{"id":16995,"date":"2020-09-28T15:30:04","date_gmt":"2020-09-28T10:00:04","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=16995"},"modified":"2020-09-28T15:30:06","modified_gmt":"2020-09-28T10:00:06","slug":"tax-obligations-for-sole-proprietorship-online","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/tax-obligations-for-sole-proprietorship-online\/","title":{"rendered":"A Complete Overview on Tax Obligations for Sole Proprietorship"},"content":{"rendered":"\n<p class=\"has-drop-cap\">As the name suggests, a sole proprietorship is an independent business model operated by a single individual. Furthermore, these business models seek no governmental registration and could be run with a minimum of hassles. The ease of formation and less compliance make this business model quite popular across the unorganized business sector.&nbsp;In this write up we will break down information on Tax obligations for Sole proprietorship<strong>.&nbsp;<\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"664\" height=\"399\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-111.png\" alt=\"Tax Obligations for Sole Proprietorship\" class=\"wp-image-16996\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-111.png 664w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-111-300x180.png 300w\" sizes=\"(max-width: 664px) 100vw, 664px\" \/><\/figure><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/tax-obligations-for-sole-proprietorship-online\/#Tax_obligations_for_Sole_proprietorship\" >Tax obligations for Sole proprietorship<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/tax-obligations-for-sole-proprietorship-online\/#Income_tax_rate_for_sole_proprietorship_for_FY_2020-21\" >Income tax rate for\nsole proprietorship for FY 2020-21<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/tax-obligations-for-sole-proprietorship-online\/#Different_ways_of_filing_the_Income_Tax_Return\" >Different ways of\nfiling the Income Tax Return&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/tax-obligations-for-sole-proprietorship-online\/#Conclusions\" >Conclusions&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_obligations_for_Sole_proprietorship\"><\/span>Tax obligations for Sole proprietorship<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A sole proprietorship taxed differently unlike other business models. Sole proprietors in India don\u2019t need to file a separate tax return on the income generated from their business. Simply put, the income earned by sole proprietors will be treated as their personal income and taxed accordingly. Just like individual assessee, the sole proprietors need to address tax obligations as per current IT rules based on the slab rates applicable to his taxable income. The income tax rate for the sole proprietors is similar to that of the individual income tax rate.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/procedure-for-sole-proprietorship-registration-online\/\">Procedure for Sole Proprietorship Registration: A Step by Step Guide<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Income_tax_rate_for_sole_proprietorship_for_FY_2020-21\"><\/span>Income tax rate for\nsole proprietorship for FY 2020-21<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The table below explains the different slab rates for sole proprietorship for FY 2020-21<\/em><\/strong><\/p>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td> <strong><em>Income   slab range (in&nbsp;INR)<\/em><\/strong>   <\/td><td>\n  <strong><em>Tax\n  rate (New regime)<\/em><\/strong>\n  <\/td><td>\n  <strong><em>Tax\n  rate (Old regime)<\/em><\/strong>\n  <\/td><\/tr><tr><td>\n  0- 2,50,000\n  <\/td><td>\n  NIL\n  <\/td><td>\n  NIL\n  <\/td><\/tr><tr><td>\n  2,50,001- 5\n  lakhs\n  <\/td><td>\n  5%\n  <\/td><td>\n  5%\n  <\/td><\/tr><tr><td>\n  5,00,001- 7.5\n  lakhs\n  <\/td><td>\n  10%\n  <\/td><td>\n  20%\n  <\/td><\/tr><tr><td>\n  7,50,001- 10\n  lakhs\n  <\/td><td>\n  15%\n  <\/td><td>\n  20%\n  <\/td><\/tr><tr><td>\n  10,00,001- 12.5\n  lakhs\n  <\/td><td>\n  20%\n  <\/td><td>\n  30%\n  <\/td><\/tr><tr><td>\n  12,50,001- 15\n  lakhs\n  <\/td><td>\n  25%\n  <\/td><td>\n  30%\n  <\/td><\/tr><tr><td>\n  Above 15,00,000\n  <\/td><td>\n  30%\n  <\/td><td>\n  30%\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h3 class=\"wp-block-heading\">Tax slab for Sole Proprietors falls in\nthe age group of 60-80 years<\/h3>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td>\n  <strong><em>Slabs\n  rate (in INR)<\/em><\/strong>\n  <\/td><td>\n  <strong><em>Rate\n  of tax<\/em><\/strong>\n  <\/td><\/tr><tr><td>\n  Up to Rs. 3\n  lakhs\n  <\/td><td>\n  Nil\n  <\/td><\/tr><tr><td>\n  Rs.3,00,001 to\n  Rs.5 lakhs\n  <\/td><td>\n  5%\n  <\/td><\/tr><tr><td>\n  Rs.5,00,001 to\n  Rs.10 lakhs\n  <\/td><td>\n  20%\n  <\/td><\/tr><tr><td>\n  Above Rs.10\n  lakhs\n  <\/td><td>\n  30%\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h4 class=\"wp-block-heading\">Health and Education Cess<\/h4>\n\n\n\n<p>Cess is an additional levy imposed on the tax obligation by the government to procure capital for a particular purpose. Cess is generally computed on the income tax liability before appending interest given under 234A, 234B, and 234C of <em><strong>IT Act 1961<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/The_Income-tax_Act,_1961\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> and surcharge, if any. <\/p>\n\n\n\n<div class=\"shadow1\"><strong>For example:<\/strong> If the tax liability of an individual comes out to be Rs 12,000 then cess will be calculated at the rate of 4% on Rs 12,000. <\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Tax slab for Sole Proprietors who is above 80 years <\/h3>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td>\n  <strong><em>Income\n  Tax Slabs<\/em><\/strong>\n  <\/td><td>\n  <strong><em>Tax\n  Rate<\/em><\/strong>\n  <\/td><td>\n  <strong><em>Health\n  and Education Cess<\/em><\/strong>\n  <\/td><\/tr><tr><td>\n  Up to Rs. 5\n  lakh\n  <\/td><td>\n  Nil\n  <\/td><td>\n  Nil\n  <\/td><\/tr><tr><td>\n  Rs.5,00,001 to\n  Rs.10 lakh\n  <\/td><td>\n  20%\n  <\/td><td>\n  4% of Income\n  Tax\n  <\/td><\/tr><tr><td>\n  Above Rs.10\n  lakh\n  <\/td><td>\n  30%\n  <\/td><td>\n  4% of Income\n  Tax\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h3 class=\"wp-block-heading\">Example of calculating the Tax obligations for Sole proprietorship<\/h3>\n\n\n\n<p>Mr. Raghav, aged 51 years managing a retail\nstore as a proprietor, the particular of this income is illustrated in the\ngiven table.&nbsp;<\/p>\n\n\n\n<ul><li>Net profit of Rs. 4, 20,000\ngenerated in the previous year.&nbsp;<\/li><li>Income of Rs. 18,000 reaped by\nthe owner from the house property.&nbsp;<\/li><\/ul>\n\n\n\n<p>During the year, Mr. Raghav contributed to PF of Rs 50,000 in January and paid insurance premiums on the self of Rs. 10,000 and daughter of Rs 28,000. The evaluation of tax liability and total income is given below.&nbsp;<\/p>\n\n\n\n<table class=\"table table-bordered\"><tbody><tr><td>\n  <strong><em>Particulars<\/em><\/strong>\n  <\/td><td>\n  <strong><em>Amount in INR<\/em><\/strong>\n  <\/td><\/tr><tr><td>\n  Income generated from the House Property\n  <\/td><td>\n  18,000\n  <\/td><\/tr><tr><td>\n  Profits generated from the business \n  <\/td><td>\n  4.2 lakh\n  <\/td><\/tr><tr><td>\n  Gross Total Income\n  <\/td><td>\n  4,38,000\n  <\/td><\/tr><tr><td>\n  Deductions available under VI-A\n  <\/td><td>\n  .\n  <\/td><\/tr><tr><td>\n  Premium paid towards Life Insurance\n  <\/td><td>\n  38,000\n  <\/td><\/tr><tr><td>\n  Contribution to PPF\n  <\/td><td>\n  50,000\n  <\/td><\/tr><tr><td>\n  Total Income\n  <\/td><td>\n  3.5 lakh\n  <\/td><\/tr><tr><td>\n  Tax On Total Income [(350000-250000)*5%]\n  <\/td><td>\n  5,000\n  <\/td><\/tr><tr><td>\n  Rebate under section 87A\n  <\/td><td>\n  2,500\n  <\/td><\/tr><tr><td>\n  Total Tax Payable\n  <\/td><td>\n  2,500\n  <\/td><\/tr><tr><td>\n  Surcharge*\n  <\/td><td>\n  NIL \n  <\/td><\/tr><tr><td>\n  Tax Including Surcharge\n  <\/td><td>\n  2,500\n  <\/td><\/tr><tr><td>\n  Health and Education Cess (4% of the income tax)\n  <\/td><td>\n  100\n  <\/td><\/tr><tr><td>\n  Net Tax Payable\n  <\/td><td>\n  2,600\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<p><strong><em>Surcharge<\/em>&#8211;<\/strong> Surcharge is a tax levied on tax. It is not imposed on the income\ngenerated but rather on tax payable. For instance, if Mr. X is earning an\nincome of Rs 100 on which the Rs 30 as a tax is imposed, the surcharge @10%\nwould be applied to the income tax value which makes the total taxable amount\nequivalent to Rs 33. Currently, a surcharge of 10% applies to an individual\u2019s\nincome exceeding Rs 50 Lakhs. Similarly, if the individual\u2019s income surpasses\nthe one crore mark then a surcharge @15% would be applied to that.