Overview of Business Taxation
Businesses in India are subject to income tax based on their legal structure. Different tax rates, deductions, and compliance requirements apply to Sole Proprietorship, Partnership, LLP, and Companies.
Financial Year: 1st April to 31st March. Assessment Year is the year following the financial year.
Income Tax Rates for Different Business Structures
| Business Structure | Tax Rate | Additional Information |
|---|
| Sole Proprietorship | Slab rates (5% to 30%) | Taxed as individual |
| Partnership Firm / LLP | 30% flat | AMT 18.5% applies |
| Private Limited Company (Turnover ≤ ₹400 cr) | 25% | Plus surcharge and cess |
| Private Limited Company (Turnover > ₹400 cr) | 30% | Plus surcharge and cess |
| New Regime for Companies (Sec 115BAA) | 22% | Without most deductions |
| New Regime for Manufacturing (Sec 115BAB) | 15% | For new manufacturing companies |
Surcharge and Cess
- Individuals/HUF: 10% (₹50 lakh-₹1 cr), 15% (₹1 cr-₹2 cr), 25% (₹2 cr-₹5 cr), 37% (above ₹5 cr)
- Firms/LLPs/Companies: 7% (₹1 cr-₹10 cr), 12% (above ₹10 cr)
- Health & Education Cess: 4% on total tax + surcharge
Presumptive Taxation Schemes
- Section 44AD (Business): 8% of turnover (6% for digital receipts) - for turnover up to ₹2 crore
- Section 44ADA (Professionals): 50% of gross receipts - for receipts up to ₹50 lakh
- Section 44AE (Transporters): ₹1,000 per vehicle per month for goods carriers
Advance Tax Due Dates for Businesses
- By 15th June: 15% of advance tax liability
- By 15th September: 45% of advance tax liability
- By 15th December: 75% of advance tax liability
- By 15th March: 100% of advance tax liability
Tax Audit Applicability
- Business (Non-presumptive): Turnover > ₹1 crore
- Business (Presumptive under 44AD): Turnover > ₹2 crore and profit < 8%
- Profession (Non-presumptive): Gross receipts > ₹50 lakh
- Profession (Presumptive under 44ADA): Receipts > ₹50 lakh
TDS (Tax Deducted at Source) for Businesses
- Salary (Sec 192): TDS based on slab rates
- Contractor Payment (Sec 194C): 1% (individual/HUF) or 2% (others)
- Professional/Technical Fees (Sec 194J): 10%
- Rent (Sec 194I): 2% (plant/machinery) or 10% (land/building)
- Interest (Sec 194A): 10% (exceeds ₹5,000)
Tax Deduction and Collection Account Number (TAN)
Businesses deducting TDS must obtain TAN (10-digit alphanumeric). Apply online using Form 49B. Penalty for non-registration: ₹10,000.
Income Tax Return (ITR) Forms for Businesses
- ITR-3: Individuals with business/profession income
- ITR-4: Presumptive taxation for individuals/HUF
- ITR-5: Partnership firms and LLPs
- ITR-6: Companies (excluding those claiming sec 11 exemption)
- ITR-7: Trusts and non-profit organizations
Due Dates for Income Tax Filing
- Businesses (requiring audit): 31st October of assessment year
- Businesses (not requiring audit): 31st July of assessment year
- Companies: 31st October of assessment year
Consequences of Late Filing
- Late filing fee under Section 234F: ₹5,000 (up to ₹1,000 for small taxpayers)
- Interest under Section 234A: 1% per month on unpaid tax
- Losses cannot be carried forward (except house property loss)