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Proprietorship Compliances

An Overview To Proprietorship Compliance

Proprietorship firms need to maintain compliances like LLP’s and companies (Public or Private limited
companies). Proprietorship firm compliance mainly includes income tax return filing, whereas LLP &
companies need to submit both the reports – Income tax return filing to the income tax department and
annual filing to the ministry of corporate affairs. Sole proprietorship firms also need to comply with TDS
regulations, GST regulations, ESI regulations etc. The requirement of compliance varies depending upon the type of entity, industry, state of incorporation, number of employees & sales turnover. It has very minimal statutory compliances as compared to a public or a private limited company. In
the case of sole-proprietorship, a sole proprietor does not enjoy the benefit of a separate legal entity and
limited liability. The annual income of the sole proprietor is considered the annual income of the
proprietorship firm. There is no need to file an annual report or financial statement to MCA. The major
compliance's of sole proprietorship firms are tax-related periodic and annual compliance's.

Proprietorship  Compliances

Proprietorship Compliances
Filing of Income-tax return - According to the Income Tax Act, any proprietor under the age of 60
years is required to submit an Income Tax Return for the year if his total income exceeds Rs 2.5
lakhs. If the proprietor is between the ages of 60 and 80 and his income exceeds Rs 3 lakhs, he is
required to file an ITR. However, if a proprietor is beyond the age of 80 years and his income does
not exceed Rs 5 lakhs, he is exempted from submitting ITR. If his income exceeds this amount, he
must file an ITR.
Due Date for Filing Income Tax Returns: If a proprietorship firm is not required to conduct a tax
audit, it must file the ITR by December 31st.
If a proprietorship firm is obliged to undergo a tax audit, the proprietorship firm must file the ITR
by September 30th.
If the proprietorship firm is required to file Form 3CEB, the ITR must be filed by November 30th.
Tax audit of Proprietorship firm – According to the provisions of the Income Tax Act, all
proprietorship firms are required to have their books of accounts audited by a Practicing Chartered
Accountant in the following circumstances:
a) If, in the case of a business, the total sales, turnover, or gross revenues exceed Rs. 1 crore in any
preceding year; Note: This section does not apply to a person who elects for presumptive taxation
under Section 44AD and whose total sales or turnover does not exceed Rs 2 crore.
b) If a professional firm's total gross receipts exceeds Rs.50 lakhs in any preceding year.
c) If the proprietorship opted for the presumptive scheme and the claimed income is less than the
scheme's deemed profits and gains.

Documents Required For Annual Compliances For Proprietorships Registration

 Invoices of purchase & sales during a financial year
 Invoices of expenses incurred during a financial year
 Bank statements for all bank accounts in the name of proprietor firm in a financial year.
 Credit card statement for expenses incurred by the proprietor on behalf of a company (If any)
 Copy of TDS challans deposited (if any)
 Copy of GST returns filed (If any)
 Copy of TDS returns filed (if any)

Procedure For Annual Proprietorship Firm Compliance Fulfillment

 Maintain proper books of accounts
 Preparation and filing of balance sheet.
 Comply with GST requirements
 File the income tax return to the income tax department.

Major Compliances For A Proprietorship

Proprietorship Compliance and Tax Return Filing -

Income tax filing – Every sole proprietor running a proprietorship firm has to mandatory file an
income tax return if his taxable income lies above the exemption threshold. In some of the cases,
an audit is also required.

GST filing – Sole proprietors registered under GST has to mandatorily file GST returns monthly,
quarterly and annually.

TDS return filing – Proprietors having TAN (
must file quarterly TDS returns as per TDS rules

ESI return – All proprietors registered under the ESI act has to mandatorily file ESI returns. ESI
registration is required in case a proprietor employs
10 or more employees in a firm.

Penalty For Not Filing Proprietorship Compliances

Late filing or non-filing of income tax returns before the due date will attract a penalty of Rs.200 per

Late filing or non-filing of GST return before the due date will attract a penalty of Rs.200 per day.

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