ITR filing for Shopkeepers
Learn everything about ITR filing for shopkeepers such as taxability, tax rate, choosing ITR form, tax rates, due date, penalty, how to file ITR. Contact us for filing!!
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As a small shopkeeper there are so many queries about income tax like how is income tax calculated, what are the tax rates, how much income is tax free, is ITR filing really required, what is the due date, how to file ITR, etc. In this guide we will clear all your queries regarding all this aspects in a simple manner.
What is an ITR?
An Income Tax Return (ITR) is a form that individuals and entities use to report their income, expenses, deductions, and taxes paid to the government. It is a crucial document for ensuring that taxpayers fulfill their legal duty to report their financial activities for a financial year from April 1st to March 31st.
Income sources for shopkeeper
Business Income
The primary source of income for shopkeepers is business income, which includes sales of goods. This income is calculated by deducting the cost of goods sold and other business expenses from the total sales revenue.
Other Income
In addition to business income, shopkeepers may have other sources of income such as:
- Interest Income: Interest earned on bank deposits or loans given.
- Rental Income: Income from renting out property or part of the shop premises.
- Capital Gains: Profits from the sale of assets like property, investments, or equipment.
All these sources of income must be reported in the ITR.
Business expenses
Business-related expenses that are directly linked to the shop’s operations can be deducted from the business income. These expenses include:
- Rent: Rent paid for the shop premises.
- Salaries and Wages: Payments made to employees and workers.
- Utilities: Expenses on electricity, water, and other utilities.
- Maintenance and Repairs: Costs incurred for maintaining and repairing the shop.
- Depreciation: Depreciation on business assets like furniture, equipment, and vehicles.
Taxability of shopkeepers
Under Section 44AD of the Income Tax Act, small businesses, including shopkeepers, can opt for the Presumptive Taxation Scheme. This scheme simplifies the ITR filing process by allowing eligible taxpayers to declare income at a prescribed rate of turnover or gross receipts. For shopkeepers, the applicable rate is 8% of turnover (6% if the turnover is received through digital transactions). The scheme is available if the turnover does not exceed ₹2 crores. Under section 44AD, maintenance of books of accounts is not required thereby is the most recommended choice for every shopkeeper. If the turnover is above ₹1 crore and has not opted for Presumptive taxation scheme then tax audit is applicable.
Shopkeepers can enjoy Tax free income upto Rs. 7 lakhs under new regime and Rs. 5 lakhs under old regime.
Is ITR filing for shopkeepers mandatory?
No, ITR filing is not required if your income from all sources including business income is below the basic exemption limit of Rs. 2,50,000 under Old regime or Rs. 3,00,000 under new regime.
But even though it is not compulsory, it is highly recommended as it helps in building financial history, serves as income proof for applying for loan, credit card, Visa.
Which ITR form is applicable for shopkeepers?
- This form is for individuals having income from a business or profession, house property, salary/pension, capital gains, and other sources.Â
- Shopkeepers can claim all relevant business expenses, depreciation, and other allowable deductions.Â
- Shopkeepers can use ITR-3 to report balance sheet and Profit & loss A/c in detail. Also in case of audit ITR-3 will be applicable.
ITR-4 (Sugam)
- This form is for individuals having income from house property, salary/pension, other sources and who have opted for the presumptive taxation scheme under Sections 44AD. Shopkeepers with total sales turnover up to ₹2 crores can opt for this form. They have to declare a minimum profit of 8%/6% of the sales turnover.
- ITR-4 simplifies the filing process by reducing the need for detailed bookkeeping and allows for a straightforward calculation of income based on a presumptive rate.
- We highly recommend ITR-4 if your turnover is below Rs. 2 crores.Â
Income tax rates for shopkeeper
Old tax RegimeÂ
| Income | Tax rates |
| Upto ₹ 2.50 lakh | 0% |
| ₹ 2.50 lakh – ₹ 5 lakh | 5% |
| ₹ 5 lakh – ₹ 10 lakh | 20% |
| Above ₹ 10 lakh | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
For senior citizen (age between 60 & 80 years), tax rate is 0% upto ₹ 3 lakhs. Rest of the rates are same.
For super senior citizen (age above 80 years), tax rate is 0% upto ₹ 5 lakhs. Rest of the rates are same.
In Old tax regime, a maximum tax rebate under section 87A of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs. The rebate under section 87A is not allowed to a Non-resident.
