Guide to Business Income Tax Return Filing in India

A business tax return holds information of the revenue and expenses of a company. Moreover, this return includes a declaration of any taxes due on any earnings, along with disclosed information about fixed assets, business debtors and creditors, loans given and received, and loans taken out.

In India, firms have to file Business Income Tax Returns (ITRs) with the Income Tax Department annually to report their earnings. To do this, an applicant must electronically file the relevant ITR form via the income tax e-filing website.

For AY 2024-25 (FY 2023-24), the due date of filing for individual returns is July 31, 2024. 

Business ITR filing categories

The different categories for filing business income tax returns are determined based on the types of business entities:

• Sole proprietorship tax return filing: Under this type, a single owner operating the proprietorship firm must file an income tax return annually. The firm is considered the same as the proprietor, and therefore the tax return filing procedures are similar to those of the proprietor’s individual income tax return filing. For a sole proprietor, business income and other personal income, such as salary, income from house property, and interest income, must be stated on the same return.
• Partnership firm tax return filing: Partnership firms are formed by two or more individuals to run a business. Partnership firms under the Income Tax Act, 1961 are taxed as individual legal entities. They are required to file income tax returns, irrespective of profit or loss.
• Limited liability partnership (LLP) tax return filing: This type of corporate entity combines the advantages of limited liability, typical of a company, with the flexibility inherent in a partnership structure. For tax purposes, it is a flow-through entity. This basically means that partners of this firm obtain untaxed profits, but the tax is payable individually.
• Company tax return filing: Business ITR filing for a company is divided into two categories, namely, the domestic company or the foreign company. Companies in India that are registered with the Ministry of Corporate Affairs, such as private limited companies, one-person company/ company limited, fall under the category of domestic companies. A foreign company is formed under the laws of the foreign land.

For companies, firms, and LLPs, a business tax return has to be filed regardless of profit or loss. Even if no operations are undertaken, a return must be filed.

Also, income tax returns must be filed by all business undertakings irrespective of whether they are subject to tax audit requirements.

Due date for filing tax returns in India

Tax audit requirements for businesses

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Every person engaged in business whose total sales turnover or gross receipts exceed INR 100 million (US$1.19 million) during the previous year is required to undergo a tax audit. This requirement applies under the following conditions:

(a) The aggregate of all amounts received, including receipts from sales, turnover, or gross receipts during the previous year, in cash, does not exceed 5 percent of the total amount received.

(b) The aggregate of all payments made, including expenditures incurred, in cash, during the previous year does not exceed 5 percent of the total payments made.

Additionally, for businesses earning profits less than 8 percent (or 6 percent in the case of digital transactions), a tax audit is mandatory. Professionals whose receipts are less than 50 percent of their total receipts can also opt for a tax audit. Furthermore, even in cases of business losses, a tax audit is necessary to carry forward the loss.

Selecting the appropriate ITR form

To file income tax returns, whether for a business, a company, or self-employed individuals, access to a computer is necessary to download Form ITR-4 Sugam. Individuals and self-employed individuals can use this form to file their returns. Self-employed individuals who opt for ITR-4 or ITR-3 must calculate their income using the presumptive tax method.

Companies, including foreign companies operating in India, must file Form ITR-6 unless they claim exemption under section 11 of the Income Tax Act. However, they are exempt from filing ITR-6 if they qualify as religious trusts or charitable trusts and claim tax exemptions.

Steps to file ITR:

1. Go to the official website for income tax e-filing, https://www.incometax.gov.in/iec/foportal/ for the filing of ITR-4.
2. Access your account with your PAN, password, and a captcha code.
3. Under the “e-file” menu, select “Income Tax Return.”
4. The page will fill in your PAN details. You will need to provide the assessment year, the ITR form number, the filing type – “Original/Revised Return,” and the submission mode – “Prepare and Submit Online.”
5. Click on “Continue.”
6. Go through the instructions and then fill-up the ITR-4 form. Keep clicking the “Save Draft” button from time to time to save the details.
7. Once this step is completed, select a verification option as per your preference.
8. Select the “Preview and Submit” button.
9. Recheck and verify all the data that you have provided.
10. Submit the ITR form.
11. Once your tax* returns have been verified online, you will be able to see your ITR file on your account.

Documents for filing ITR for businesses

The following documents are needed to file ITR for businesses under Form-4:

• Form 16
• Form 26AS, AIS, and TIS
• Form 16A
• Bank statements
• Housing loan interest certificates
• Receipts for donation made
• Rental agreement
• Rent receipts
• Investment premium payment receipts – LIC, ULIP, etc.

Who is eligible to file ITR-4?

ITR-4 can be filed by a Resident Individual / HUF / Firm (other than LLP) who has:

• Income not exceeding INR 5 million (US$ 59,937) during the FY
• Income from business and profession which is computed on a presumptive basis u/s 44AD, 44ADA or 44AE
• Income from salary/pension, one house property, agricultural income (up to INR 5000/ or US$59.9)
• Other sources which include (excluding winning from lottery and income from racehorses):
• Interest from savings account
• Interest from deposit (bank/post office/cooperative society)
• Interest from income tax refund
• Family pension
• Interest received on enhanced compensation
• Any other Interest Income (e.g., interest Income from unsecured loan)

Presumptive tax in India

To ease compliance for micro-enterprises, the government in the assessment year (AY) 2017-18 introduced presumptive taxation. Under presumptive taxation, small businesses and individual professionals are exempt from maintaining books of accounts. Taxpayers who opt for presumptive taxation do not need to estimate their income by deducting their expenses from revenue. Taxpayers only have to calculate a percentage of their total revenue and pay taxes on that.

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An applicant can opt for the old tax regime by filing Form 10 IEA before filing the ITR. For business cases, Form 10 IEA has been notified vide Notification no.43/2023 dated June 21, 2023, which can be used by taxpayers to exercise their right to choose between the old or the new regime. According to the Income Tax Department, this form can be filed twice in a lifetime, i.e., one for opting out of the new tax regime and one for re-entering the new tax regime. As per the income tax laws, an individual having business income shall submit the form before the due date of filing ITR i.e. July 31 under non-audit cases and October 31 under audit applicable cases.

India has framed the Presumptive Taxation Scheme under sections 44AD, 44ADA and 44AE of the Income Tax Act, 1961. India’s Union Budget 2023 has amended Section 44AD and section 44ADA to revise presumptive taxation limits for FY 2023-24 (AY 2024-25) as follows:

(US$1 = INR 83.54)

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