Income tax for small business owners in India
Presumptive tax under 44AD, when you need an audit, GST limits and advance tax.
What is presumptive taxation (section 44AD)?
Resident individuals, HUFs and partnership firms (not LLPs) can declare 8% of turnover as profit, or 6% of turnover received digitally, and skip detailed books. It's available for turnover up to ₹2 crore, or ₹3 crore if cash receipts are 5% or less. If you leave the scheme, you can't return to it for five years.
When do I need a tax audit?
Generally when turnover is above ₹1 crore, or ₹10 crore if cash receipts and payments are each 5% or less. A presumptive business that declares less than the presumptive profit may also need one.
When do I need GST registration?
Businesses selling goods must register once turnover crosses ₹40 lakh (₹20 lakh in some special category states); for services, the limit is ₹20 lakh. Small businesses can choose the composition scheme and pay a flat rate on turnover.
When is advance tax due?
If your tax for the year is ₹10,000 or more. Presumptive businesses can pay it all by 15 March; others pay 15%, 45%, 75% and 100% by 15 June, 15 September, 15 December and 15 March.
Which ITR form do I file?
ITR-4 for presumptive income with total income up to ₹50 lakh; ITR-3 if you keep books. Partnership firms and LLPs file ITR-5, and companies file ITR-6.
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