% instead of 37% for AY 2023-24

Tax Audit for Proprietorship

A proprietorship firm would require an audit if the total sales turnover is over Rs.1 crore during the financial year. In the case of a professional, an audit would be required if total gross receipts are more than Rs.50 lakhs during the financial year under assessment.

Due Date for Filing Proprietorship Tax Return

The income tax return of a proprietorship that doesn't require audit is due on July 31. In case the income tax return of a proprietorship needs to be audited as per the Income Tax Act, then the return would be due on September 30.

ITR Form for Proprietorships Return Filings

Proprietorship firms would be required to file Form ITR-3 or Form ITR-4-Sugam. Form ITR-3 can be filed by a proprietor or a Hindu Undivided Family carrying out a proprietary business or profession. Form ITR-4-Sugam can be filed by a proprietor who wants to pay income tax under the presumptive taxation scheme.

Partnership Firm Tax Return Filing

All partnership firms must file income tax returns, regardless of income or loss. Partnership firms are taxed as a separate legal entity under the Income Tax Act. Hence, the income tax rate applicable for partnership firms is similar to LLPs and Companies registered in India.

Requirement for Filing Partnership Firm Tax Return

All partnership firms are required to file income tax returns each year, irrespective of income or loss. If there was no business activity, a NIL income tax return must be filed before the due date for a partnership firm.

Income Tax Rate for Partnership Firms

Partnership firms must pay income tax at 30% of total income. In addition to the income tax, a partnership firm is liable to pay an income tax surcharge on the amount of income tax at the rate of 12% when total income exceeds Rs.1 crores. In addition to the income tax and taxation, a partnership firm must pay a Health and education cess. Health & Education Cess is applicable on the amount of income tax and the appropriate surcharge at 4%.

Minimum Alternate Tax for Partnership Firms

Similar to income tax applicable for a company, partnership firms are subject to minimum alternate Tax. A minimum alternate tax of 18.5% of adjusted total income is applicable. Hence, income tax payable by a partnership firm's profits cannot be less than 18.5 percent (increased by income tax surcharge, education cess, and secondary and higher education cess).

Tax Audit for Partnership Firm

Partnership firms carrying on business with total sales of over Rs.1 crore are required to obtain tax audits. Similarly, partnership firms carrying on a profession wherein gross receipts exceed Rs.50 lakhs in the previous year are required to obtain tax audits. In addition, other applicable conditions could make an audit mandatory for a partnership firm.

Due Date for Filing Partnership Firm Tax Return

Most partnership firms' income tax return due date is July 31 of the assessment year. Partnership firms required to get their accounts audited under the Income Tax Act must file the income tax return before the September 30 deadline.

ITR Form For Partnership Firm Return Filing

Partnership firms are required to file income tax returns in form ITR 5. Like all other income tax forms, ITR 5 is an attachment-less form, and there is no requirement for submitting any documents or statements along with a partnership firm tax return. However, the taxpayer must save all records about the business and produce the same before tax authorities when requested.

LLP Tax Return Filing

All LLPs are required to file an income tax return, irrespective of the amount of income or loss. LLPs are a separate legal entity and are taxed separately from the Partners of the LLP. The income tax rate applicable for LLPs is similar to companies registered in India.

Requirement for Filing LLP Tax Return

All LLPs are required to file income tax returns each year, irrespective of income or loss. If there was no business activity, then a NIL income tax return must be filed before the due date.

Income Tax Rate for LLPs

The income tax rate applicable for LLP registered in India is 30% of the total income. In addition to the income tax, a surcharge is levied on the income tax payable at 12% when the total income exceeds Rs.1 crore. In addition to the income tax surcharge, a Health and education cess at 4% applies to the income tax and surcharge of an LLP.

Minimum Alternate Tax for LLP

Similar to income tax applicable for a company, LLP is also subject to minimum alternate Tax. A minimum alternate tax of 18.5% of adjusted total income is applicable for LLP. Hence, income tax payable by LLP cannot be less than 18.5 percent (increased by income tax surcharge, education cess, and secondary and higher education cess).

