Are you a business owner? Wondering how to file your business income tax returns? Here is the list of commonly made mistakes and ways to avoid them.
Very often, small business owners make grave errors when filing returns for their businesses. This not only attracts penalties but could also end up eating a huge chunk of your profits. Here, in this article, you can find a list of standard mistakes made by business owners when filing ITR and the ways to avoid them.
Let’s get started.
Mistake 1: Failing to file the ITR before the due date
30th September 2018 – the last date for submitting Income Tax returns of businesses for the financial year 2017 -18 (the Assessment year 2018-19).
When you miss the due date, you have to file belated returns. This can be filed anytime before the end of the assessment year (31st, March 2019). However, late returns attract a penalty, and you also end up losing on specific key benefits.
The Solution: Always make sure to file your business ITR well ahead of the due date.
Mistake 2: Filing Returns at the last minute
Filing ITR is indeed a complicated process and is quite time-consuming. So, when you file it at the last minute, you’re likely to make errors that have a negative impact on your finances. What more, inaccuracies or non-disclosures can even lead to criminal charges.
The Solution: Make sure to file your IT returns well ahead of time, so that you have sufficient time to review it and make changes.
Mistake 3: Submitting the wrong ITR form
If you submit the wrong form while submitting your ITR, it is considered as a defective return by the Income Tax department. So, make sure to use the right form when filing taxes.
The Solution: Check the following different ITR forms and choose the one that suits you. ITR3 and ITR4 are the forms used by business owners.
- ITR3 – Used by individuals who are partners in a firm but do not earn any income from it.
- ITR4 – Used by individuals who are either sole proprietors of a business or partners in a company and earn income from it.
- ITR4S – Used by a HUF or individuals who earn income from a business and own a single house property.
Mistake 4: Not Including Losses from the Previous Year
When you file ITR for your business for the current assessment year, you can set-off losses from the previous assessment year. This loss is deducted from the gains of the current year. Very often, businesses fail to deduct this amount, thereby ending up paying higher returns than required.
The Solution: However, you can claim deductions on the loss of the previous assessment year, only when you have filed the ITR well before the due date.
Mistake 5: Doing it by yourself
Business income tax return filing is more complicated than filing personal ITR. There are plenty of forms to include and several key details to figure out. If you’re a small business owner, with no assets that are to be depreciated or cost of goods sold to be included, you can use a software program to help you calculate the taxes.
But bigger firms, especially partnership firms, private limited firms have a complicated tax schedule, and it becomes difficult to work out on your own.
The Solution: Enlist the help of experts, who have the necessary qualification and experience to help you file your business tax returns without any errors. Additionally, when you hire experts, they help you figure out ways to cut down on your taxes, saving you huge sums of money.
As a business owner, make sure to file your business tax returns accurately and well-before time to avoid complicated legal tangles and enjoy peace of mind.