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_ways_of_filing_the_Income_Tax_Return\"><\/span>Different ways of\nfiling the Income Tax Return&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The sole proprietor needs to obtain a\nPermanent Account Number before filing an income tax return. However, the\nissuance authority won\u2019t be able to furnish an independent PAN to the applicant\nsince the sole proprietorship business doesn\u2019t hold any separate identity.\nThus; the PAN card allotted to the sole proprietor will be utilized to meet the\nincome tax-related requirements.&nbsp;<\/p>\n\n\n\n<p>Individuals engaged with a sole proprietorship business required to file the ITR-3 form. The sole proprietor can also serve this purpose through an online platform by using the digital signature. Individuals operating as a sole proprietor must <a href=\"https:\/\/corpbiz.io\/income-tax-return-filing\"><strong>file income tax return<\/strong><\/a> on or before 31st July. If the income tax return of the sole proprietorship seeks statutory audit as per the Income Tax Act, then the last of filling further extended to 30th September. Please note that an audit must be carried out by the registered CA to maintain the legality of the process.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusions\"><\/span>Conclusions&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As a sole proprietor, addressing your tax liability is much easier than other business models. It\u2019s worth noting that the income of the sole proprietors is taxes as personal income, making it easier to manage tax obligations. Liabilities and business assets are distinctive because sole proprietorship are not treated as an independent business entity. All you need to consolidate your sole proprietorship\u2019s income, profit, and losses on individual ITR form. Whether is matter of addressing tax liability or filling ITR on urgency, <a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a> can help you out in finding best possible ways of encountering such obligations. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/documents-required-for-sole-proprietorship-registration-online\/\">Know the Documents Required for Sole Proprietorship Registration<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As the name suggests, a sole proprietorship is an independent business model operated by a single individual. Furthermore, these business models seek no governmental registration and could be run with a minimum of hassles. The ease of formation and less compliance make this business model quite popular across the unorganized business sector.&nbsp;In this write up [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":17025,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[159],"tags":[1045],"acf":{"service_id":"6"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":8165,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16995"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=16995"}],"version-history":[{"count":11,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16995\/revisions"}],"predecessor-version":[{"id":17026,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16995\/revisions\/17026"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/17025"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=16995"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=16995"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=16995"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}