Proprietorship firms file the Proprietor income tax return just like the LLPs and the Companies registered in India. In the legal sense, the proprietorship and the proprietor are considered to be one. Hence, the income tax return filing of the proprietor and the proprietorship are the same.
As a sole proprietorship is not taxed as a different legal entity, the business owners file their business taxes like their individual returns. Like any other individual taxpayer, a proprietorship firm is also entitled to a proprietorship tax deduction as per the prevailing Income tax rules and depending on the slab rates applicable to his income.
Whereas the income tax rates for the registered companies are assessed on flat rates.
As the proprietorship firms are small and independent businesses owned by a single person. These unregistered businesses are one of the easiest to manage.
A new tax regime has been announced where the individuals can pay taxes as per the new slabs subject to certain conditions from FY2020-2021 onwards.
| Income range | Rate of tax |
|---|---|
| 0-2,50,000 | NIL |
| 2,50,001-5,00,000 | 5% |
| 5,00,001-7,50,000 | 10% |
| 7,50,001- 10,00,000 | 15% |
| 10,00,00-12,50,000 | 20% |
| 12,50,000- 15,00,000 | 25% |
| Above 15,00,000 | 30% |
Tax slab rates for sole proprietorship income tax return filing wherein the proprietor's age is above 60 years but less than 80 years at any time during the previous year.
| Income Slab | Income Tax Rate |
|---|---|
| Up to Rs. 3,00,000 | NIL |
| Rs.3,00,000 to 5,00,000 | 5% of the total income above Rs.3,00,000 |
| Rs.5,00,000 to 10,00,000 | Rs. 10,000+20 % of the total income above Rs.5,00,000 |
| Above Rs. 10,00,000 | Rs. 1,10,000+30% of the total income above Rs. 10,00,0000 |
Tax slabs for proprietorship firms where the age of the proprietor is above 80 years
| Income Slab | Income Tax Rate |
|---|---|
| Up to Rs. 5,00,000 | NIL |
| Rs. 5,00,000 to 10,00,000 | 20% of the total income above Rs.5,00,000 |
| Above Rs.10,00,000 | Rs.1,00,000 +30% of the total income above Rs.10,00,000 |
Tax slab for sole proprietorship firms where the proprietor is a non-resident individual ( Irrespective of the proprietor's age).
| Income Slab | Income Tax Rate |
|---|---|
| Up to Rs. 2,50,000 | NIL |
| Rs. 2,50,000 to 5,00,000 | 5% of the total income above 2,50,000 |
| Rs. 5,00,000 to 10,000,000 | Rs.12,500 + 20% of the total income above Rs. 5,00,000 |
| Above Rs. 10,00,000 | Rs. 1,12, 500 + 30 of the total income above Rs. 10,00,000 |
A surcharge is payable over and above the income tax calculated as per the income tax rate provided above.
| Income slab | Surcharge Rates |
|---|---|
| Total Income above Rs. 50 Lakh but then Rs. 1 crore | 10% of the income tax |
| Total Income above Rs. 1 crore | 15% of the income tax |