Proprietorship is one of the most popular business structures in India due to its simplicity and ease of operation. However, proprietors must comply with various accounting, auditing, and tax requirements to maintain legal standing and avoid penalties. This comprehensive guide covers all compliance obligations for proprietorship businesses.
Proprietorship businesses must comply with various acts and regulations:
Proprietors must file income tax returns using appropriate forms:
Proprietors must deduct TDS on applicable payments and file quarterly returns:
Tax audit is mandatory under Section 44AB of the Income Tax Act when:
GST audit is required when:
Find answers to common questions about proprietorship compliance, tax filing, GST requirements, auditing, and timelines.
Yes, proprietorships with annual income above ₹2.5 lakhs must file income tax returns. Even if income is below this threshold, filing returns is recommended for various benefits like loan applications and visa processing.
Proprietorships typically use ITR-3 for business income or ITR-4 for presumptive taxation under Section 44AD. The choice depends on turnover and accounting method adopted.
GST registration is mandatory for proprietorships with annual turnover above ₹20 lakhs (₹10 lakhs for special category states). Below this threshold, registration is optional but recommended for business credibility.
Late filing attracts penalties up to ₹5,000 and interest on tax due. However, you can still file belated returns within one year of the due date with additional fees.
Yes, if the proprietorship deducts TDS on payments like rent, professional fees, or contractor payments above specified thresholds, quarterly TDS returns must be filed.
Yes, most states require proprietorships to register under the Shop and Establishment Act within 30 days of starting business operations.
GST audit requires maintaining books of accounts, invoices, purchase records, bank statements, and reconciliation statements between books and GST returns.
Late GST return filing attracts penalties of ₹200 per day (₹100 for CGST + ₹100 for SGST) with maximum penalty of ₹5,000 per return.
Tax audit is mandatory when business turnover exceeds ₹1 crore (₹2 crore for presumptive taxation) or professional receipts exceed ₹50 lakhs.
Asktrix provides complete tax audit support including preparation of books, reconciliation, audit report filing, and liaison with auditors to ensure smooth compliance.
Yes, maintaining proper books of accounts is mandatory for proprietorships with turnover above ₹1.2 lakhs or when opting out of presumptive taxation.
While not mandatory like companies, proprietors should prepare annual financial statements for tax filing, loan applications, and business analysis purposes.
Yes, proprietorships with turnover up to ₹2 crore can opt for presumptive taxation under Section 44AD, declaring 8% of turnover as profit (6% for digital payments).
GST registration is optional below ₹20 lakh turnover, but recommended for business credibility, input tax credit benefits, and competitive advantage.
Failure to deduct TDS attracts penalty equal to the amount not deducted, plus interest at 1% per month from the due date of deduction.
Income tax payments are due quarterly: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15 of the financial year.
Advance tax must be paid in four installments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15.
Monthly GST returns (GSTR-1, GSTR-3B) are required for businesses with turnover above ₹5 crore. Smaller businesses can file quarterly returns.
Professional tax applies in certain states like Maharashtra, Karnataka, Tamil Nadu, etc. It's levied on professionals and business owners based on income slabs.
Asktrix provides complete GST compliance services including registration, monthly/quarterly return filing, reconciliation, annual return preparation, and audit support.
Ensuring smooth compliance for your proprietorship business with Asktrix provides not only legal adherence but also ongoing support for growth and success. Our comprehensive approach ensures your business meets all regulatory requirements efficiently and accurately.