What is a Business Tax Return?
A business tax return is basically an income tax return. The return is a statement of income and expenditure of the business. Also, any tax to be paid on the profits made by you is declared in this return. The return also contains details of the assets and liabilities held by the business. Items like fixed assets, debtors and creditors of business, loans taken and loans were given are declared here.
Who has to file a business tax return?
Filing of return mainly depends on the type of business structure. For example:
- If you are a sole proprietor your business income and your other personal income like salary, income from house property and interest income have to be stated on the same return.
- If your total income before deductions is above the basic taxable limit you need to compulsorily file your income tax return irrespective of profit or loss in your business.
- The basic taxable limit is Rs. 2.5 lakh. So, if your income before deductions is above Rs 2.5 lakh you need to file your business tax return.
- For companies, firms and Limited Liability Partnership (LLP) a business tax return has to be filed irrespective of profit or loss. Even if there are no operations undertaken, a return has to be filed.
- Companies, firms, and LLPs are taxed at a rate of 30%.
Applicable ITR form for different types of Business
Applicable ITR Form | Business Type | Description |
ITR-3 | Individuals/HUFs (Business/Profession Income) | For individuals and Hindu Undivided Families (HUFs) with income from business or profession (requires maintaining books of accounts or audit). |
ITR-4 (Sugam) | Individuals/HUFs/Firms (Business under Sec 44AD/44ADA/44AE) | For residents with income up to ₹50 lakhs from business or profession computed under sections 44AD, 44ADA, or 44AE (presumptive taxation scheme).** |
ITR-5 | LLPs/Partnerships | For Limited Liability Partnerships (LLPs) and Partnerships (except those filing ITR-7). |
ITR-6 | Companies (Except Sec 11 Exemption) | For companies other than those claiming exemption under section 11 (e.g., public charitable trusts). |
ITR-7 | Companies under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only | For person and companies required to file returns under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only |
Documents required for filing ITR for business
- PAN Card: This is essential for identification purposes.
- Aadhaar Card: Aadhaar is mandatory for filing ITRs for most businesses.
- Profit and Loss (P&L) Statement: This document summarises your business’s income and expenses over the financial year.
- Balance Sheet: This shows your business’s financial position at the end of the financial year, including assets, liabilities, and capital.
- Bank Statements: You will need these to reconcile your income and expenses and ensure all transactions are accounted for.
- GST Registration Number (if applicable): If your business is registered under GST, you’ll need your GST number.
- Tax Deducted at Source (TDS) Certificates: If you have deducted TDS from payments made to others, you’ll need the TDS certificates.
- Loan Documents (for claiming interest rebates): If you’ve taken out business loans, you may need documents to claim interest rebates.
- Challans of Income Tax Payments: Keep copies of any challans showing advance tax or self-assessment tax payments made.
- Records of Fixed Assets: If you’ve added or sold fixed assets during the year, you’ll need records of these transactions.
Penalty for late filing business tax return
- Interest: As per Section 234A, a penalty interest of 1% per month (or part month) will be charged on any outstanding tax amount from the due date until the payment is made. This can quickly add up, so timely filing is important.
- Late Filing Fee: Section 234F imposes a late filing fee of Rs. 5,000 if you miss the deadline. However, there’s some relief for smaller businesses. If your total income is below Rs. 5 lakh, the late fee is reduced to Rs. 1,000.
- Loss Carry Forward: Missed deadlines can impact your ability to offset future tax liabilities. Businesses often incur losses, especially in initial years. These losses can be “carried forward” and used to reduce taxable income in subsequent years. However, this benefit is forfeited if you fail to file your return on time.
- Belated Returns: If you miss the deadline, you can still file a “belated return” by December 31st of the assessment year (subject to any government extensions). However, you will still be subject to late filing fees and interest charges. Additionally, you cannot carry forward any business losses for future tax adjustments.