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Setting up a business and understanding the complexities involved in filing returns is an important aspect of running a business. Let’s understand business tax return in more detail:

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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%.

Income Tax Audit

Every taxpayer whose turnover is above Rs. 1 Crore in case of businesses and Rs. 50 Lakh in case of professionals is required to get a tax audit done. The taxpayer has to appoint a Chartered Accountant to audit their accounts.

Also, a tax audit is required if there has been a loss of your business and you want to carry forward the loss. A tax audit is necessary even when the profits declared by you is less than 8% (6% on Digital transactions) of the turnover in case of business and 50%  of receipts in case of professionals.

Presumptive Taxation

Individuals, HUF, and Firms running businesses or providing services can offer their income to tax on a presumptive basis. Turnover up to which presumptive taxation is allowed for businesses is Rs. 2 Crore and for professionals is Rs. 50 Lakh.

Minimum of 8% of the turnover has to be offered as income under presumptive basis for businesses.  For professionals, 50% of professional receipts have to be declared on the business tax return.

What are the due dates for filing of returns?

For the Individuals not liable to tax audit, the last date for the filing of the return is 31st July after the end of the financial year (Belated return can be filed up-to 31st March subject to penalty)

For individuals liable to tax audit and all other assesses like company, LLP or partnership firm, the due date is 30th September after the end of the financial year.

The penalty for non-filing of returns- Any loss incurred during the year cannot be carried forward if the return is filed after the due date of filing income tax return.

Also a fine of Rs. 5000 under the section 271F can be levied on the assessee.

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