{"id":1002,"date":"2025-05-22T00:00:00","date_gmt":"2025-05-22T00:00:00","guid":{"rendered":"https:\/\/rize.blog.razorpay.in\/proprietorship-tax\/"},"modified":"2026-06-24T05:59:52","modified_gmt":"2026-06-24T05:59:52","slug":"proprietorship-tax","status":"publish","type":"post","link":"https:\/\/razorpay.com\/rize\/blogs\/proprietorship-tax\/","title":{"rendered":"Proprietorship Tax Return Filing Procedure and Its Compliance"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Overview of Taxation for Proprietorships in India<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In India, proprietorships are taxed as individual taxpayers under the Income Tax Act. The business income is added to the proprietor&#8217;s total income and taxed according to the applicable individual tax slabs. Proprietors typically file their income tax returns using:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">ITR-3<\/strong>: For individuals and HUFs having income from a proprietary business or profession<\/li>\n\n\n\n<li><strong id=\"\">ITR-4 (Sugam)<\/strong>: For those opting for the presumptive taxation scheme under sections 44AD, 44ADA, or 44AE<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Taxpayers can choose between the old tax regime (with deductions and exemptions) or the new one (with lower tax rates but no exemptions).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Do Proprietorship Firms Need to File Income Tax Returns?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, proprietors are legally obligated to file ITRs if their total income exceeds the basic exemption limit, which for FY 2024-25 is:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\u20b92.5 lakh for individuals below 60 years<\/li>\n\n\n\n<li>\u20b93 lakh for senior citizens (60-80 years)<\/li>\n\n\n\n<li>\u20b93.5 lakh for super senior citizens (above 80 years)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Even if the income is below the exemption limit, filing returns is necessary to carry forward business losses, to claim TDS refunds and if there are any foreign assets or income involved.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Importance of Filing Income Tax Returns for Proprietorship Firms<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Beyond legal compliance, filing ITR offers several advantages:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">Financial Credibility<\/strong>: Enhances your chances of securing loans, credit lines, or business investments<\/li>\n\n\n\n<li><strong id=\"\">Business Growth<\/strong>: Essential for bidding in tenders and expanding operations<\/li>\n\n\n\n<li><strong id=\"\">Avoiding Penalties<\/strong>: Non-filing attracts penalties and interest under the Income Tax Act<\/li>\n\n\n\n<li><strong id=\"\">Refund Claims<\/strong>: Enables claiming refunds on excess TDS deducted<\/li>\n<\/ul>\n\n\n\n\n\n\n<h2 class=\"wp-block-heading\">Tax Audit for Proprietorship<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A <strong id=\"\">tax audit<\/strong> is a review of accounts to ensure accuracy and compliance with tax laws. For proprietorships, audit requirements apply if:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Turnover exceeds \u20b91 crore (business)<\/li>\n\n\n\n<li>Gross receipts exceed \u20b950 lakh (profession)<\/li>\n\n\n\n<li>Turnover exceeds \u20b910 crore if 95% of payments and receipts are digital<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Non-compliance with tax audit provisions can attract a penalty under <strong id=\"\">Section 271B<\/strong>, which can be up to 0.5% of turnover or a maximum of \u20b91.5 lakh.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Presumptive Taxation Scheme: A Simplified Option for Small Proprietors<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To ease compliance for small taxpayers, the Income Tax Act offers presumptive taxation schemes:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">Section 44AD<\/strong>: For small businesses with turnover up to \u20b92 crore (to be extended to \u20b93 crore from AY 2025-26 if cash transactions are below 5%)<\/li>\n\n\n\n<li><strong id=\"\">Section 44ADA<\/strong>: For professionals with receipts up to \u20b950 lakh<\/li>\n\n\n\n<li><strong id=\"\">Section 44AE<\/strong>: For those involved in the business of transportation<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">ITR Guidelines for Proprietorship Firms \u2013 Union Budget 2024\u201325 Insights<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Union Budget 2024 brought several important changes aimed at easing compliance, promoting transparency, and offering relief to taxpayers, especially for salaried individuals and businesses. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s a quick overview of key updates relevant to individual taxpayers and proprietorships:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">1. Increased Standard Deduction Under the New Tax Regime<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To offer more relief to salaried individuals, the standard deduction under the <strong id=\"\">new tax regime<\/strong> has been <strong id=\"\">increased from \u20b950,000 to \u20b975,000<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">2. Reduced TDS Rates on Specified Payments<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The budget has also <strong id=\"\">reduced the Tax Deducted at Source (TDS)<\/strong> rates on certain specified payments to improve ease of doing business and simplify compliance for both payers and recipients. This change will benefit small and mid-sized businesses by easing their cash flow and lowering the burden of upfront tax deduction.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">3. Government Scheme for First-Time Entrepreneurs<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The Union Budget 2024 introduced a new loan scheme to support <strong id=\"\">first-time entrepreneurs.<\/strong> The <strong id=\"\">scheme<\/strong> aims to promote inclusive entrepreneurship and boost India\u2019s startup ecosystem.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Proprietorship Tax Rate &amp; Surcharge AY 2025-26 | FY 2024-25<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Under the New Regime<\/strong><\/h3>\n\n\n\n<div data-rt-embed-type=\"true\">\n<table>\n<thead>\n<tr>\n<th><strong>Income Tax Slab<\/strong><\/th>\n<th><strong>Income Tax Rate under the New Regime<\/strong><\/th>\n<th><strong>Surcharge<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Up to \u20b9 3,00,000<\/td>\n<td>Nil<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 3,00,001 \u2013 \u20b9 7,00,000<\/td>\n<td>5% above \u20b9 3,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 7,00,001 \u2013 \u20b9 10,00,000<\/td>\n<td>\u20b9 20,000 + 10% above \u20b9 7,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 10,00,001 \u2013 \u20b9 12,00,000<\/td>\n<td>\u20b9 50,000 + 15% above \u20b9 10,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 12,00,001 \u2013 \u20b9 15,00,000<\/td>\n<td>\u20b9 80,000 + 20% above \u20b9 12,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 15,00,001 \u2013 \u20b9 50,00,000<\/td>\n<td>\u20b9 1,40,000 + 30% above \u20b9 15,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 50,00,001 \u2013 \u20b9 100,00,000<\/td>\n<td>\u20b9 1,40,000 + 30% above \u20b9 15,00,000<\/td>\n<td>10%<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 100,00,001 \u2013 \u20b9 200,00,000<\/td>\n<td>\u20b9 1,40,000 + 30% above \u20b9 15,00,000<\/td>\n<td>15%<\/td>\n<\/tr>\n<tr>\n<td>Above \u20b9 200,00,001<\/td>\n<td>\u20b9 1,40,000 + 30% above \u20b9 15,00,000<\/td>\n<td>25%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Under the Old Tax Regime<\/strong><\/h3>\n\n\n\n<div data-rt-embed-type=\"true\">\n<table>\n<thead>\n<tr>\n<th><strong>Income Tax Slab<\/strong><\/th>\n<th><strong>Income Tax Rate under the Old Regime<\/strong><\/th>\n<th><strong>Surcharge<\/strong><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Up to \u20b9 2,50,000<\/td>\n<td>Nil<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 2,50,001 \u2013 \u20b9 5,00,000<\/td>\n<td>5% above \u20b9 2,50,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 5,00,001 \u2013 \u20b9 10,00,000<\/td>\n<td>\u20b9 12,500 + 20% above \u20b9 5,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 10,00,001 \u2013 \u20b9 50,00,000<\/td>\n<td>\u20b9 1,12,500 + 30% above \u20b9 10,00,000<\/td>\n<td>Nil<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 50,00,001 \u2013 \u20b9 100,00,000<\/td>\n<td>\u20b9 1,12,500 + 30% above \u20b9 10,00,000<\/td>\n<td>10%<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 100,00,001 \u2013 \u20b9 200,00,000<\/td>\n<td>\u20b9 1,12,500 + 30% above \u20b9 10,00,000<\/td>\n<td>15%<\/td>\n<\/tr>\n<tr>\n<td>\u20b9 200,00,001 \u2013 \u20b9 500,00,000<\/td>\n<td>\u20b9 1,12,500 + 30% above \u20b9 10,00,000<\/td>\n<td>25%<\/td>\n<\/tr>\n<tr>\n<td>Above \u20b9 500,00,000<\/td>\n<td>\u20b9 1,12,500 + 30% above \u20b9 10,00,000<\/td>\n<td>37%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Deadline for Proprietorship ITR Filing<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">Non-audited firms<\/strong>: July 31st of the assessment year (AY)<\/li>\n\n\n\n<li><strong id=\"\">Audited firms<\/strong>: October 31st of the assessment year (AY)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">For AY 2025-26:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Non-audited deadline: <strong id=\"\">July 31, 2025<\/strong><\/li>\n\n\n\n<li>Audited deadline: <strong id=\"\">October 31, 