Income Tax for Business

Every business is mandated to file income tax returns levied by the government of India or as defined in the Income Tax Act of 1961. The income tax for business and profession is defined under section 28 of the Income Tax Act 1961. The person or organization paying income tax is known as the assessee. The assessee is identified by the PAN or Permanent Account Number.

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ITR for Self-employed

To comprehend the ITR for self-employed, it is crucial to understand who falls under this category. An individual who sells his goods or services on a contract basis falls under the category of self-employed. The self-employed are subject to filing a return of income tax for business. 

The income tax for business levied on the self-employed comes under the head of ‘Profit and Gain from Business or Profession’ (PGBP).

The tax is calculated on the profit made by the business after deducting the losses and expenses incurred to earn an income. The self-employed are required to file a return of income tax for business under ITR-4.

Income Tax Slab for Business

The table below shows the business income tax rate along with the business income tax slab. It is for an individual (below 60 years of age), sole proprietor, Hindu Undivided Family, Body of Individual, Association of persons and artificial juridical person.

  1. Old Tax Regime

    Slab Tax Rate
    Up to INR 2,50,000 Nil
    INR 2,50,000 to INR 5,00,000 5% on INR 2,50,000 (INR 12,500)
    INR 5,00,000 to INR 10,00,000 INR 12,500 + 20% on INR 5,00,000 (INR 1,00,000)
    More than INR 10,00,000 INR 1,25,000 + 30% on the amount more than INR 10,00,000
  2. New Tax Regime

    Slab Tax Rate
    Up to INR 3,00,000 Nil
    INR 3,00,000 to INR 6,00,000 5%
    INR 6,00,000 to INR 9,00,000 10%
    INR 9,00,000 to INR 12,00,000 15%
    INR 12,00,000 to INR 15,00,000 20%
    More than INR 15,00,000 30%

In case of senior citizens aged between 60 to 80 years:

  1. Old Tax Regime

    Slab Tax Rate
    Up to INR 3,00,000 Nil
    INR 3,00,000 to INR 5,00,000 5%
    INR 5,00,000 to INR 10,00,000 INR 10,000 + 20% on INR 5,00,000
    More than INR 10,00,000 INR 1,10,000 + 30% on the amount more than INR 10,00,000
  2. New Tax Regime

    Slab Tax Rate
    Up to INR 3,00,000 Nil
    INR 3,00,000 to INR 6,00,000 5%
    INR 6,00,000 to INR 9,00,000 10%
    INR 9,00,000 to INR 12,00,000 15%
    INR 12,00,000 to INR 15,00,000 20%
    More than INR 15,00,000 30%

In case of income tax rates for super senior citizens over 80 years:

  1. Old Tax Regime

    Business Income Tax Slab Business Income Tax Rate
    Up to INR 5,00,000 Nil
    INR 5,00,000 to INR 10,00,000 20% on the amount more than INR 5,00,000
    More than INR 10,00,000 INR 1,00,000 + 30% on the amount more than INR 10,00,000
  2. New Tax Regime

    Slab Tax Rate
    Up to INR 3,00,000 Nil
    INR 3,00,000 to INR 6,00,000 5%
    INR 6,00,000 to INR 9,00,000 10%
    INR 9,00,000 to INR 12,00,000 15%
    INR 12,00,000 to INR 15,00,000 20%
    More than INR 15,00,000 30%

    Note: Confirm income tax rates for business with your finance professional or from the official website of the IT department before finalizing your purchase.

Surcharge on Income Tax for Business

  • The amount of income tax for a business is subject to increase by 10% if the total income of a business exceeds INR fifty lakh but does not exceed INR one crore. However, the assessee will be subject to avail of the marginal relief on the surcharge.

  • A surcharge at the rate of 15% shall be applied if the income exceeds INR one crore. However, it remains less than INR 2 crores. Nevertheless, the assessee will be subject to marginal relief. 

  • An income that falls between INR 2 crores to 5 crores will be subject to a surcharge of 25% on the total income tax.

  • A surcharge of 37% under the old regime and 25% under the new regime will be applied to the income tax if the income of the assessee exceeds INR 5 crores.

Documents for Filing ITR

An assessee should produce the following documents to file an ITR for income tax for business:

  • The individual should have his PAN and Aadhaar cards for filing ITR for business.

  • If the assessee wishes to claim a rebate on the taxable income, he must produce the documents of the loan.

  • The assessee must maintain the balance sheet of the financial year to show the liability, assets, income and expenditure of the business.

  • He must produce the record of the audit if applicable. 

  • He must show the certificate of tax deduction, such as TDS.

  • He must produce the challan copy of the tax he has paid in advance.

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ITR for Business

An assessee may file ITR 4 online. It is straightforward to submit the ITR online. 

An assessee needs to follow the steps given below to file online ITR for income tax for business income:

  • The assessee is required to visit the official website to file ITR.

  • The assessee may log in to his account upon entering the password, PAN and captcha code displayed on the screen.

  • Next, he should select the 'Income Tax Return' link in the e-file menu.

  • Now, the site shall automatically fill in the PAN. In addition, the user is required to fill in the assessment year, filing type 'original/revised return, ITR form number and submission mode.

  • Click on 'Continue' to proceed further.

  • Click on the 'save draft' option to fill up the ITR 4 form upon reading all the instructions displayed on the screen. 

  • Next, the user may select the verification option.

  • The user may review the form and click on the submit button.

  • The user may verify the data entered by him, and further, he may submit the ITR.

Presumptive Taxation

The presumptive taxation for income tax for business is defined under section 44AD of the Income Tax Act of 1961. A company with a turnover of up to INR 2 crores may opt to be taxed presumptively. 

The business is required to offer at least 8% of the total turnover as income under section 44AD for presumptive taxation. However, for professionals, 50% of the turnover is required to be held as a business tax return.

In Conclusion

Income tax for business is an income tax return required to be filed by a company, sole proprietor, LLP, and HUF. The return shows the income and expenditure of a firm during a financial year. The tax under the income tax act is paid on the profit earned by a business. To pay taxes, it is necessary to deduct the losses and liabilities of a business.

FAQ's

  • What documents are required to be furnished to file an ITR for business?

    An assessee should produce the following documents to file an ITR for income tax for business
    • PAN card
    • Aadhaar card
    • Loan document
    • Balance Sheet
    • Certificate of TDS
    • Challan copy for paying tax in advance
  • What is the surcharge rate for income tax for businesses?

    Here is the surcharge rate for income tax for businesses:
    Surcharge Rate
    Assessment Year 2023-24 Assessment Year 2022-23
    Income Range Income Range
    INR 50 lakh to INR 1 crore INR 1 crore to INR 2 crore INR 2 crore to INR 5 crore INR 5 crore of INR 10 crore Amount exceeding INR 10 crore INR 50 lakh to INR 1 crore INR 1 crore to INR 2 crore INR 2 crore to INR 5 crore INR 5 crore of INR 10 crore Amount exceeding INR 10 crore
    10% 15% 25% 37% 37% 10% 15% 25% 37% 37%
  • What are health and education cess?

    The cess of education and health is meant to be paid by the assessee at the rate of 4% on the surcharge. The health and education cess is calculated upon evaluating the surcharge.
  • What is the due date for filing ITR for business?

    30th September is the due date for filing ITR for a company, partnership firm, or LLP.
  • How much fine do I need to pay if I fail to file ITR?

    Under section 271F of the Income Tax Act of 1961, the government of India levied INR 5,000 fine if the assessee failed to file the ITR.

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