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TAXAJ Corporate Services LLP - Financial Doctors

Sole Proprietorship Firm Compliances & Filing

Running a Sole Proprietorship in India comes with a set of crucial financial and legal responsibilities. Compliance with various tax and regulatory requirements is essential to ensure your business's smooth operation and growth. This includes filing Income Tax ReturnsTDS ReturnsGST ReturnsEPF Returns, maintaining accurate accounting records, and sometimes undergoing a Tax Audit.

Filing tax returns is an essential obligation for businesses operating as sole proprietorships in India. At TAXAJ, we understand the significance of Compliance with Indian tax laws and the potential benefits that come with it. Our comprehensive services are designed to assist business owners in navigating the intricate Compliance. To navigate these compliance obligations seamlessly, TAXAJ offers expert assistance and a user-friendly platform, making the process efficient and hassle-free for Sole Proprietors.

By partnering with TAXAJ, you can fulfill your tax obligations and explore opportunities to optimize your tax benefits, allowing your business to succeed while following tax rules.

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About This Plan

Filing of Compliances for a Sole Proprietorship Firm in India.

Created by potrace 1.15, written by Peter Selinger 2001-2017


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    • Preparation & Filing of Compliances for Sole Proprietorship Firm in India
Documents Required
  1. Monthly Sales and Purchase bill for GST return.
  2. Monthly TDS sheet (Draft sheet we will provide) for TDS payment and Return.
  3. Monthly Expenses bill for Accounting.
  4. Monthly ESI & PF sheet (Draft sheet we will provide) for payment and return.

Choose From Array of Applicable Compliances for Proprietorship Firm

Accounts Preparation

Outsource Your Books of Account Preparation to Professionals.

GST Compliance

Let us manage your GST Compliance for a seamless experience.

TDS Compliance

TDS Filing is mandatory for a Private limited company in India.

PayRoll Compliance

Managing Payroll is more complicated than it seems.

Income Tax Filing

Every year company has to file its annual tax return to Income Tax Department.

Virtual Address

Now easily find a virtual address for your Proprietorship Firm

Virtual CEO/CFO

Avail the expertise of a CEO/CFO for your business to grow

Change Address

Moving to a new place? Do not forget to update it with Income Tax.

What are the Applicable Compliances for a Sole Proprietorship in India?

According to the name, sole denotes “only one”, and proprietorship denotes ownership. A sole proprietorship is a business entity where a single person oversees all the company’s operations. The term “sole proprietor” can also refer to a sole trader. The sole proprietor of this business unit is in charge of raising the initial capital for the company. The individual is also in charge of controlling every aspect of management.

A sole proprietorship must file annual returns for a variety of reasons. It ensures that all legal and regulatory requirements are met, assisting the company in avoiding fines and legal repercussions. Accurate financial records kept through annual filings allow for proper taxation and make corporate operations more transparent. Additionally, the proprietorship can take advantage of incentives and privileges offered to enterprises that comply with the law. It offers essential information about the company’s financial performance and health to stakeholders, including lenders and investors. Annual filing is essential for upholding good governance and fostering confidence in the commercial ecosystem.

Key TakeAways:

  1. A sole proprietorship is a business entity where a single person controls all operations and is responsible for raising initial capital and managing every aspect of the business.
  2. Annual filing requirements for a sole proprietorship ensure compliance with legal and regulatory obligations, avoiding fines and legal repercussions.
  3. Accurate financial records through annual filings enable proper taxation, transparency, and access to incentives and privileges.
  4. Annual filings provide essential information on financial performance to stakeholders, such as lenders and investors, fostering confidence in the business ecosystem.
  5. Key requirements for a registered sole proprietorship in India include business registration, PAN card for financial transactions and tax filing, GST registration for tax compliance, income tax return filing, audit requirements based on turnover, and other statutory compliances.
  6. Non-compliance can result in late fees, penalties, legal consequences, and adverse effects on credit ratings, impacting access to loans, investments, and business partnerships.

Annual Filing Requirements for a Registered Sole Proprietorship in India

Business Registration

There are certain procedures and requirements to form a sole proprietorship in India. The first stage is getting the essential licenses and permits for the company’s operation. Licenses issued by regional organizations, like municipal corporations or health departments, may fall under this category. Additionally, registering with such a business is crucial if the company is subject to any particular regulatory agencies. 

PAN Card

The Income Tax Department’s Permanent Account Number (PAN) is required to register a Sole Proprietorship in India which is not separate but the PAN Number of Individual/Proprietor himself. PANs are unique 10-digit alphanumeric IDs issued by the Income Tax Department to individuals and companies. The PAN (Permanent Account Number) is crucial for several reasons. First, PAN acts as a distinctive identifier for the company, facilitating easy financial transactions. Opening a bank account to conduct financial activities, accept payments, and make payments is important. Second, PAN is a requirement for filing income tax returns. Ensuring proper tax assessment and compliance with tax legislation enables the sole proprietor to submit both their business and personal income under a single PAN. In addition to battling tax evasion and proving the legality, trustworthiness, and compliance of a single proprietorship, PAN aids in maintaining transparency and accountability in the tax system.

