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Business Tax Return Filing: Types of Business Tax Returns
All businesses operating in India have to file income tax return and TDS return every year in compliance with the Income Tax Act. Also, any tax payable on the profits you make is declared in this return. This return is a statement of the earnings and expenditures including information about fixed assets, loans lent, loans acquired, debtors, and creditors of the business.More About Business Tax Return Filing
This is basically a tax return filing applicable to businesses. It is a documentation of the income and expenditure along with other necessary and relevant information. It includes the profit made in the business and the tax related to it etc. A tax audit is mandatory for businesses with a turnover of Rs. 1 crore. It is the process of inspecting the tax return filed for the accuracy of the income details and the deductions mentioned. For digital transactions, tax audits can be done for profits lower than 6% or 8% Professionals with less than 50% receipts can also get their tax audits performed. In case of a loss in business too, a tax audit can be done to be able to carry forward the loss.
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.
More About The Types of Business Tax Return Filing
Type of Business based on structure | Requirements | Rate of tax | Tax Audit | Least Alternate Tax | Due Date |
|---|---|---|---|---|---|
Partnership | All (If no business activity then NIL) | 30% of income. If Gross Total Income > 1 crore - 30% income tax + income tax surcharge on 12% rate of the income tax amount Health and Education Cess- 4% rate on the amount of tax returned + tax return | Gross Total Income > 1 crore for gross business receipts over Rs.50 Lakhs for professionals | 18.5% of the total income adjusted | 31st August 2019 Extended ITR filing: 21st March 2020 |
Limited Liability Partnership/Company | All (If no business activity then NIL) | 30% on total income Gross Total Income > 1 crore. Total tax amount + 4% of Health and Education cess + surcharge of 12% rate | Turnover > Rs. 40 Lakhs Contribution> Rs. 25 lacs Foreign LLPs with some domestic LLPs transactions have to complete form 3CEB and have it audited. | 18.5% of the total income adjusted | 30th September 2019 Extended ITR filing: 21st March 2020 |
Company | All (Including inactive companies) | 25% of total income for domestic companies’ Gross Total Income < 250 crores 30% of total income for companies’ Gross Total Income <250 crores + Education cess of 4% on income tax surcharged | All company accounts must be audited | 18.5% of book profit + surcharge and education cess if the liability < 18.5% of the book profit. | 30th September 2019 belated ITR filing 21st March 2020 |
Proprietorship (Gross Total Income) | 1) > 60 years Gross total income greater than 2.5 Lakhs 2) 60-80 years Gross total income > 3 lakhs 3) Above 80 years Gross total income > 5 lakhs | 0% - Rs. 0 to 2.5 Lakhs 5% - Rs. 2.5- 5 Lakhs 5% - Rs. 5 -10 Lakhs 20% - >Rs. 10 Lakhs | Nil | Nil | 31st August 2019 Extended ITR filing 21st March 2020 |
Things To Know For Filing Business Tax Return
- The business income and the personal incomes (income from house rent, interest incomes, and salary) should be stated on the same return in the case of sole proprietorship business.
- The tax rate for companies, LLPs, and firms is 30%, and tax returns for these have to be filled regardless of loss or gain or the operations undertaken.
- In the case of any business, total incomes have to be computed. If the amount exceeds the basic taxable limit before deductions are made, then it is mandatory to file for income tax return in spite of profit or loss from that business.
- Gross Total Income above Rs. 2.5 lakhs means being above the basic taxable limit. For business tax returns, the income before deductions of over Rs. 2.5 lakhs is accounted for.
- The tax rate for LLPs, companies, and firms is 30% and tax returns for these have to be filed irrespective of loss or gain, or operations undertaken.
Conclusion
Your income tax return reflects the financial standing of your business and how successful you are. Government tenders are granted upon checking your financial records. And this in turn is done by verifying your annual tax returns for the past several years. Apart from these, there are several other benefits for filing business tax returns.
FAQS of Business Tax Return Filing
1. How do I file a business tax return?
You can file a business tax return through 4 key steps as follows. Collect all your business records, find the correct IRS tax form, fill out the form accurately and completely, and lastly, be attentive towards deadlines while also being aware of deadlines for the different types of filing.
2. Can I file a business tax return by myself?
You can file a business tax return by yourself. Your return is due by 31st October each year. You can also find a registered tax agent. Registered tax agents operate on their own schedule. Your agent will be able to tell you the date by which your return must be filed, but you must be registered with an agent by 31 October.