How to File ITR for Business?

If you are running a business, then you must file business tax returns. This is a process through which a business must report income and expenses to the IT Department. Businesses, be it big or small, must file business tax returns.

What is business tax return? The business tax return is a statement which shows income earned and expenses of a business. If your business is making profits, then you must pay tax on these profits. The business must file TDS or pay advance tax. Business tax returns must have details on assets and liabilities of the business.

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How to File ITR for Business?

Who Must File Business Tax Return?

Filing of Income Tax Returns depends on the business structure.

• If you are a sole proprietor, you must show business income, personal income like salary/house property and interest income in the same return.
• All proprietors below the age of 60 years and with total income in excess of Rs 2.5 Lakhs a year must file ITR. Proprietors between 60 to 80 years and with total income in excess of Rs 3 Lakhs must file ITR. Its total income in excess of Rs 5 Lakhs for super senior citizens.
• Firms, Companies and Limited Liability Partnerships must file business tax returns irrespective of profit/loss. This is even if these businesses have undertaken no operations.
• Partnership firms must file ITR each year, irrespective of income or loss. If there is no business activity, then NIL income tax returns are filed before due date.
• All Companies which are registered in India must file ITR each year. This is irrespective of income, profit or a loss. Dormant Companies with no transactions must file ITR each year.
• Companies, LLPs and firms are taxed at 30%.

See Also: Income from Other Sources: How to File ITR

Requirements for Filing Business Tax Returns

You can file Business Tax Returns depending on the type of business. Your business could be a proprietorship, partnership firm, limited liability partnership or a private limited company.

Maintain book of accounts if:

• Income is greater than Rs 1.2 Lakhs  OR
• If total sales, gross receipts or turnover is more than Rs 10 Lakhs in any of the three preceding years.

For certain businesses you would require the external tax audit.

Presumptive Taxation Scheme (Section 44AD): The Presumptive taxation scheme is applicable to individuals, HUFs and partnership firms engaged in business. Businesses with total turnover of less than Rs 2 Crores and professionals with gross receipts < Rs 50 Lakhs in a Financial Year can use the presumptive taxation scheme under Section 44AD.

With presumptive taxation scheme, you can calculate tax on estimated profit.

• Net income is considered to be 8% of your business turnover. (Its 6% in case of digital receipts).
• There’s no need to maintain book of accounts.
• Accounting records need not be audited.
• You can file income tax returns using ITR-4.

You lose presumptive tax benefits under Section 44AD if you do not continue for at least 5 years.

See Also: How To E-File ITR Form -1 In 2 Minutes?

How to file ITR-4 Form?

Online:

• Filing ITR electronically with digital signature.
• Transmitting the data electronically and then submitting Income Tax Return verification through ITR-V.

Offline:

You must be 80 years or more to file ITR offline.

• Furnish the return in the paper form.
• Furnish a bar coded return.

The IT Department will give an acknowledgement when submitting physical paper return.

See Also: Steps to File Income Tax Returns

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