Income Tax Returns (ITR) for Sole Proprietorship Businesses

An Income Tax Return (ITR) is a form that sole proprietors, individuals who own and operate unincorporated businesses, must file with the government to declare their taxable income and pay applicable taxes. It helps the government track and collect taxes from individuals who earn income from their business activities.

Sole proprietors are required to file ITR if their total income exceeds the basic exemption limit. The basic exemption limit for individuals below 60 years of age is ₹2.5 lakh, and for senior citizens (aged 60 years and above), it is ₹3 lakh. This applies to the combined income from their business and any other sources.

Eligibility Criteria for ITR Filing by Sole Proprietors

Sole proprietors are generally required to file ITR if they meet the following criteria:

• They are the sole owner of an unincorporated business.
• Their total income exceeds the basic exemption limit for their age group.
• They have not opted for the presumptive taxation scheme.

Applications for ITR Filing by Sole Proprietors

Several applications can be used to file ITR online. Some popular options include:

• Income Tax Department’s e-Filing Portal: The official portal for filing ITR online.
• MyReturns: A commercial tax filing platform with a user-friendly interface and expert assistance.

Documents Needed by Sole Proprietors to File ITR

To file ITR, sole proprietors typically need the following documents:

• Profit and Loss Account (P&L) Statement: A financial statement that summarizes the business’s income and expenses during a specific period.
• Balance Sheet: A financial statement that provides a snapshot of the business’s assets, liabilities, and equity at a specific point in time.
• Bank account statements
• Proof of business expenses (e.g., invoices, receipts)
• Proof of investments (e.g., mutual funds, stocks, bonds)
• Proof of deductions (e.g., medical expenses, education expenses, donations)