GST Registration

Businesses in India that generate more revenue than the set threshold must register for GST (Goods and Services Tax). It entails getting the sole proprietorship a special GST identification number. A sole proprietor registered for GST can file GST returns, collect and remit GST on taxable supplies, and claim input tax credits. Additionally, it makes it simpler for sole proprietorships to benefit from all of the safeguards and advantages provided by the GST regime and ensures that business transactions are transparent.

Income Tax Return Filing

In India, submitting an income tax return (ITR) is an essential annual requirement for a sole proprietorship. It involves notifying the tax authorities of the business’s earnings, outlays, and other financial information. Compliance with tax rules, accurate tax assessment, and avoidance of fines or other repercussions for the sole proprietorship are all ensured by proper ITR Filing.

In India, when it comes to taxes, proprietorships have the same responsibilities as their owners. A proprietorship is an extension of the owner, meaning the tax process is quite similar to what individuals go through. The income tax rules that apply to individual proprietors also apply to proprietorships.

  • Proprietorships, much like partnerships and companies, are required to pay taxes based on their earnings.
  • For tax purposes, proprietors and their businesses are viewed as single entities. The income tax filing process for proprietorships aligns with the tax returns of the Proprietor.
  • Since a proprietorship isn't considered a distinct legal entity, it has no unique tax identification number. Instead, the Proprietor's Permanent Account Number is used for filing returns on behalf of the proprietorship.

Is it Mandatory for Sole Proprietorship to File Income Tax Return?

Yes, under the Income Tax Act in India, proprietorship firms must file income tax returns based on the age and income of the Proprietor:

  • Below 60 Years: Proprietors below 60 years of age must file an income tax return if their total income exceeds Rs. 3 Lakhs.
  • Between 60 and 80 Years: Proprietors aged between 60 and 80 must file an income tax return if their total income exceeds Rs. 3 Lakhs.
  • Above 80 Years: Proprietors aged 80 years and above must file an income tax return if their income exceeds Rs. 5 Lakhs.

Filing ITR before the deadline is crucial because it allows business losses to be carried forward for future use. Additionally, certain deductions under sections like 10A, 10B, 80-IA, 80-IAB, 80-IB, and 80-IC can only be claimed if the proprietorship's ITR has been filed on or before the due date.

Presumptive Tax Filing for Sole Proprietorship Firm

The Presumptive Taxation Scheme for proprietorship is a provision in the Income Tax Act designed to ease the tax burden on small taxpayers in India. Its purpose is to enable small businesses to operate without the heavy compliance obligations. Businesses that opt for this scheme can calculate their income based on an estimated basis using Section 44AD. This scheme allows taxpayers to pay taxes at a minimum rate and eliminates the requirement to maintain detailed accounting records.

Deadline for Proprietorship Tax Return Filing

The deadline for filing an income tax return for a proprietorship in India varies depending on certain factors outlined in the Income Tax Act of 1961:

  • No Audit Required: If your proprietorship does not need an audit, the income tax return must be filed by July 31st.
  • Audit Required: If your proprietorship requires an audit, the deadline for filing the income tax return is September 30th.
  • International Transactions or Specific Entities: The deadline for filing the income tax return is November 30th for proprietorships engaged in international transactions or specific domestic entities.

Audit for Sole Proprietorship

The amount of turnover and the company’s nature determine the audit criteria for a sole proprietorship in India. It is required to have a tax audit performed by a certified accountant if the turnover exceeds the authorized threshold (currently Rs. 2 crores). The audit verifies the accuracy and adherence to accounting standards of the sole proprietorship’s financial statements and records. It aids in confirming the accuracy of claimed income, expenses, and deductions. The audit report also gives the financial statements credibility and improves transparency, especially for key stakeholders like lenders, investors, and tax authorities.

Other Statutory Compliances

A sole proprietorship in India may also be required to adhere to other regulatory requirements besides the annual filing requirements. These may change depending on the type of business and the relevant laws. These compliances include things like submitting annual returns to regulatory bodies, keeping records up to industry standards, abiding by labour rules, and making sure environmental regulations are followed as necessary. To meet these additional compliance requirements and steer clear of any legal or regulatory concerns, sole proprietors need to keep up with the pertinent laws and regulations. To ensure total compliance, it can be helpful to seek professional counsel.

