The compliance obligations of a sole proprietorship registration are crucial for the proper functioning of the business. As the only owner and operator, you are personally liable for any and all business activities. Compliance with the law ensures that you run your business legally and ethically.

However, a sole proprietorship registration in India comes with many legal and financial obligations. To keep your business running smoothly and growing, you need to comply with multiple tax and regulatory requirements. These include filing income tax returns, TDS returns, GST returns, and EPF returns; maintaining accurate financial records; and, sometimes, a tax audit being a Services Plus, proprietorship firm registration we provide all the services under our portal.

Advantages of Proprietorship Compliance

• Affordable:

The establishment of a sole proprietorship firm registration is relatively cheap; it usually does not require formal registration. If you are only thinking as part of your own space, it does not require a specific business registration, such as income tax and some service tax registrations.

• Ease of Decision-Making:

As the sole decision-maker, a sole proprietor can swiftly implement operational changes necessary for the business's continuity.

• Financial control:

The owner controls all company finances, so they have a lot of incentive to get involved and stay involved.

• Personal Business Relations:

Sole proprietorships law firm, are often found to be successful in industries that involve personal relationships. Provides one-on-one relationships for employees and customers

• Confidentiality:

It’s easier to keep the business’s secrets in this type of structure than in most others.

Tax Savings for Sole Proprietors

Investment Deductions:

Being Services Plus, as a sole proprietorship tax filing, we make sure to get income tax deductions can be claimed on qualifying investments made through some instruments, including PPF, national savings certificates, life insurance, and pension plans, as per sections covering 80C, 80CC, and 80CCD.

Health Insurance Benefits:

Tax deductions Claim under Section 80D, 80DD & 80DDB: If you paid for health insurance for yourself or for relatives as well.

Benefits of a Home Loan:

If home loan repayments are ongoing, as a Services Plus sole proprietorship registration we make sure you to claim a deduction on both principal repayment and interest payment under, respectively, Sections 24 and 80C of the I-T Act.

Deductions on Educational Loans: 

Loans for your education or a family member's education can be eligible for deductions under Section 80E, but this deduction is only on the interest portion.

Equity Savings Scheme:

If your annual income is less than Rs 12 lakh per annum, you may invest in sanctioned companies and mutual funds under the Rajiv Gandhi Equity Savings Scheme, Section 80CCG.

Capital Gains Exemptions:

 If you reinvest the gains from long-term capital assets like real estate in any of the products that are approved for capital gains tax exemption, it can give you (you guessed it) long-term safety.

Donations:

Contributions towards a charitable or social cause or national relief fund under sole proprietorship law firm can get a Section 80G deduction.

Income from non-taxable sources:

Including Hindu Undivided Family, partnership firm shares, international service allowances, gratuities, etc.

Essential Documents For Proprietorship Registration

• PAN Card
• Aadhaar Card
• GST Number (if relevant)
• Sales and Purchase Records
• MSME Registration (if applicable)
• Bank Statements
• Credit Card Statements  (If any)
• Sole Proprietorship Firm: Compliance Requirements

Income Tax Filing

Sole proprietorships' tax filing is also required to submit an annual income tax return every year in the financial year at the same tax rates as individual proprietors. The returns can either be filed physically or e-filed at the Income Tax e-filing portal, and the form to be used for filing the return shall be Form ITR-3 for businesses and Form ITR-4 (SUGAM) for businesses where income is computed on a presumptive basis up to ₹50 lakh.

TDS Return Submission

After that, if the owner has TAN, TDS [tax detection and collection] return has to be filed [Aadhaar cards are issued on opening.] The type of return needs to be filed based on the type of the deduction, such as Form 24Q for salary deduction, Form 27Q for non-resident deduction, Form 26QB for property transfer, etc.

GST Return Filing

If the turnover of the owner's business exceeds Rs. 20 lakhs, the owner must be registered for GST. Upon registration, GST returns such as GSTR-1 and GSTR-3B have to be filed listing transactions for taxable supplies of goods and/or services and for tax paid, which will be due for monthly or quarterly filing.

