Tax Saving Tips for Sole Proprietor
April 3, 2020
Proprietorship Tax Return Filing
Sole Proprietor is popular business model in India. Its easy to do sole Proprietorship registration. Due to is simple structure and slab wise tax benefit its most popular business model. Income Tax rete for Sole Proprietor is higher when firms taxable income is above 15 Lac. Tax planning is required to save income tax for sole proprietor. Income tax return is combination different heads of income. Below are 5 heads of Income Under Income Tax Act 1961.
- Salary Income
- Income from housing property
- Business Income
- Capital Gain
- Income From Other sources
Under this article we would discuss about Proprietorship Tax Return Filing, Income Tax rate, Due date of filing ITR , audit , list of documents required to file ITR.
Income Tax Rate for Sole Proprietor For FY 2020-21
| Income Tax Slab | Tax Rate |
|---|---|
| Up to Rs 2.5 lakh | NIL |
| Rs 2.5 lakh to Rs 5 lakh | 5% (Tax rebate of Rs 12,500 available under section 87A) |
| Rs 5 lakh to Rs 7.5 lakh | 10% |
| Rs 7.5 lakh to Rs 10 lakh | 15% |
| Rs 10 lakh to Rs 12.5 lakh | 20% |
| Rs 12.5 lakh to Rs 15 lakh | 25% |
| Rs 15 lakh and above | 30% |
Surcharge applicable Sole Proprietor For FY 2020-21
| Income limit | Surcharge Rate on the amount of income tax |
|---|---|
| Net income exceeds Rs 50 lakh but doesn’t exceed Rs 1 crore | 10% |
| Net income above Rs 1 crore but doesn’t exceed Rs 2 crore | 15% |
| Net income exceeds Rs 2 crore but doesn’t exceed Rs 5 crore | 25% |
| Net income exceeds Rs 5 crore | 37% |
Benefits of filing Income Tax return for Sole Proprietor
As per Income Tax Act 1961 Section 139(1) if any persons income tax above taxable limit then he required to file ITR. If income of Sole Proprietor is above ₹. 5 Lac then its mandatory to file income tax return. Tax return filing is moral responsibility. Timely income tax filing helps to build income stability for personal or business loan. For business expansion one may ask banker for loan. Income tax return is key documents which banker demands to check credit score. Below are benefits for tax return filing
- Mandatory under Income Tax Act 1961
- Save Late Filing Penalty of ₹ 10000/-
- ITR required for Loan
- ITR required for Visa
- ITR required for home loan
Section 87A rebate for Sole Proprietor
Rebate is form of concession given by department to reduce tax Burdon on tax payer. Section 87A is tax rebate section. For the Financial Year 2020-21, maximum tax rebate available under section 87A is ₹ 12,500. Tax rebate is applicable only if net taxable income up to ₹ 5 Lakhs for for Sole Proprietor. This rebate is applicable before adding surcharge.Income Tax Computation sheet Proprietorship Firm
Income Tax Computation sheet is a simple replica of your income tax return. Before filing income tax return a professional expert prepares income tax Computation sheet is a detail working of Gross income and taxable income. Most of time in case of bank loan or for income tax assessment officer asks for income tax Computation sheet. Below is key content of Income Tax Computation sheet.- Gross Income
- Net Taxable Income
- Income Tax Calculation
- Advance Tax Paid
- Income Tax Credit 26 AS
- Carry forward of losses if any
- Net Tax payable / Refund
- Details of Proprietor
Tax Audit For Sole Proprietor
Tax Audit is a detail reporting of firms annual financial statement by Chartered Accountant firm on behalf of firm to tax authorities. Section 44 AB of income tax act gives condition when this audit is applicable. Below are primary condition Tax Audit applicability for Sole Proprietor business.
ITR Form 3 & ITR Form 4
ITR filing forms, as applicable to the sole proprietorship firm, is detailed hereunder:| Income Tax Form | Description |
| ITR 3 | Applicable to the individuals and HUFs having income from a proprietary business or profession. |
| ITR 4 | Applicable to individual/proprietor carrying out business or profession under presumptive income. |
Due Date for Proprietorship Firm Tax Return
Due date for Proprietorship Firm Tax Return tax return filing is same as for individual. Proprietorship firm tax return filing is annual process. For FY 2019-20 due date for ITR filing of Proprietorship is 31 July 2020. In case for firm Tax audit under section 44AB of income tax applicable then due date for same is 30 September 2020.Steps For Sole Proprietorship Firm Income Tax Return
Income tax return for Sole Proprietorship is complete online. Once financial statement for proprietary business is ready , prepare for computation sheet of firm. Computation sheet is calculation for tax purpose.- Download Income Tax Return Form
- Prepare Financial statements of firm
- Prepare Computation sheet of firm
- Fill details in Income Tax Return form
- Validate tax return form & generate xml file
- Upload xml file at income tax site
- E verify ITR with evc / otp / post
List of Documents for Sole Proprietorship Tax Return Filing
Sole proprietorship firm income tax return filing is simple is simple & online. Income tax return filing is detail reporting of firms annual financial statement. Tax return is based on Proprietorship firms annual financial statement. To prepare Sole Proprietorship Firm Income Tax Return following documents required.| S.No. | Head of Income | List of Documents |
| 1 | Salary Income |
|
| 2 | Rental Income |
|
| 3 | Business Income |
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| 4 | Income From Other sources |
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| 5 | Capital Gain |
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