Consequences of Non-Compliance

Late Fees & Penalties

In India, failure to comply with the annual filing requirements for a sole proprietorship can have several negative effects, including late fees and penalties. The tax authorities reserve the right to impose fines for late filing income tax returns. The same applies to late fees and penalties for failing to submit GST returns or pay GST obligations on time. Over time, these fines and costs can add up, creating financial hardship and posing legal risks. In addition, non-compliance may result in the loss of certain advantages, such as input tax credits or exemptions, and harm the sole proprietorship’s credibility and reputation.

Legal Consequences

A sole proprietorship in India may face legal consequences if the annual filing deadlines are unmet. The relevant regulatory bodies may take legal action, impose penalties, or initiate criminal investigations. Additionally, it may result in losing advantages or benefits that conforming businesses have access to. Single proprietors must follow all legal and regulatory requirements to prevent such legal consequences and preserve the integrity of their business activities.

Impact on Credit rating

Failure to comply with India’s annual filing requirements could impact the sole proprietorship’s credit rating. Credit Rating agencies may receive a report if financial obligations, such as the timely filing of income tax returns or GST reports, are not met. As a result, the sole proprietorship may have a lower credit rating, making it more challenging to obtain loans and credit facilities and draw in possible investors and business partners. A positive credit rating is preserved, and the company’s financial reputation is improved by maintaining good compliance.


To maintain legal compliance, correct financial records, and proper taxation, sole proprietorships in India must comply with the annual filing requirements. Non-compliance can result in fines, legal consequences, and company reputation harm. TAXAJ, a trusted compliance partner, can help sole proprietors complete their filing requirements. Sole proprietors can negotiate registration difficulties, filing income tax returns, GST compliance, and other statutory duties with TAXAJ assistance. Trust TAXAJ to provide thorough and reliable support in satisfying your annual filing requirements and guaranteeing a hassle-free and legal business journey.

Income Tax Slabs for Sole Proprietorship

The income tax landscape for proprietorship firms has witnessed significant changes in the 2023-2024 budgets. The revised income tax regime has introduced an enhanced tax rebate threshold of Rs. 3 lakh for both salaried individuals and taxpayers. Moreover, the tax rebates for individual and salaried taxpayers have been elevated from Rs. 5 lakh to Rs. 7 lakh under this updated income tax framework.

Proprietor's AgeNet Income RangeRate of Income Tax (%)
Below 60 YearsUp to Rs. 2,50,000-
Rs. 2,50,001 to Rs. 5,00,0005
Rs. 5,00,001 to Rs. 10,00,00020
Above Rs. 10,00,00030
60-80 YearsUp to Rs. 3,00,000-
Rs. 3,00,001 to Rs. 5,00,0005
Rs. 5,00,001 to Rs. 10,00,00020
Above Rs. 10,00,00030
Above 80 YearsUp to Rs. 5,00,000-
Rs. 5,00,001 to Rs. 10,00,00020
Above Rs. 10,00,00030

Tax rates for Proprietors opting for an Alternate Tax Regime under Section 115BAC

An alternative tax regime for proprietors was introduced by Finance Act 2020 as Section 115BAC. Assesses must give up specified exemptions and deductions to take advantage of this tax regime. The Income tax rate for a Proprietor who opts for the alternate tax regime:

Net Income RangeRate of income-tax (%) (FY 2022-23)Rate of income-tax (%) (FY 2023-24)
Up to Rs. 2,50,000--
Rs. 2,50,001 to Rs. 3,00,0005-
Rs. 3,00,001 to Rs. 5,00,00055
Rs. 5,00,001 to Rs. 6,00,000105
Rs. 6,00,001 to Rs. 7,50,0001010
Rs. 7,50,001 to Rs. 9,00,0001510
Rs. 9,00,001 to Rs. 10,00,0001515
Rs. 10,00,001 to Rs. 12,00,0002015
Rs. 12,00,001 to Rs. 12,50,0002020
Rs. 12,50,001 to Rs. 15,00,0002520
Above Rs. 15,00,0003030

Rates of surcharge under the Normal Tax Regime

In addition to the Income Tax amount calculated, individuals must pay Surcharge and Cess based on the above-mentioned tax slabs.

In respect of a Proprietor, the rate of surcharge for the Assessment Year 2024-25 is tabulated here:

Nature of IncomeRange of Total Income
Up to Rs. 50 lakhs (%)Rs. 50 lakhs to Rs. 1 crore (%)Rs. 1 crore to Rs. 2 crores (%)Rs. 2 crores to Rs. 5 crores ((%)More than Rs. 5 crores
Short-term capital gain as per under Section 111A or Section 115ADNil10151515
Long-term capital gain is covered under Section 112A or Section 115AD, or Section 112Nil10151515
Dividend income not being dividend income chargeable to tax at the special rate under sections 115A, section 115AB, section 115AC, section 115ACANil10151515
Unexplained income chargeable to tax under Section 115BBE2525252525
Any other incomeNil10152537