Proprietorship Income Tax Return

Everything You Need to Know About Proprietorship Income Tax Return & Its Compliances

Online Legal India LogoBy Online Legal India Published On 18 Jan 2023 Category Income Tax

Like other incorporated businesses such as partnerships and corporations, a proprietorship must pay tax on its revenue. However, in the legal sense, a proprietorship is considered the proprietor himself, and the income tax returns must be submitted following the same method as the owner's own filings. As a result, the regulations regulating the proprietor's income tax payment also govern the proprietorship.

For example, if the proprietor is a senior citizen, income tax slabs for elderly persons apply to the proprietorship, i.e.

a) Citizens above the age of 60 are excused from paying income tax if their total income is less than Rs 3 lakh.
b) Citizens above the age of 80 are free from income tax if their total income is less than Rs 5 lakh.

Proprietorship ITR Annual Compliances

Like sole proprietorship operations, LLPs and corporations registered in India must file income tax returns. However, because proprietorship firms are recognised as proprietors, filing an income tax return by a proprietorship firm is the same as that of the proprietor.

The Income Tax Act requires all owners under the age of 60 to submit an income tax return if their total income exceeds 2.5 lakhs. If the total revenue exceeds three lakhs, proprietors above the age of sixty but under the age of 80 must file an income tax return.

If an owner's total income reaches five lakhs, they must submit income tax returns if they are 80 or older.

Tax Audit for a Sole Proprietorship

An audit is required if a proprietorship firm's yearly sales income surpasses one crore. In addition, an audit would be needed if the total gross receipts for the assessment year exceeded 50 lakhs.

Furthermore, regardless of turnover, an audit would be required for every proprietorship business subject to the presumptive taxation scheme if the income declared is less than the scheme's deemed profits and gains.

Proprietorship Firm Tax Return Due Date

A sole proprietorship that does not require an audit is required to file its income tax return by July 31. However, if the Income Tax Act requires an audit, the proprietorship's income tax return is due on September 30. Sole proprietorship enterprises must submit Form ITR-3 or Form ITR-4-Sugam.

A proprietor or a Hindu Undivided Family engaged in a proprietary trade or profession can file Form ITR-3. However, the proprietor must complete Form ITR-4-Sugam if they intend to pay income tax under the presumptive taxation scheme.

A presumptive taxation plan is intended to reduce the compliance burden by assuming a certain profit margin on the total income of the profession.

How To File a Proprietorship Income Tax Return?

Unless exempted, proprietorships are required by law to submit tax returns every year. As previously stated, the proprietorship's income tax is that of the proprietor. The tax return can be filed either physically or electronically using an e-filing site utilising the proprietor's electronic signature. Depending on the nature of the proprietorship, two distinct forms must be filed:

Form ITR-3:

If the proprietorship is conducted by a Hindu Undivided family or any other proprietor, this form should be utilised to submit income tax.

Form ITR-4 Sugam:

Unlike the preceding form, this one is utilised by proprietorships that are subject to presumptive tax schemes. This is done to lessen the regulatory load on small firms. As previously stated, the income tax of a proprietorship is similar to that of the owner, which means that the proprietorship's business revenue is added to the proprietor's income. As a result, the proprietor's business taxes become their personal taxes. As the case may be, he is still eligible for all tax breaks available to individuals or Hindu Undivided Families (HUFs).

Steps to File for A Proprietorship Income Tax Return Online

The steps that are involved in Proprietorship Tax Return filing Online are-

  • To begin, you must have a PAN card. Each taxpayer receives this card from the Income Tax Department. To pay taxes, the cardholder needs a certain Permanent Account Number (PAN) supplied by the card.
  • Because the proprietorship lacks a unique legal entity, income taxes must be paid, and income tax returns must be submitted using the proprietor's PAN.
  • If you haven't previously, you must use your PAN to access the e-filing portal.
  • In the future, select "Income Tax Return" from the e-filing drop-down menu.
  • On this page, you must select one of the following options: Tax year > ITR form > Filing status (original or revised)> and Prepare and submit your Submission in the Submission.
  • Continue by clicking the button. Fill out all of the information given on the new page with attention.
  • Certain fields must be completed, while others are dependent on their application.
  • After filling out all of the required fields, you must choose a verification method. There are three options: e-verify, which validates the file instantly; e-verify later within 120 days, which gives you an opportunity to rectify any necessary information within 120 days; and 'I don't want to verify,' which allows you to proceed manually.
  • Click the "Preview and Submit" button at this stage. Again, you have the option to inspect the return before submitting it to check for any last-minute problems.
  • After submitting the e-verify option, you have two options for filing verification: OTP or EVC. The OTP or EVC must be submitted within 60 seconds for successful verification.

Last Date for Filing An ITR for A Proprietorship

The deadline for filing a proprietorship tax return filing depends on whether it has to be audited under the Income Tax Act of 1961 and if it has engaged in any overseas activities.

  • Ownerships not requiring an audit must file their income tax forms by July 31st.
  • Proprietorships that must be audited must file their income tax filings by September 30th.
  • Proprietorships that have engaged in overseas transactions and certain designated domestic firms must file their income tax returns by November 30th.

Latest Updates

The CBDT issues Form 12BBA, a declaration form to be submitted by qualified elderly persons to the designated banks in order to avoid submitting the ITR.

In Budget 2021, it is planned to exclude older individuals from submitting income tax returns if their sole yearly income sources are pension and interest income. In addition, section 194P has been added to require banks to withhold tax from pension and interest income earned by elderly people over the age of 75.


Sole Proprietorship Registration, like other incorporated firms such as Partnerships Firm Registration and LLP Registration, must pay tax on its revenue. A proprietorship is considered a single entity under the law and must submit income tax reports. As a result, the proprietorship is subject to the same legal requirements as the proprietor's income tax payment.

On the other hand, a sole proprietorship will not be taxed as a separate legal entity. Like the rest of the country's individual taxpayers, all business owners should submit their taxes as individual returns. The proprietorship tax return filing is also deductible according to income-tax laws and slab rates.

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Anjali Malhotra


Anjali Malhotra


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