The compliance requirement for a proprietorship is very less as compared to other forms of companies like LLP, private limited company etc. Every proprietorship firm is required to file certain returns and obtain certain registrations.
A proprietorship is a form of business which is owned and managed by a sole member and has no separate legal entity from its owner. The liability of the owner of the sole proprietorship firm is unlimited. Further, for the purpose of taxation the incomes and losses of the firm are taxed on the owner's personal tax return. The various compliance that every proprietorship firm is required to fulfill are-
- Income Tax returns- Every proprietorship firm is required to file income tax returns annually. Even if its income is less than the threshold limit it is required to fill NIL Income tax returns.
- Income tax payment- In case the income of the sole proprietorship firm exceeds the threshold limit then the income tax liability arises. Further, it should be noted that the sole proprietorship and its owner is not considered as a separate legal entity thus to calculate the threshold limit the income of both of them will be considered.
- GST registration- If the turnover of the proprietorship firm exceeds the threshold limit of 20 lakhs then it is required to obtain GST registration and file returns accordingly.
- GST returns- All proprietorship who have obtained GST registration are required to file GST returns.
- Audit- Tax audit is not compulsory for a sole-proprietorship. It is required only if the turnover of the firm exceeds Rs. 2 Crore.
