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All About Business Tax Return Filing

What do we mean by business tax return filing?

Tax return is a report of income, expenses, and other relevant tax information mentioned in a form. Similarly, business tax return filing is income tax return with additional filing of TDS for businesses and has to be filled each year. This return is also a statement of the earnings and expenditures. It includes information about fixed assets, loans acquired, loans lent, debtors and creditors of business etc.

Tax returns permit tax payers to calculate the tax payments schedule, tax liability and tax refund in in case of overpayment. Different countries have different tax return filing policies and features, but the time frame is commonly on an annual basis. Business tax return for an individual business or a company with an income in par or more than the exempted limit as specified by government must file taxes annually. Income includes wages, interests, dividends, capital gains, and profit. This documentation is filed with a taxing authority following the guidelines.

More About Tax Return Filing

Before getting into Business tax, let us understand better the concept of tax return in India.

Income tax has to be obligatorily filed by Indian citizens with a Gross Total Income (GTI) of more than Rs. 2.5 lakhs (a number below 2.5 lakhs is exempted). Income tax returns have to be filed annually within the specified date. There are multiple income tax return forms based on different criteria that are applicable for different sections of people. Applicable forms have to be identified and filed to get it processed by the Income Tax Department of India. Income tax returns filings have many benefits, listed down are a few of them:

  1. Refund claims
  2. Carry-forward of losses
  3. Acts as proof for loans
  4. Acts as proof for other compensation cases etc.

All About Business Tax Return Filing

As mentioned above, it is basically a tax return filing applicable to businesses. A documentation of the income and expenditure along with other required and relevant information occurs. It includes the profit made in the business and the tax attached to it etc.

For businesses with a turnover above Rs. 1 crore, a tax audit is mandatory. Similarly, for professionals with turnovers of Rs. 50 lakhs also require a tax audit. A tax audit basically means examination of the tax return filed (for the aforementioned categories) to verify the accuracy of the income details and the deductions mentioned. Chartered Accountants are hired to audit such accounts and business tax returns.

For profits lesser than 8% or 6% for digital transactions for businesses, tax audits can be done. Professionals with less than 50% receipts can also get their tax audits performed. In case of a loss in business too, tax audit can be done to be able to carry forward the loss.

Let us delve into the entities that have to file this return.

Who Should File Business Tax Return File?

Tax file return is compulsory for all qualified businesses operating under Indian tax laws. Income tax returns are added with TDS (Tax Deducted at Source) return along with it, for these businesses. It is always better to pay taxes in advance so as to comply with the Income Tax Act. Businesses use the help of various tax filing services providers to file GST return filing among others. It takes about 3 to 5 working days on an average for one to file an income tax return for their business.

It is to be noted that the filing of business tax return depends on the structure of a business:

  1. Sole proprietorship businesses
  2. Partnership businesses
  3. Limited Liability Partnership business
  4. Companies

Things to keep in mind:

  • In the case of a sole proprietorship business, the business income and the personal incomes (like income from house on rent interest incomes, and salary) are to be stated on the same return.

  • Total incomes have to be calculated and if the amount is above the basic taxable limit, before the deductions, 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 is equivalent to being above the basic taxable limit. Note that income before deductions of more than Rs. 2.5 lakhs is accounted for business tax return.

  • The tax rate for LLPs, companies, and firms is of 30% and tax returns for these have to be filed irrespective of loss or gain, or operations undertaken.

Types of Business Tax Return Filing

The different types of business tax return filing is named on the basis of business entities that are entitled to file these returns, i.e. different structure of businesses and their names accordingly.

  • Sole proprietorship tax return filing: Under this type, a single owner operating the proprietorship firm has to file income tax return annually. The firm is considered the same as the proprietor, and therefore the tax return filing procedurals, are similar to that of the proprietor’s individual income tax return filing.

  • Partnership firm tax return filing: Partnership firms are formed by two or more individuals to run a business. Hence, unlike Sole proprietorship, partnership firms under the Income Tax Act are taxed as an individual legal entity. They are required to file income tax return, irrespective of gain or loss.

  • Limited Liability Partnership tax return filing: This is an alternative form of corporate business which includes the benefits of limited liability of a partnership business, at the same time the flexibility of being in a partnership form of business. For tax purposes, it is a flow-through entity. This basically means that partners of this firm obtain untaxed profits, but the tax is payable individually. Limited Liability Company (a form of corporate business in addition to the limited liability of a company) and LLPs are more preferred than regular corporations. This is because these corporations are taxed as an entity in inclusion to the shareholders being charged for distributions as tax.

  • Company tax return filing: Business Income Tax Return filing for a company is of two categories, i.e. the domestic company or the foreign company. The companies that are registered with the Ministry of Corporate Affairs such as Private Limited companies, one person company/ company limited fall under domestic company. Whereas, a foreign limited liability company as an LLC is a company formed in a state and carrying out business in another.

