In India, we have two types of taxes – direct and indirect. Direct tax is calculated on your net income while indirect tax is levied on goods and services we avail. Income Tax (Direct tax) return, in simple terms, is a form that you need to fill with the Income Tax Department as a statement of income every year. The government has designed the forms to make it easier for taxpayers to calculate their tax liability, schedule tax payments and request refunds in cases of overpayment of taxes. Depending on your legal status as a taxpayer (individual, company, HUF, etc.), you need to fill a specific form and follow certain processes. Today, we will talk about the forms and processes for filing the income tax return for private limited company.
We can categorize the income tax return for a company into two parts:
- Domestic company
- Foreign company
Let’s look at all the essential aspects of the income tax return for a domestic company:
Income Tax Rate
The tax rate for a domestic private limited company is as follows:
- Gross annual turnover > Rs.250 crore in the previous financial year – Tax Rate of 30%
- Gross annual turnover < Rs.250 crore in the previous financial year – Tax Rate of 25%
Further, there are various sub-sections under Section 115 of the Income Tax Act, 1961, that talk about tax rules and rates for companies from specific sectors, income from certain transactions, etc. It is important to review these sub-sections before calculating the final tax liability.
- Annual income more than Rs.1 crore but less than Rs.10 crore – Surcharge of 7% on the computed income tax
- Annual income > Rs.10 crore – Surcharge of 12% on the computed income tax
- Health and Education Cess – 4% of income tax + surcharge
MAT or Minimum Alternate tax
If a company declares a tax liability of less than 18.5% of the book profits, then it is required to pay 18.5% of the book profits as income tax plus surcharges and cess.
Note: The Minimum Alternate Tax is proposed to be abolished from the financial year 2020-21.
Due Date for filing Income tax Return for Private Limited Company
A domestic private limited company is required to file the income tax return on or before September 30th. If transfer pricing provisions apply to the company, then the due date is November 30th.
Type of Tax Return that a Pvt Ltd Company needs to file
A domestic private limited company is required to file the income tax return via Form ITR 6.
Documents required for the income tax return for private limited company
There is no functionality of attaching documents with the ITR form. Hence, you don’t need any bank statements or investment proof or TDS certificates. However, you will need a PAN Card and a Class II Digital Signature Certificate for a director.
Process of filing Income Tax Return for Private Limited Company
Here is a step-by-step process for filing the return:
Maintain the Book of Accounts
According to the Companies Act, 2013, every company must maintain its book of accounts in a particular format.
Prepare the Financial Statements
Based on the book of accounts, the company must prepare financial statements. These statements offer information about the financial position of the company and include a balance sheet, profit and loss statement, etc.
Audit the Financial Statements
Every company must appoint an auditor within 30 days of its incorporation. This auditor audits the financial statements of the company. Further, he submits a report on the accounts of the company to its members. The auditor also assesses if the accounts of the company provide a fair view of its business.
Conduct an Annual General Meeting
After the audit of the financial statements, the company must conduct an Annual General Meeting (AGM). At the AGM, the members of the company review the financial statements of the company along with the Auditor’s and Director’s report. If they are satisfied, then they approve the statements.
Annual Return Filing
Once the company adopts the audited and approved financial statements, it needs to file them with the Registrar of Companies. The Ministry of Corporate Affairs has a prescribed format for the same. The company must ensure that it files the financial statements within 60 days of the AGM.
Some common mistakes while filing the income tax return for private limited company
Avoid these commonly-made mistakes when you file the income tax return:
- Using the wrong ITR Form
- Failing to disclose all sources of income (this can attract notice from the Income Tax Department too)
- Error in providing personal information
- Not reconciling the ITR Form details with those mentioned on Form 26AS
- Not mentioning the exempted income in the ITR
- Error in following the prescribed format of the ITR Form
- Not filing ITR because you have paid TDS
- Failing to claim deductions
We hope that this article helped you understand everything that you needed to know about filing the income tax return for private limited company. Remember, filing the return is your legal responsibility. Ensure that you follow the process or hire a professional to help you with it.