Filing Income Tax Returns (ITR):
- Mandatory for:
- All proprietors with a total income (business + personal) exceeding Rs. 2.5 lakhs (Rs. 5 lakhs for individuals aged 60 and above).
- Proprietors whose business turnover exceeds Rs. 1 crore (even if total income is below Rs. 2.5 lakhs).
- Due Date: July 31st for non-audit cases, September 30th for audit cases.
- Forms: ITR-3 or ITR-4 depending on the nature and turnover of the business.
Key Considerations:
- Business Income:
- Record all business income and expenses accurately.
- Maintain proper books of accounts if required (turnover exceeding Rs. 25 lakhs or business income exceeding Rs. 2.5 lakhs in any of the preceding 3 years).
- Claim legitimate deductions and exemptions.
- Personal Income: Include all sources of income (salary, investments, etc.) in your ITR.
- Tax Liability: Calculate your tax liability based on your income and applicable tax slabs. Advance tax payments might be required if your tax liability exceeds Rs. 10,000.
- Tax Audit: If your annual turnover exceeds Rs. 1 crore, a tax audit is mandatory.
Income Tax Penalties and Late Fees for Proprietorship Firms:
While complying with income tax regulations is crucial for your proprietorship firm, late filing or non-compliance can come with some penalties and late fees. Here’s a breakdown of what you need to know:
Penalties for Late Filing of ITR:
- Maximum Penalty: Rs. 5,000 (reduced from Rs. 10,000 in FY 2021-22 onwards).
- Applicable to:
- All late-filed ITRs (except audit cases with extended deadlines).
- The penalty amount decreases if ITR is filed before December 31st:
- July 31st to December 31st: Rs. 1,000 for total income below Rs. 5 lakhs, Rs. 5,000 for above Rs. 5 lakhs.
- ITRs filed after December 31st attract the maximum penalty regardless of income.
Interest on Late Payment of Taxes:
- Interest Rate: 1% per month or part of a month on the outstanding tax liability.
- Applicable to: Any unfilled tax by the due date (July 31st for non-audit cases).
- Compounding Interest: Interest accumulates monthly, further increasing the burden.
Additional Penalties:
- Failure to maintain books of accounts: If required, not maintaining proper books can attract a penalty of Rs. 10,000 or 50% of the taxable income (whichever is lower).
- Concealment of income: Intentionally underreporting income can lead to a penalty of up to 100% of the concealed income.
- Other offenses: Non-compliance with specific provisions of the Income Tax Act can attract varying penalties as prescribed.