More About the Types of Tax Return Filing

Structure of business Requirements Tax Rate Tax Audit Minimum Alternate Tax Due date
Proprietorship (GTI- Gross Total Income) 1) > 60 years
GTI > 2.5 lacs
2) 60-80 years
GTI > 3 lacs
3) 80 < years
GTI > 5 lacs
Rs. 0-2.5lacs
Rs. 2.5-5lacs
Rs. 5-10lacs
>Rs. 10lacs
NIL NIL 31st August 2019
Belated ITR filing 21st March 2020
Partnership ALL (If no business activity then NIL) 30% of income.
If GTI> 1 crore- 30% income tax + income tax surcharge on 12% rate of the amount of income tax
Health and Education Cess- 4% rate on amount of tax return + tax return
For business Gross receipts over Rs. 50 lacs For professionals
18.5% of the total adjusted income 31st August 2019
Belated ITR filing 21st March 2020
Limited Liability Partnership/Company ALL (If no business activity then NIL ) 30% on total income
GTI> 1cr. Total tax amount + surcharge of 12% rate and 4% of Health and Education cess
Turnover> Rs. 40 lacs
Contribution> Rs. 25 lacs
Foreign LLPs with some domestic LLPs transactions have to fill form 3CEB and get it audited.
18.5% of the total adjusted income 30th September 2019
Belated ITR filing 21st March 2020
Company ALL (including dormant companies with no transactions) 25% of total income for domestic companies GTI< 250cr.
30% of total income for companies’ GTI<250 cr.
+ Education cess at 4% on income tax surcharged
All company accounts must be audited 18.5% of book profit+ surcharge and education cess if the liability is less than 18.5% of the book profit. 30th September 2019
Belated ITR filing 21st March 2020

Frequently Asked Questions

What is a PAN?

PAN is a combination of alphanumeric codes that are privately assigned to an individual. More or less, it is a mark of identification of an Indian citizen. It helps the income tax department keep a track of the individual’s tax payment to whom the PAN number has been assigned.

What is Jurisdiction Income Tax?

There are thousands of taxpayers residing in an area. To make things easy, the Income Tax Department has divided this population into different jurisdictions, based on their location. This simply means that an individual comes under the jurisdiction of the area he resides in.

Who is a Jurisdictional Assessing Officer?

Jurisdictional Assessing Officer is an officer appointed by the Income Tax Department, who has total jurisdictional powers over the area assigned to him. He has the rights to take decisions which will ensure the smooth execution of Income Tax duties in that particular location. A jurisdictional Assessing Officer is also required to address disputes regarding any income tax issues. They are also available to solve any concerns of the taxpayer regarding income tax.

How to find your jurisdictional details?

In order to find jurisdictional details, you can follow either of the two methods mentioned above.

One requires you to visit the official website and log into it. Once you have submitted all the required details, an OTP will be sent to your registered mobile number. Enter this OTP and all the relevant details will be shown on the screen.

Another method demands you to open the e-filing site and log into it. Go to your profile and enter your PAN details. Subsequently, your jurisdictional details will be visible on the screen.

What is the importance of Jurisdictional details?

Jurisdictional details help the Income Tax Department to approach you in the time of need. If they need to send you a personal notification or letter, they would definitely send it to the address mentioned in your jurisdiction details. Thus, a jurisdiction detail acts as a link between you and the Income Tax department.

For the taxpayer, the Jurisdictional details are of great importance as they help in cases of income tax disputes.

What is AO code?

AO code is Assessing Officer code. This refers to the details of the Assessing Officer who is in charge of your jurisdiction area. This is also a means of classifying the taxpayer according to the area of residence and range of income.

How to change your jurisdictional Assessing Officer?

Sometimes with the change in location, the jurisdiction is also updated automatically. Whereas in other cases, you need to change your Assessing Officer by putting in an application. Once the application is approved by both- the new and existing Assessing officer, the process of jurisdiction change begins.

What is Income Tax Ward and Income Tax Circle?

When a taxpayer has an income of more than Rs. 10 lakh, he is categorised under “Circle”. Ward and Circle are two categories used to classify taxpayers and also their Assessing Officers. There are two categories of Assessing Officers- AO type C and AO type W.

Whom should you approach for disputes regarding Income Tax?

Whenever a dispute arises regarding income tax issues, it should be dealt with by the Jurisdictional Assessing Officer. He has full authority on any income tax dispute of his territory.

Why is the information regarding Jurisdictional details so important?

Jurisdictional details help the taxpayer in cases of disputes. Having relevant information is very important and has proven to be effective in cases of income tax disputes.