New tax Regime (FY 23-24)
| Income | Tax rates |
| Upto ₹ 3 lakh | 0% |
| ₹ 3 lakh – ₹ 6 lakh | 5% |
| ₹ 6 lakh – ₹ 9 lakh | 10% |
| ₹ 9 lakh – ₹ 12 lakh | 15% |
| ₹ 12 lakh – ₹ 15 lakh | 20% |
| More than ₹ 15 lakh | 30% |
New tax Regime (FY 24-25)
Income | Tax Rate |
Upto ₹ 3 lakh | 0% |
₹ 3 lakh – ₹ 7 lakh | 5% |
₹ 7 lakh – ₹ 10 lakh | 10% |
₹ 10 lakh – ₹ 12 lakh | 15% |
₹ 12 lakh – ₹ 15 lakh | 20% |
Above ₹ 15 lakh | 30% |
New tax Regime (FY 25-26)
| Income Range (₹) | Tax Rate |
|---|---|
| Upto ₹ 4 lakh | Nil |
| ₹ 4 lakh – ₹ 8 lakh | 5% |
| ₹ 8 lakh – ₹ 12 lakh | 10% |
| ₹ 12 lakh – ₹ 16 lakh | 15% |
| ₹ 20 lakh – ₹ 20 lakh | 20% |
| ₹ 20 lakh – ₹ 24 lakh | 25% |
| Above ₹ 24 lakh | 30% |
Documents Required for ITR filing for shopkeepers
- PAN Card
- Aadhaar Card
- Bank statement/passbook
- Details of income like sales register, sales invoicesÂ
- Details of expense like purchase register, purchase bills, expense bills, etc
- Balance Sheet and Profit & loss A/c
- Form 26AS and AIS
- Other relevant documents depending on other income sources
Step-by-Step Guide for ITR filing for shopkeepers
1. Registering on the Income Tax E-Filing Portal
- Visit the Portal: Go to the official Income Tax Department e-filing website
- New User Registration: If you are a first-time user, click on ‘Register Yourself’. Choose the ‘Individual’ category and enter your PAN, which will serve as your User ID.
- Fill in Details: Provide your basic details, contact information, and create a password.
2. Choosing the Correct ITR Form (ITR-3 or ITR-4)
3. Filling Out Personal Details and Income Information
- Select the Assessment Year: Choose the appropriate assessment year for which you are filing the return.
- Income Details: Enter your income details under the appropriate heads:
4. Claiming Deductions and Exemptions
- Deductions under Section 80C: Enter eligible deductions such as life insurance premiums, PPF, NSC, and tuition fees.
- Deductions under Section 80D: Include premiums paid for health insurance.
- Other Deductions: Claim deductions under other sections like 80E for education loan interest, 80G for donations, etc.
5. Verifying and Submitting the Return
- Calculate Tax: Click on ‘Compute Tax’ to see the tax liability or refund.
- Tax Payment: If there is any tax payable, pay it through the e-filing portal using net banking or other available options.
- Preview and Submit: Preview the completed ITR form, ensure all details are correct, and click ‘Submit’.
- Verification: After submission, verify your ITR within 30 days of filing. You can e-verify using methods such as Aadhaar OTP, net banking, or through a digital signature. Alternatively, you can send a physical signed copy of ITR-V to the Centralized Processing Center (CPC).
What is the Due date of ITR filing for shopkeepers?
The Due date to file Income tax return is 31st July. If tax audit is applicable then due date is 31st October.
In case you have missed this deadline then you can file belated ITR till 31st December with late fees.
Also for any mistake made while filing ITR before 31st July, you can make corrections by filing Revised ITR any number of times till 31st December.
If you miss deadline of Belated income tax return filing then you can file Updated ITR till 2 years from the end of relevant assessment year with late fees and additional taxes.
What are the Consequences of non-payment of Tax and non-filing of ITR by shopkeepers?
Failing to pay taxes and file your Income Tax Return (ITR) has severe consequences. Firstly, unreported income is deemed illegal, equating to tax evasion, and can result in a penalty of 100% to 300% of the evaded tax under Section 271(C). Secondly, a penalty ranging from 10% to 90% of the undisclosed amount may be imposed under Section 271AAB, depending on the circumstances. Lastly, if you miss the filing deadline, a 1% interest per month or part thereof will be charged on the unpaid tax amount as per Section 234A.
Conclusion
Understanding the taxability for shopkeepers involves recognizing the various income components, applicable deductions, and tax rates. By staying informed about these aspects, shopkeepers can file their Income tax return correctly by choosing the right ITR form. Regularly updating knowledge about income tax and seeking professional advice when needed can further aid in effective tax planning.
In case you still have any query or want to file ITR with CA assisstance then you can contact us at +91 9769647582
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