Taxation Provisions for Sole Proprietorship Firm
A sole proprietorship is a business structure in which the identity of the firm is not distinct from the legal identity of its proprietor. Thus, the business income earned by the sole proprietor firm is not taxed separately rather it is clubbed with the income of the proprietor and taxed as his personal income. The provisions of the income tax for the individual entity are largely similar with the provisions of income tax for the Sole proprietorship firm. Through this article we will be taking a look at the various provisions of Income Taxation for the sole proprietorship firm.
Rate of Tax
Unlike the private limited company or a Limited Liability Partnership the income tax rate for the Sole proprietorship firm is not prescribed. Rather the income tax slabs applicable to the individual taxpayer are considered to be applicable for the sole proprietorship firm. The age of the sole proprietor and his income along with firm income are considered for ascertaining the slab applicable. The tax rate can vary from NIL percentage to 30%. The proprietor can simply check the slab in which his income is falling according to his age and pay the tax accordingly.
Are Proprietorship firms required to file Trademark return?
The proprietorship firm is not required to file the income tax returns it its annual turnover along the income of the proprietor is below the taxable income limit. Thus under the income tax act if the age of the proprietor is below 60 years and his income is below 2,50,000 he is not required to file income tax return, if the age of proprietor is over the age of 60 years but below 80 years, income tax filing is mandatory if total income exceeds Rs.3 lakhs. Proprietors over the age of 80 years and above are required to file income tax return if the total income exceeds Rs.5 lakhs. These are the limits for filing the income ta returns.
Which form is to be used for filing the ITR by single firm and what is the process?
In order to file the income tax return on behalf of the sole proprietorship firm the ITR 3 shall be used by the proprietor. There are two ways of filing the income tax return for the sole proprietorship firm one is physical and other is manual. The proprietor can file the income tax return using the form ITS 3 using the digital signature of the proprietor. In case the proprietor chooses to file the manual return he is required to take out the two copies of ITR form 5. He must keep one copy with himself for the records and sent the other one by ordinary post to Post Bag No. 1, Electronic City Office, Bengaluru–560100 (Karnataka).
What is the due date of filing the return by Sole proprietor?
The due date for filing the income tax return by the sole proprietor firm is 31st July provided its returns are unaudited while in case of audited returns the returns are required to be filed by 30th September.
These are the main provisions of the income tax act with respect to the sole proprietorship firm.