Tax Audit for LLP

LLP whose turnover exceeded Rs. 40 Lakh or whose contribution exceeded Rs. 25 Lakh are required to get their accounts audited by a practicing Chartered Accountant. In addition, LLPs that entered into an international transaction with associated enterprises or undertook certain Specified Domestic Transactions must file Form 3CEB. Form 3CEB must be certified by a Chartered Accountant. LLPs required to file Form 3CEB have November 30 as the deadline for LLP tax filing.

Due Date for Filing LLP Tax Return

The deadline for LLP tax filing in India is July 31. LLPs required to obtain a tax audit have September 30 as the deadline for filing an income tax return.

ITR Form for LLP Return Filing

LLPs must file income tax returns using Form ITR 5. Form ITR 5 must be filed online using the digital signature of one of the designated partners of the LLP.

Company Tax Return Filing

All companies registered in India are required to file income tax returns each year. Under the Income Tax Act, company tax return filing falls under two categories, namely domestic company or foreign company. Companies registered with the Ministry of Corporate Affairs, like Private Limited, Personal, or Limited Companies, are classified as domestic companies.

Requirement for Filing Company Tax Return

All companies registered in India must file income tax returns yearly, irrespective of income, profit, or loss. Hence, even dormant companies with no transactions are required to file income tax returns each year.

Income Tax Rate for Company

For Assessment Year 2024-25, the Income tax rate of 25% of total income is applicable for domestic companies with a total turnover of less than Rs.400 crores in 2020-21. For companies with a turnover of more than Rs.400 crores in the year 2020-21, an income tax rate of 30% is applicable. In addition to the income tax, companies must pay a surcharge and Health and Education Cess at 7% income tax and surcharge.

Minimum Alternate Tax for Company

All companies are required to pay a minimum alternate tax at the rate of 15% of book profit plus surcharge and education cess if the company's tax liability is less than 15% of book profit.

Tax Audit for Company

A company's accounts must be audited each year by a Chartered Accountant, irrespective of turnover or profit/loss.

Due Date for Filing Company Tax Return

All companies registered in India are required to file income tax returns on or before September 30. Companies incorporated between January - March can file MCA annual returns after 18 months in the first year. However, the same type of exemption is not available under the Income Tax Act. Hence, even companies registered from January - to March must file income tax returns on or before September 30 of the same calendar year.

ITR Form For Company Tax Filings

Companies registered in India and operating a business for profit must file Form ITR 6. Hence, private limited companies, limited companies, and one-person companies would be required to file Form ITR6.

Key Points to Consider When Filing a Business Tax Return

• Total Income Assessment: Every business must compute its total income regardless of profit or loss. If the total income surpasses the basic taxable threshold before deductions, filing an income tax return is mandatory.
• Gross Total Income Criteria: Gross Total Income exceeding Rs. 2.5 lakhs signifies surpassing the basic taxable threshold. For business tax returns, income before deductions exceeding Rs. 3 lakhs is considered.
• Uniform Taxation for LLPs, Companies, and Firms: LLPs, companies, and firms are all subject to a tax rate of 30%, obligating them to file tax returns regardless of financial outcomes or undertaken operations.

How IndiaFilings Can Assist with Business Tax Return Filings

Navigating the intricate world of business tax return filings is made effortless with IndiaFilings. Our dedicated services offer comprehensive support to ensure your tax obligations are met seamlessly. Our platform provides a user-friendly interface that guides you through the step-by-step filing process. Our experienced professionals are well-versed in the nuances of tax regulations, ensuring accurate and timely submissions. We're here to aid businesses of all types in effortlessly filing their tax returns.

With our user-friendly platform and seasoned team, the process becomes less daunting, ensuring deadlines and rules are followed. We will keep you well-informed about crucial deadlines, assist in selecting the appropriate ITR form, and guide you through a meticulous, error-free filing process. With IndiaFilings, you can confidently handle your business tax returns, saving time and minimizing the complexities involved.

Ready to simplify your business tax returns? Reach out to us today for seamless and stress-free filing.