Business Tax Returns Filing: Types of Business Tax Returns, Business Taxes

What is a Business Tax Return?

A business tax return functions similarly to an income tax return. It provides a comprehensive overview of the business's earnings and expenses. Moreover, it discloses any taxes owed on the profits generated. Additionally, the return includes a breakdown of the business's assets and liabilities, such as fixed assets, outstanding debts, and loans received or issued.

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Who Needs to File Business Tax Return?

The requirement to file a tax return primarily depends on the type of business structure in place. Here are some examples -

• For sole proprietors, business income along with other personal earnings such as salary, income from property, and interest income, must be reported on the same tax return.
• If your total income before deductions exceeds the basic taxable threshold, which is Rs. 2.5 lakh, you are obligated to file your income tax return regardless of whether your business made a profit or incurred a loss.
• Companies, firms, and Limited Liability Partnerships (LLPs) are mandated to file a business tax return irrespective of their financial performance. Even if no business operations were conducted, a return must still be filed.
• These entities, namely companies, firms, and LLPs, are subject to a tax rate of 30%.

In essence, the filing of tax returns is determined by the nature of the business entity and the income thresholds set by tax authorities.

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What are the Types of Business Tax Return Filing?

There are various types of business tax filing on the basis of business entities that are filing these returns.

• Sole Proprietorship Tax Return Filing - Under this type, a single owner who operates the proprietorship firm is required to file income tax return annually. The firm is the same as the proprietor. Therefore, the process of filing return is the same as the individual return filing.
• Partnership Tax Return Filing - A partnership firm consists of two or more individuals who run a business together. Partnership firms are taxed as a separate legal entity and are required to file business tax returns irrespective of profit/loss.
• Limited Liability Partnership Tax Return Filing - LLP is a type of business structure that provides the benefits of limited liability as well as the flexibility of being in a partnership busines. The partners of this firm get untaxed profits but the tax is payable individually. Limited Liability Companies (LLCs) and LLPs are often preferred over regular corporations because they avoid double taxation. In regular corporations, both the company and shareholders get taxed on distributions.
• Company Tax Return Filing - Business tax return filing can be of two types domestic companies or foreign company. Private limited companies and one person companies that are registered under MCA are known as domestic companies. Whereas, a foreign limited liability company (LLC) is a company formed in a state and carrying out business in another state.

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When is an Income Tax Audit Required?

An income tax audit is required when the taxpayer’s turnover exceeds Rs.1 crore for businesses and Rs.50 lakhs for professionals. In this case, the taxpayers are required to appoint a CA to get their accounts tax audited.

You also need to get a tax audit done if you have incurred a loss in the business and you want to carry forward the loss. A tax audit becomes mandatory even if the profits declared by you are 8% (6% on digital transactions) on turnover for businesses and 50% for professionals.

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Presumptive Taxation Scheme

Individuals, HUFs, and firms can opt for a presumptive income tax scheme. Businesses having a turnover of upto Rs.2 crores can opt for a presumptive taxation scheme, and professionals with annual income upto Rs.50 lakh can opt for a presumptive income scheme.

Businesses have to offer minimum 8% of their turnover to tax and professionals have to offer 50% of their professional receipts to presumptive taxation.

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What are the Due dates for Filing Business Tax Returns?

For individuals not subject to tax audits, the deadline for filing returns is August 31st, following the end of the financial year. A belated return can be filed until March 31st with a penalty. For individuals subject to tax audits and other entities like companies, LLPs, or partnership firms, the deadline is September 30th after the end of the financial year.

If returns are filed after the due date, any losses incurred during the year cannot be carried forward for offset against future income.

Additionally, a penalty of Rs. 5000 under section 271F may be imposed on the assessee for non-filing of returns.

As a business owner, it can be difficult to find time to manage your taxes. However, it is necessary for business owners to file their tax returns. From maximizing tax savings to maintaining tax compliance, our tax experts can ensure a smooth tax journey for you. Get Tax Consultation Now!

If you need assistance with filing your business tax return, you can book an eCA with tax2win for accurate return filing.

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