2025<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">List of Documents Needed for Proprietorship Income Tax Return Filing<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PAN card of the proprietor<\/li>\n\n\n\n<li>Aadhaar card<\/li>\n\n\n\n<li>Bank account statements<\/li>\n\n\n\n<li>Profit &amp; Loss statement<\/li>\n\n\n\n<li>Balance sheet<\/li>\n\n\n\n<li>GST returns (if registered)<\/li>\n\n\n\n<li>TDS certificates (Form 16A\/26AS)<\/li>\n\n\n\n<li>Sales invoices and purchase bills<\/li>\n\n\n\n<li>Expense receipts<\/li>\n\n\n\n<li>Investment proofs for claiming deductions (under the old regime)<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">How to File an Income Tax Return for a Proprietorship (Step-by-Step Guide)<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s a simple, step-by-step guide to help you file accurately and on time:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Step 1: Choose the Right ITR Form<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">ITR-3<\/strong>: For proprietors with regular business or professional income<\/li>\n\n\n\n<li><strong id=\"\">ITR-4<\/strong>: For those opting for the <strong id=\"\">Presumptive Taxation Scheme<\/strong> under Sections 44AD, 44ADA, or 44AE<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Step 2: Prepare Financial Information<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">Compile key documents<\/strong><\/li>\n\n\n\n<li>Calculate your <strong id=\"\">total income<\/strong> and <strong id=\"\">tax liability<\/strong><\/li>\n\n\n\n<li>Claim eligible <strong id=\"\">deductions<\/strong> (only under the old regime).<\/li>\n\n\n\n<li>Verify <strong id=\"\">TDS<\/strong> credits and <strong id=\"\">advance tax<\/strong> paid.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Step 3: Log into the Portal<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Visit the<a id=\"\" href=\"https:\/\/www.incometax.gov.in\/\" target=\"_blank\" rel=\"noopener\"> Income Tax e-Filing portal<\/a><\/li>\n\n\n\n<li><strong id=\"\">Log in<\/strong> using your PAN and password.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Step 4: Submit the Return<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Select <strong id=\"\">Assessment Year 2025\u201326<\/strong> and the appropriate <strong id=\"\">ITR form<\/strong> (ITR-3 or ITR-4)<\/li>\n\n\n\n<li>Enter all relevant details\u2014income, deductions, taxes paid, etc<\/li>\n\n\n\n<li><strong id=\"\">Validate and submit<\/strong> the return<\/li>\n\n\n\n<li><strong id=\"\">E-verify<\/strong> using Aadhaar OTP, bank account, or DSC<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong id=\"\">Step 5: Download <\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong id=\"\">Download the acknowledgement (ITR-V)<\/strong> and save it for your records.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Running a proprietorship already comes with a long to-do list, and filing your income tax return might feel like just another box to check. But here\u2019s the truth: Filing your ITR on time helps you stay on the right side of the law, but it also unlocks serious advantages like improved loan eligibility, smoother business expansion, and better financial credibility.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That\u2019s why choosing the right ITR form (like ITR-3 or ITR-4), keeping your documents ready, and understanding your tax regime can save you a lot of future headaches.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Don\u2019t wait until the last minute- start organising your financials today and file your ITR on time to stay ahead, stay compliant, and build a more credible, growth-ready business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n\n","protected":false},"excerpt":{"rendered":"<p>Learn the step-by-step procedure for proprietorship tax return filing in India. Understand key compliance requirements, due dates, and tax implications for sole proprietors.<\/p>\n","protected":false},"author":1,"featured_media":1003,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1002","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/1002","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/comments?post=1002"}],"version-history":[{"count":2,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/1002\/revisions"}],"predecessor-version":[{"id":1581,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/posts\/1002\/revisions\/1581"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media\/1003"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/media?parent=1002"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/categories?post=1002"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/rize\/blogs\/wp-json\/wp\/v2\/tags?post=1002"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}