EPF Return Submission

 At the time of sole proprietorship tax filing, if the owner/sole proprietor has more than 20 Employees, EPF Registration & EPF Returns are to be filed accordingly.

Accounting and Bookkeeping

If, at any one of the last 3 years, the sales/turnover/gross receipts of the business exceeded Rs. 25 lakhs or the income from the business surpassed Rs. 2.5 lakhs, then maintaining books of accounts becomes necessary.

Tax Audit

Pursuant to the provisions of the income tax act, a tax audit shall be mandatory if the sales, turnover, or gross receipts of the business exceed Rs. 1 crore during the previous year or in a few other cases. For the assessment year 2020-2021, however, subject to conditions, the threshold limit for a tax audit is proposed to go up to Rs. 5 crore. The Finance Bill 2021 further seeks to raise the same limit to Rs. 10 crore for taxpayers involved in digital transactions.

Procedures for Proprietorship Compliance

Compliance for a sole proprietorship firm registration includes legal, tax, and regulatory obligations. Here is a brief summary of main processes, mandatory documents, and deadlines:

Step 1: Licenses & Permits For Business Registration

• Register under the Shops and Establishments act (if applicable) and get necessary licenses as per the type of business (i.e., FSSAI for food businesses, trade license, etc.)
• Files: PAN card, Aadhaar, address proof, rental or possession agreement, and No Objection Certificate from the landlord.
• Due Date: At the commencement of business.

Step 2: GST Registration & Compliance

• Yearly turnover exceeds ₹40 lakhs (₹20 lakhs for services): obtain GST registration. GSTR-1 and GSTR-3B tax returns filing for proprietorship firm registration.
• Supporting Documents — PAN, Aadhaar, bank details, business address proof
• Due Dates:

1. GSTR-1: 11 of the month following the quarter (monthly) / 13 of the month following the quarter (for QRMP)
2. GSTR-3B 20th of the subsequent month

Step 3: Income Tax Compliance

• ITR-3/ITR-4  
• Income Tax Return + Comparability Report + Other (If filing ITR-3/ITR-4) > Pay advance tax if annual liability is over ₹10,000.
• Identity: Permanent Account Number (PAN), financial statements, Form 26AS, bank statements;
• Due Dates:

1. ITR Filing: 31st July (non-audit), 31st October (audit)
2. Advance Tax: 15 June, 15 September, 15 December, 15 March.

Step 4: TDS (Tax Deducted at Source) Compliance (if applicable)

• TDS Deduction: Section 194 — Payment of rent, contractor, professional fees, etc. File TDS returns quarterly.
• TDS Challan, payment-related info, TAN, etc.
• Due Dates:

1. TDS Payment: 7th of the subsequent month.
2. TDS Return due dates: July 31, October 31, January 31, and May 31.

Step 5: Accounting & Book keeping

• If the turnover exceeds ₹25 lakhs (for professionals) or ₹50 lakhs (for businesses), maintain books of accounts.
• Kinds of documents: sales invoices, purchase bills, expense records.
• Due Date: Ongoing during the financial year.

Step 6: Professional Tax (if applicable)

• Process: As per the state laws, get yourself registered and pay professional tax.
• PAN, Aadhaar, salary details
• Filing Frequency: Monthly or annually (state dependent)

Step 7: Business Audit (If applicable)

• Process: Audit is mandatory when turnover is more than ₹1 crore (₹10 crore if 95% of transactions are digital).
• Due Date: 30th September.

Step 8: Udyam Registration (MSME) (Optional but Helpful)

• Process: To avail government benefits registered under MSME
• Documents: PAN, previous income tax returns (ITR), Aadhaar, bank details.
• Due Date: On or after commencement of business.

Legal and tax obligations help you run your business smoothly and avoid unnecessary penalties in the future. Services Plus, as a topsole proprietorship law firm, provides you solutions for your some detailed queries for particular things!