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Income tax return filing for business can be classified into three categories, non-tax audit, tax audit under section 44AB filing, and presumptive taxation income tax return filing. Filing of business income tax returns should be done considering the benefits available under the income tax act. Considerably Tax savings is possible for a small business whose turnover is less than Rs.2 crores if opted for presumptive taxation under section 44AD. Apart from tax savings, various provisions regarding advance tax, TDS, and disallowance of expenses has to be taken care of with respect to the income tax act.
What is income tax return filing for business?
Income tax return filing for business is declaring income earned under the head “Profits and gains from business or profession”, there are numerous sections and rules for the calculation of turnover, allowance of expenses, and allowance of deductions. Business income tax return filing in case of tax audit requires compliance with and reporting of a major part of the income tax act. Where there is option for assessee to opt for presumptive taxation, it is recommended to opt it due to lower compliance and process. Income tax returns for business will be accompanied by financial statements such as profit and loss account, balance sheet, and depreciation statements in general.
How to file an income tax business return?
Income tax return filing for individuals is filed in Form ITR-3 other than presumptive taxation or ITR 4 for presumptive taxation. Income tax return is prepared in online utility or offline utility after arriving at turnover, expenses, deductions allowed etc. In case of presumptive taxation filing in ITR 4, the process of verification of bank statements and other basic records is sufficient for the determination of profits to be declared and turnover. In the case of filing in ITR4- it needs preparation of the profit and loss account balance sheet, depreciation statements as per the income tax act before preparation of the income tax return.
What are the details required for business income tax return filing?
- Income tax login details
- Bank statement for the financial year
- Previous year financial statements (P&L, Balance Sheet along with schedules, Depreciation statement)
- Details of other income such as bank interest, capital gains, income from house property, etc.
- Details of Chapter VI-A deductions such as life insurance, school fees, housing loan, etc.
- Filled up checklist.
Pricing:
₹Rs.5000
Steps to Register
Income tax consultation
Our income tax consultant will have a discussion to understand the nature of the business, the tax compliance required, level of tax compliance by the client.
1
Verification of documents and records
Verification of the previous year's income tax returns, and financial statements. Compilation of data from AIS, TIS, Form 26AS of income tax portal, and GST portal is carried out.
2
Preparation of financial statements
Preparation of financial statements with data provided by the client and with the support of bank statements. Profit is arrived as per accounts provided in case of person required to maintain accounts and who are required to file ITR in ITR-3.
3
Discussion with client
Discussion with the client is carried out after sending draft financial statements, tax payable or refund is communicated and required self-assessment tax will be paid.
4
Preperation of Income tax return
Income tax return will be prepared after approval by the client, ITR submitted online is e-verified using OTP sent to the client's Aadhaar-linked mobile no.
5
Handover documents and advisory
The client will be provided with a hard copy of the financial statements. Detailed information regarding compliance deviation in the current year and steps required to correct it in the future is provided, which will assist them to ensure long term compliance to income tax act.
6
Who is required to file business income tax returns, and what are the benefits available to them?
Common points on income tax return filing for proprietorship firms and partnership firms
- Individuals carrying business in sole proprietorship need to file an income tax return even if his/her total income is less than the basic exemption limit if
1. Turnover or gross receipts in more than Rs.60 lakhs in a financial year
2. Gross receipts in profession exceeds Rs.10 Lakhs during the previous year
3. Total tax deducted or collected during the financial year is Rs.25,000 or more, this limit is increased to Rs.50,000 in the case of senior citizens. The information regarding the total amount of TDS or TCS can be gathered from form 26AS. - Tax audit U/s 44AB is applicable if the turnover from the business Exceeds Rs.1 crores, the limit is increased to Rs.10 crores if cash payments and cash receipts in business do not exceed 5 % in a financial year.
- Mandatory Tax audit U/s 44AB is not applicable if the taxpayer opted for presumptive taxation U/s 44AD. Benefits of section 44AD presumptive taxation are available to eligible businesses if turnover does not exceed Rs.2 crores in the financial year, and 8% of turnover or gross receipts are considered as profits from the business. In the case of the profession, the limit is Rs.50 lakhs and 50 % of gross receipts are deemed as profits from the profession. Conditions for availing presumptive taxation have to be complied with.
- If turnover is above Rs.1 crore and up to Rs.2 crore, the profit from the business can be declared lower than 8 % of gross receipts only if the audit is conducted U/s 44AB. If turnover is up to Rs.1 crores, a profit below 8 % can be declared without audit.
- It is always recommended to declare actual profit even if the profit is above 8 % of turnover, the declaration of higher actual income will give benefits of increased creditworthiness for long-term business growth and development by additional term loan or overdraft facility. If we look at the advanced tax planning aspect, capital available with the firm will be lesser in papers but however actual capital will be higher as unreported profit will not be considered.
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Frequently Asked Questions
We make it easy for you to find the answer to frequently asked questions here...
Carry forward of business loss is allowed up to the next 8 years from the relevant financial year, unabsorbed loss after 8 financial years will expire, Income tax return before the due shall be filed to be eligible for carry forward of business loss subject to compliance of other rules and regulations.
Financial statements for returns filed under section 44AD can be prepared even after filing the return, but it is advisable to prepare only before the filing of a return due to complexity in preparation after filing the returns. Section 44AD presumptive taxation is beneficial on the basis of the reduced tax amount as the profit to be declared is only 8%, however, we need to take care of other factors such as the preparation of financial statements and compliance with rules to be complied with for presumptive taxation, reversal of benefits availed under presumptive taxation in case the rules are not complied with.
If income is up to 1 crore lower profits can be declared without availing the benefit of section 44AD, the only difference is profit can be declared even below 8 % and financial statements need to be prepared mandatorily for filing an income tax return.
