How Are Sole Proprietorship Businesses Taxed In India?

A Sole proprietorship is a business structure or construction under which a business can be continued. It alludes plainly to the individual element and is by and by liable for their obligations.

A sole proprietor, like Radhe Shyam Groceries, can work under the name of its proprietor or it can do business under an imaginary name. The phoney name is only a trademark; it doesn’t make a different lawful element from the sole proprietor. Albeit easy to set up, the Sole Proprietorship is anything but a lawful substance.

How Are Sole Proprietorship Business Taxed In India.

Getting Sole Proprietorship

Inferable from the straightforwardness of a sole proprietorship, simplicity of arrangement, and insignificant expense, a sole proprietorship is a well-known business type. A sole proprietor needs to enrol his name and get neighbourhood licenses to prepare the sole proprietor for business.

Regardless, one unmistakable disadvantage is that the proprietor of a sole proprietorship remains actually at risk for every one of the obligations of the organization. What’s more, in the event that a sole owner organization faces monetary difficulty, loan bosses can bring claims against the proprietor of the business. Assuming that such suits hold great, the offended party should pay his/her own cash for the organization’s obligations.

The proprietor of Sole Proprietorship for the most part signs contracts in their name, as there is no different character under the law for the sole proprietorship. Generally, the sole owner proprietor will have clients compose checks for the sake of the proprietor, regardless of whether the business takes on a made-up name.

Sole Proprietorship Business Taxed In India.

Advantages of Sole Proprietorship In India

1. Business to be started by only one individual.

2. Least consistent expected to begin and maintain the business.

3. It is similarly less expensive to begin this kind of business.

4. Corporate duty rates don’t matter for a sole proprietorship. Thus, personal duty piece rates will apply.

5. The direction and control of the business are vested with one individual in particular.

Disadvantages of Sole Proprietorship in India

1. The owner is presented with limitless responsibility. He is by and by at risk for every one of the exchanges.

2. There is generally a danger of a business closing down because of a solitary individual claiming and dealing with the whole business.

3. It is extremely difficult to raise money to scale the business.

Sole proprietorship income tax calculation

In India, a sole proprietorship business isn’t burdened as an alternate legitimate element. Rather, the entrepreneurs record their business charges as parts of their singular government forms. Notwithstanding, the business pay of a sole owner is added to his singular pay subsequent to deducting the costs of doing business, charge allowances, and other pertinent pay, if any, from his gross receipts. Like some other individual assessee, such a business is additionally qualified to forget the sole ownership charge derivation, according to winning IT governs and relying on the section rates pertinent to his available pay. This is rather than the enlisted organizations, for whom personal charges are surveyed on level rates.

Sole proprietorship charge rates for AY 2019-20 (FY 2018-19)

The different piece rates relevant for sole proprietorship charges 2019 are additionally streamlined in the accompanying tables-

A) For sole owners beneath the age of 60 years

Income Tax SlabsTax RateWellbeing and Education Cess
Upto Rs. 2.5 LakhNilNil
Rs.2,50,001 to Rs.5 lakh*50%4% of Income Tax
Rs.5,00,001 to Rs.10 lakh20%4% of Income Tax
Above Rs.10 lakh30%4% of Income Tax

B) For sole owners over 60 years however under 80 years

Income Tax SlabTax RateWellbeing and Education Cess
Upto Rs. 3 lakhNilNil
Rs.3,00,001 to Rs.5 lakh5%4% of Income Tax
Rs.5,00,001 to Rs.10 lakh20%4% of Income Tax
Above Rs.10 lakh30%4% of Income Tax

C)For sole proprietors over 80 years

Income Tax SlabTax RateWell being and Education Cess
Up to Rs. 5 lakhNilNil
Rs.5,00,001 to Rs.10 lakh20%4% of Income Tax
Above Rs.10 lakh30%4% of Income Tax

Notwithstanding the annual assessment sum imposed according to the previously mentioned chunks, sole owners are additionally expected to pay the extra charge as given beneath-

  • 10% of the annual assessment sum, assuming that the absolute pay is in the scope of Rs 50 lakhs. to 1 crore
  • 15% of the personal assessment sum, assuming the absolute pay surpasses Rs 1 crore.

One more significant element of the sole ownership personal duty the computation is that the misfortunes of his business, if any, will be permitted to be conveyed forward assuming he records the IT return at the very latest the specified cutoff time. Additionally, the duty derivations permitted u/s 10 A and B and u/s 80-IA, IB and IC won’t be thought of assuming he neglects to record his own IT return prior to the cutoff time.