Business income tax return filing (ITR) tips

BusinessCategory
6 min read
Sudeep Saxena

Filing business tax returns is the process through which a business reports its income and expenditure to the Income Tax department.

All companies in India must file their Income Tax Returns (ITR) regardless if they were engaged in business activities or made any profit in the financial year.

Tax file return is compulsory under Income Tax Act 1961.

Firstly, let’s understand the different types of tax filing for various business structures.

Different types of business tax return filing

The type of business tax return filing varies with different business incorporation structures:

  • Sole proprietorship tax return filing - The proprietorship firm can use ITR-4 for tax filing under a presumptive tax scheme.
  • Partnership firms, including Limited Liability Partnership (LLP) tax return filing - Partnership firms (registered or unregistered) are required to file income tax returns in form ITR 5 each year.
  • Company tax return filing - All types of companies registered in India are required to file income tax return in form ITR-6 each year, and MCA Annual Return.

Related: Learn the company incorporation procedure

What are the documents required for filing ITR for business?

For businesses, below mentioned are the documents required to file an ITR.

  • PAN card
  • Aadhaar card (sole proprietorship)
  • Loan documents to claim a rebate
  • A balance sheet of the financial year
  • Records of audit (if applicable)
  • Certificates that show the Tax Deducted at the Source (TDS)
  • Challan copy of income tax payments such as advance tax and self-assessment tax

Income tax filing due date and penalty

The last date to file ITR for taxpayers (company, partnership firm, or proprietorship) whose accounts need to be audited is October 31, 2022.

For businesses with a turnover above Rs. 1 crore, tax audit is mandatory.

Similarly, professionals with turnovers of Rs. 50 lakhs also require a tax audit.

In case you miss the due date and file your return after the due date, then you will have to pay:

  • Interest under Section 234A @ 1% per month on the unpaid tax amount
  • A late fee of Rs. 5000 under section 234F

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5 top accounting tips for businesses to prevent last-minute panic

Managing the finances of your small business can be tricky. On top of all the other things you need to do as an entrepreneur, it's normal to get overwhelmed by accounting tasks.

But if you set up the right systems and take care of them consistently, the accounting will be much easier.

To help you out, here are some tips that I've learned over time:

1. Keep business records

Record-keeping is one of the most critical responsibilities for a small business owner. Maintain the record of all the invoices, receipts, and expenses your business has incurred for accurate filing of taxes.

Moreover, tax authorities mandate keeping the records, in general, for at least six years from the last date of filing the annual return.

2. Always have money set aside for taxes

It's advisable to set aside some money for the payment of taxes.

You need to be prepared for taxes, so that you can pay them on time.

If you don't have enough cash, then it's possible that you may face heavy penalties or even cancellation of your business licences.

As part of your overall budgeting process, think about how much money will be needed to pay taxes each year. And make sure that the amount is available at all times, so that no nasty surprises occur when the time comes for filing your taxes.

3. Invest in the right technology

If you want to be able to generate reports, manage your finances and keep track of your business performance in real-time, then it's essential that you invest in the right technology.

Cloud-based accounting software makes perfect sense if your company is growing quickly or has multiple branches.

Using a reliable accounting system ensures that tax returns are filed accurately and efficiently every year.

Some of the recommended softwares include Zoho Books, QuickBooks and RealBooks.

4. Hire some help

If your business is expanding quickly, then you may consider hiring an accountant to manage your financial books.

Accounting is a necessary part of running a business.

Overhead view of person working on business reports

In addition to managing your accounts, a good accountant can also advise you on:

  • How best to structure taxes
  • What financial risks may arise from certain business decisions

An accountant can also help you to structure and file the quarterly GST returns of your business.

Related: How to find reliable bookkeeping services

5. Don't mix your business and personal finances

You don't want to mix your business and personal finances. It's easier to keep track of finances if you know exactly where all your money is coming from and going out.

There are ways that help you to keep your business finances separate from your personal ones.

The first one is keeping your business and personal records separate.

You should have two separate accounts for each type of account keeping — one for personal and one for business.

If you're just starting out, this may not be possible. However, it's still critical that you keep your business expenses documented to prevent any last-minute confusions.

Accounting may seem complicated but having the right systems in place can make it much easier. You need to be able to:

  • Keep track of your finances
  • Manage them for growth
  • Predict your financial future

If you don’t have the right accounting system, it can make it harder for you to stay on top of everything.

Conclusion

I hope these tips have helped you understand some of the basics of paying taxes and accounting for small businesses.

As I said before, it can be a complicated topic, but the more systems you have in place to keep things straight and organised, the less overwhelming it will be.

If you take care of your finances from day one, there’s no reason why you should panic at the last moment of filing your tax returns. And remember the last day of filing your return is October 31, 2022, so get your documents ready and don't wait until the last minute to complete them.

The information contained in this blog post is provided for informational purposes only and should not be construed as an endorsement or advice from GoDaddy on any subject matter.