ITR for Sole Proprietorship

ITR for Sole Proprietorship



A proprietorship, like other incorporated businesses such as partnerships and corporations, is required to pay income tax on its profits. A proprietorship is legally treated the same as the owner, and the Income Tax Returns that must be filed follow the same procedure as the proprietor’s own filings. As a result, the laws governing the payment of the proprietor’s income tax apply to the proprietorship as well.

This article will explain “How to File Income Tax Return for Sole Proprietorship in India.”

Filling Out a Sole Proprietorship Income Tax Return


In India, sole proprietorship is a very popular and prominent business model. Sole proprietorships are small, independent service providers or resellers who run their own businesses. A single individual owns the company. This business structure has the fewest legal, regulatory, and registration requirements, making it the most straightforward in terms of incorporation and setup.This business model is extremely popular among small business owners due to its simple structure and slab-based tax benefits. Because a sole proprietorship firm is the same as the proprietor, its income is added to the proprietor’s income and the individual’s tax return is filed using the applicable slab rates.

Sole Proprietorship Information on ITR Form


For a sole proprietorship, two ITR (Income Tax Return) forms must be filed:

ITR Form 3: A sole proprietor engaged in a proprietary business or profession uses the ITR 3 Form.

ITR Form 4: The ITR-4 Form is an income tax return form for taxpayers who have chosen the presumptive income scheme under Sections 44AD, 44ADA, and 44AE and have a taxable income of less than Rs 50 lakh per year.

In India, how do you file an income tax return for a sole proprietorship?

Steps for Filing a Proprietorship Income Tax Return Using E-Filing:

     The first step is to obtain a PAN card. The Internal Revenue Service issues this card to every taxpayer. It provides the cardholder with a unique Permanent Account Number (PAN), which is needed to pay taxes.

     Due to the lack of a separate legal entity in a proprietorship, the proprietor’s PAN must be used to pay taxes and file returns.

     To begin, you must register at the e-filing portal, if you are already registered, you must log in using your PAN.

     Then, from the e-filing menu, select ‘Income Tax Return.’

     On this page, you must select the following options: – Assessment year – ITR form Filing type (original/revised) – In the submission mode, select prepare and submit.

     Press the enter key to continue. You must carefully fill out all of the information requested on the new page.

     Some details will be required, while others will be dependent on the situation.

     After you’ve filled out all of the required fields, you’ll need to choose a verification method. There are three filing options: two for electronic filing and one for paper filing. Select e-verify to have the filing verified immediately. – E-verify within 120 days to allow you time to update any required information. – To proceed manually, select ‘I do not want to e-verify.’

     From the drop-down menu, choose ‘Preview and Submit.’ You can double-check for errors by previewing the return before submitting it.

     After submitting the filing via the e-verify option, you can validate it using OTP or EVC (Electronic Verification Code). The OTP/EVC must be submitted within 60 seconds for successful verification.

When must sole proprietorship businesses file their ITRs?

When a proprietorship firm’s return is due is determined by the tax audit applicability.

The deadline for sole proprietorship businesses that are not subject to a tax audit is July 31.

Sole proprietorship tax audits must be completed by September 30.

On November 30, those who conduct international business transactions as a sole proprietorship.

Information Required for ITR Submittal

     PAN cards are required for all assessors.

     Individual taxpayers must now have an Aadhaar card. Non-individual taxpayers must provide the authorised individual’s Aadhaar card.

     Agriculture, salary, home ownership, other sources, capital gains, profession, and so on are all examples of income sources.

     Personal identifiable information includes things like your name, address, phone number, job title, and so on.

     Expenses that can be deducted under the provisions of Chapters 10 and VI-A of the

Internal Revenue Code, as well as a number of other tax code sections

     Account information such as the branch name, IFSC code, and account number

     TCS and TDS payments for self-assessment and advance tax will be updated automatically.

     Between November 9 and December 31, last year, more than Rs 2 lakh in old demonetized notes were deposited.

What are the due dates for filing a sole proprietorship’s ITR?

The Income Tax Act of 1961 specifies the due dates for filing ITRs, which include the following dates for a sole proprietorship business:

Audit is not required in the following cases:

The deadline for filing an ITR for a sole proprietorship is July 31st of each year.

Where Audit is Necessary:

The deadline for filing tax audit reports and ITRs is September 30th of each year.

When is an audit required for a sole proprietorship?

     The Income Tax Act audit criteria are based on the turnover of any business or profession. The audit required by section 44AB of the Income Tax Act is known as a “Tax Audit,” and it must be conducted by a Chartered Accountant. Section 44AB establishes the following threshold limits for tax audits:

     When a business entity’s gross turnover, receipts, or sales exceed Rs. 1 crore, a tax audit is required.

     The limit for the profession is Rs. 50 lakhs rather than Rs. 1 crore.

What are the ramifications of a proprietor failing to file an ITR?


A proprietor’s failure to file an ITR may result in a penalty/late fee under Section 234F of the Income Tax Act. The minimum penalty under Section 234F is Rs. 1000, with a maximum penalty of Rs. 5,000.

Though a sole proprietorship is the most basic form of conducting any business or profession, it is still required to comply with income tax requirements and file income tax returns on or before the due date prescribed. Filing an ITR has numerous advantages for anyone in India. As a result, you should not avoid filing ITRs on purpose because it may result in trouble in the form of notices and penalties.

What are the late fees and penalties if the return is submitted after the deadline?

If a sole proprietor fails to file an income tax return by the due date, interest and a late fee are imposed under section 234F of the Income Tax Act of 1961.

The fee for failing to submit an income tax return will be as follows:


     Rs 5,000 if the return is submitted on or before the 31st of December of the assessment year following the due date.

     In any other case, Rs. 10,000

     However, the late filing fee shall not exceed Rs 1,000 if the assesses total income does not exceed Rs 5 lakh.