ITR for Proprietorship Firms


ITR is a form which must be filled for the purpose of filing tax returns. It is very much essential that proprietorship has to file tax return each and every year unless it is exempted. The tax return by filling the ITR forms can be filed physically or through online by filing via an e-portal. The electronic signature of the proprietor must be there. There are different ITR forms which have to be filled but depending upon the nature of the proprietorship firm and sole proprietor, a form has to be filled in that case. 

A proprietorship firm needs few ITR regulatory compliance requirements which is essential for the long run. This kind of ITR form will be helpful for the entrepreneurs or businessman who initially wants to start a small business with few clients. It is an unregistered business entity where ITR form -3 and ITR 4 Sugam are of utmost importance. The micro and small businesses prefer proprietorship for registration of ITR in the organized sector. The person who is one person owner here, that is the proprietor and the proprietorship firm, has the same legal entity and the same person is entitled to the same kind of income tax.  In case of any liabilities happening in business, the proprietor is liable for it because it is on the basis of his documents such as PAN and others, the filing of ITR forms has taken place. 

Forms: Different kinds

  • Form IT- 3: This is a form which helps to file income tax only if the proprietor belongs to a Hindu family or run by a Hindu undivided family or any other proprietor. 
  • Form ITR – 4 Sugam: This is a different form than the other. This form is used by all proprietorships that fall under the presumption tax schemes. Form ITR- 4 Sugam reduces the burden of compliances only if they come under small businesses. As the income tax of both the proprietorship firm and proprietor remains the same, the Proprietorship’s business income is added to the proprietor’s income himself. Thus the business tax changes into the personal tax of the proprietor. The proprietor faces all tax deductions which get offered only to individuals or Hindu undivided families (HUF). A set profit margin is assumed by the proprietor in the business or the total income of the proprietor. 
  • Form ITR- 7: For filing income tax return, any taxpayer can fill form ITR-7 even if they are filing as a trust. The company firm, local authority and association of persons (AOP) with artificial judicial persons claims exemption. This comes under Section 139(4A), 139 (4B) and 139 (4C) and Section 139 (4D). 
  • Form ITR – 6: This form is not so important. Any assessee of the proprietorship firm according to Section 2 (17) of the Income Tax Act, 1961 can avail this form and will be applicable. Most of the companies file ITR-7 and cannot opt for ITR- 6. 
  • Form ITR – 1: This form is limited to the proprietors and proprietorship firms of India. They have to be the permanent resident of India and then only can avail the tax purpose. The proprietors who come under “Salaries”, “Income from House Property” and “Income from other Sources” are applicable for Form ITR-1. 

The income tax return of a Proprietorship firm which is in Form ITR 3 and Form ITR 4 Sugam can be filed online. The proprietor’s digital signature has to be used manually. Under Income Tax Act, 1961, the income tax has to be audited here and checked whether any international transactions have been conducted or not. The ITR forms have to be filled within 31st July of every year as that is considered to be the last date for every income tax return. The Proprietorship firms which have conducted international transactions has to file the income tax by filing the ITR forms by 30th November.

Aishwarya Says:

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