Business Income Under Income Tax:
What is Business Income?
Business income refers to the earnings generated from any trade, profession, or business activity. It is categorized under “Profits and Gains from Business or Profession” in the Income Tax Act and is subject to taxation based on applicable laws.
Types of Business Income
Benefits of Filing Business Income Tax Returns (ITR)
Types of Taxes Applicable on Business Income
Due Dates for Business Income Tax Filing
Types of Business Income
Income from Proprietorship Business
- Earned by individuals running a business under their own name.
- Taxed as per the individual’s income tax slab.
- Eligible for deductions under business expenses.
Income from Partnership Firm
- A business operated by two or more partners.
- The firm is taxed at 30% plus applicable surcharge and cess.
- Partners’ salaries and interest are tax-deductible under certain conditions.
Income from Limited Liability Partnership (LLP)
- Taxed at a flat rate of 30% plus applicable surcharge and cess.
- LLP partners are not taxed separately on firm income but on their individual share.
Income from Private Limited Company (Pvt Ltd)
- Taxed at 22% (for companies opting for concessional tax regime) or 25%/30% based on turnover.
- Subject to Dividend Distribution Tax (DDT) when profits are distributed as dividends.
Income from Public Limited Company
- Similar to private companies but subject to additional corporate governance regulations.
- Shareholders receive dividends, which are taxable in their hands.
Income from Freelancing & Self-Employed Professionals
- Income earned by professionals like doctors, lawyers, consultants, etc.
- Taxed as per individual income tax slabs.
- Eligible for deductions on professional expenses like rent, office maintenance, etc.
Income from Presumptive Taxation Scheme (for Small Businesses & Professionals)
- Businesses with turnover up to ₹2 crore can opt for presumptive taxation under Section 44AD, taxed at 8%/6% of turnover.
- Professionals with receipts up to ₹50 lakh can opt under Section 44ADA and pay tax on 50% of their gross receipts.
- Businesses with turnover up to ₹2 crore can opt for presumptive taxation under Section 44AD, taxed at 8%/6% of turnover.
Benefits of Filing Business Income Tax Returns (ITR)
- Legal Compliance: Ensures adherence to tax laws, avoiding penalties.
- Claim Deductions: Reduces taxable income by claiming business expenses.
- Ease in Loan Approval: Helps in obtaining business loans and credit facilities.
- GST & Other Compliance: Aids in seamless GST and other regulatory compliance.
- Avoidance of Penalties: Late or non-filing leads to fines and interest.
Types of Taxes Applicable on Business Income
- Income Tax – Based on business profits, applicable as per entity type.
- Goods & Services Tax (GST) – Levied on supply of goods/services, applicable based on turnover.
- TDS (Tax Deducted at Source) – Deduction on specific payments like rent, salaries, and professional fees.
- Advance Tax – Payable if the expected tax liability exceeds ₹10,000 in a financial year.
- Professional Tax – Levied by some state governments on businesses and professionals.
Due Dates for Business Income Tax Filing
- Individuals, HUFs, and Firms (Non-Audit Cases) – 31st July of the assessment year.
- Businesses Requiring Audit – 31st October of the assessment year.
- Companies & LLPs – 31st October (Audit cases) or 31st July (Non-audit cases).
- Filing with Transfer Pricing Reports – 30th November of the assessment year.
- Advance Tax Payment Due Dates:
- 15% by 15th June
- 45% by 15th September
- 75% by 15th December
- 100% by 15th March