Business Tax filing

Business Tax Filing

Business Tax Returns Filing

Setting up a business and understanding the complexities involved in filing returns is an important aspect of running a business.

A business tax return is basically an income tax return. The return is a statement of income and expenditure of the business. Also, any tax to be paid on the profits made by you is declared in this return. The return also contains details of the assets and liabilities held by the business. Items like fixed assets, debtors and creditors of business, loans taken and loans were given are declared here.

Business Tax Returns Filing : Types of Business Tax Returns, Business Taxes

Setting up a business and understanding the complexities involved in filing returns is an important aspect of running a business.

Who has to file a business tax return?

Filing of return mainly depends on the type of business structure. For example:

• If you are a sole proprietor your business income and your other personal income like salary, income from house property and interest income have to be stated on the same return.
• If your total income before deductions is above the basic taxable limit you need to compulsorily file your income tax return irrespective of profit or loss in your business.
• The basic taxable limit is Rs. 2.5 lakh. So, if your income before deductions is above Rs 2.5 lakh you need to file your business tax return.
• For companies, firms and Limited Liability Partnership (LLP) a business tax return has to be filed irrespective of profit or loss. Even if there are no operations undertaken, a return has to be filed.
• Companies, firms, and LLPs are taxed at a rate of 30%.

Income Tax Audit

Every taxpayer whose turnover is above Rs. 1 Crore in case of businesses and Rs. 50 Lakh in case of professionals is required to get a tax audit done. The taxpayer has to appoint a Chartered Accountant to audit their accounts.

Also, a tax audit is required if there has been a loss of your business and you want to carry forward the loss. A tax audit is necessary even when the profits declared by you is less than 8% (6% on Digital transactions) of the turnover in case of business and 50% of receipts in case of professionals.

Presumptive Taxation

Individuals, HUF, and Firms running businesses or providing services can offer their income to tax on a presumptive basis. Turnover up to which presumptive taxation is allowed for businesses is Rs. 2 Crore and for professionals is Rs. 50 Lakh.

Minimum of 8% of the turnover has to be offered as income under presumptive basis for businesses. For professionals, 50% of professional receipts have to be declared on the business tax return.

What are the due dates for filing of returns?

For the Individuals not liable to tax audit, the last date for the filing of the return is 31st August after the end of the financial year (Belated return can be filed up-to 31st March subject to penalty) For individuals liable to tax audit and all other assesses like company, LLP or partnership firm, the due date is 30th September after the end of the financial year. For the FY 2017-18, this due date has been extended from 30 September 2018 to 31 October 2018.

Also a fine of Rs. 5000 under the section 271F can be levied on the assessee.

Who Should File Business Tax Return?

Filing of tax returns is mandatory for all qualified businesses operating under Indian tax laws. Income tax returns are added with Tax deducted at source (TDS) returns for these businesses. Businesses use the help of various tax filing service providers to file GST returns among others. It takes about 3 to 5 working days for someone to file an income tax return for their business.

The filing of business tax return depends on the structure of a business:

• Proprietorship
• Partnership
• LLP
• Companies

Proprietorship

An individual having a business or professional income of more than Rs. 2.5 Lakhs per year will have to file an income tax return each year.

Partnership

It is mandatory for partnership firms (registered or unregistered) to file income tax return in Form ITR 5 each year. Partnership firms attract income tax at the rate of 30%.

LLP

Limited liability partnership firms registered in India are required to file an income tax return in Form ITR-5 each year and MCA Annual Return.

Companies

All types of companies registered in India are required to file income tax return in Form ITR-6 each year and MCA Annual Return.

Types of Business Tax Return Filing

Different types of business tax return filing are based on the business entities. They are also so named based on the entity.

• Tax return filing for sole proprietor: Tax returns should be filed by the single owner operating the proprietorship firm. In the case of a sole proprietorship firm, there is only one person operating the firm. So, tax return filing procedures for the sole proprietorship firm are similar to that of personal tax filing for the owner.
• Tax return filing for partnership firms: Partnership firms are run by two or more individuals. So, such firms are taxed as individual legal entities under the Income Tax Act. So, the income tax rate applicable for partnership firms is similar to LLPs and companies registered in India.
• Tax return filing for limited liability partnership: This type of corporate business gives double benefits. It includes the advantages of limited liability of a partnership business and the flexibility of being in a partnership form of business. In this type of business, the profits are not taxed. That is the partners get untaxed profits, but they are taxed individually. Limited Liability Companies are preferred to regular corporations. This is because these companies are taxed as legal entities in addition to the shareholders being charged for distributions as tax.
• Company tax return filing: This falls into two categories - The domestic company or the foreign company. The companies which are registered with the Ministry of Corporate Affairs, such as sole proprietorship companies, Private Limited/Company Limited fall under domestic company. A foreign limited liability company is an LLC formed in a state and carrying out business in another.