Complete Guide for Income Tax Returns for Non-Individuals

• Taxation
• ||
• September 17, 2024

Overview

Income Tax Return (ITR) is the form that taxpayers file with income tax authorities, in which they declare their incomes, expenses, and other financial details along with tax liability or refund as applicable for a specific financial year.

Income Tax Returns (ITR) are not just for individuals but also required by various entities, including businesses and organizations that need to file returns. Whether you’re managing a company, a partnership firm, or a non-profit organization, understanding the nuances of ITR for non-individuals is crucial. This blog will guide you through the essentials of ITR for non-individuals, including types of entities, relevant forms, and filing tips.

Types of Non-Individuals

• Companies
• Partnership Firms
• Trusts
• Non-Profit Organizations (NPOs)
• Hindu Undivided Family (HUF)
• Body of Individuals (BOIs) /Association of Persons (AOPs), whether incorporated or not
• Limited Liability Partnership
• Artificial Juridical Person, not falling within any of the above points.

Relevant ITR Forms for Non-Individuals

Due Date for Filing ITR

Documentation Required

1. Registration Details:
   1. PAN of the entity
   2. Certificate of incorporation or registration
2. Financial Statements:
   1. Balance sheet
   2. Profit and loss account
   3. . Cash flow statement (if applicable)
   4. Notes to accounts
3. Tax Audit Report (if applicable):
   1. Form 3CB/3CD, as required u/s 44AB
4. Income Details:
   1. Details of all sources of income, including business income, investments, and others
   2. Details of capital gains, if applicable
5. Deductions and Exemptions:
   1. Details of deductions claimed under various sections (e.g., Section 80C, 80D)
   2. Documentation for any tax exemptions claimed
6. TDS/TCS Certificates:
   1. Certificates for tax deducted at source (TDS) or tax collected at source (TCS)
   2. Proof of TDS deposits
7. Documents Related to Foreign Income/Assets (if applicable):
   1. Details of foreign income
   2. Documents supporting foreign assets, including foreign bank statements

Benefits to Non-Individuals for Filing ITR

1. Financial Transparency: Filing ITR provides a transparent record of various aspects of financial reporting, such as the entity’s income, expenses, and tax payments, which can be crucial for stakeholders.
2. Improved Access to Credit and Funding: For successful applications of loans and credit facilities, filing ITR is crucial to serve as proof of income and financial stability.
3. Carry Forward of Losses: Entities can carry forward certain losses (e.g., business or capital losses) to offset against future income, reducing future tax liabilities. If ITR is not filed, then the entity shall not be able to carry forward its losses, and it will result in the lapse of those losses. Hence, it is beneficial to file ITR for entities incurring losses. Moreover, Loss return u/s 139(3) is required to be filed on or before the due date of return fillings.
   For instance, in case there is a business loss for FY 2023-24 of ₹5,00,000 and in the following year there is an income of ₹8,00,000, then in that case, the entity is required to pay tax upon the income of ₹3,00,000, i.e., after set-off of losses of the preceding year (₹8,00,000-₹5,00,000).
4. Refund Claim: Entities that have paid excess tax can claim refunds by filing their return. For example, in the case of TDS, when the tax deducted is more than the amount of tax to be paid, then entities can claim the refund of the excess tax deducted. However, in case of TDS wrongly or extra deposited, then the person can claim the refund by filing Form 26B for excess TDS or TCS through Traces, i.e., the said person is not mandatorily required to claim the amount through filing a return.
5. Legal Documentation: A filed ITR serves as an official record for various legal and regulatory purposes, including disputes or claims related to taxes.
6. Legal Documentation: ITR filling is required for various legal and regulatory purposes, including disputes or claims related to taxes.
7. Financial Insights: Regular filing helps in assessing the entity’s financial health and performance, aiding in better business planning and strategy formulation.
8. Audit and Assessments: Accurate and timely filings help in the preparation of audits and assessments by tax authorities. It provides a documented record of financial activities and tax compliance.

Penalties for Non-Compliance

1. Late Filing of ITR
   Where HUF or other taxpayers failed to file a return on or before the due date, in that case, the penalty is applicable as per Section 234F in the following way:
   • In case income is upto ₹5,00,000, then a penalty of ₹1,000 applies.
   • In case income is above ₹5,00,000, then a penalty of ₹5,000 applies.
2. Interest on Late Payment of Taxes
   • Section 234A: Entities that delay filing their return and have outstanding taxes, in that case, interest @1% per month or part of the month of the outstanding tax amount from the due date of return filing.
   • Section 234B: Entities that failed to pay advance tax, in that case, 1% per month or part of a month on the tax payable, starting from April 1st of the assessment year until the date of payment.
   • Section 234C: Entities that failed to pay advance tax installments on time, in that case, 1% per month on the shortfall in advance tax installments.

Due Date for Payment of Advance Tax

1. Consequences of Non-filing or Defective Fillings
   • Defective filling: If a non-individual taxpayer fails to file the correct information in ITR, the income tax department may issue a notice stating that the return is faulty, and hence, the taxpayer is required to revise the return u/s 139(5) within the period provided by Assessing Officer (AO) to rectify the error.
   • Non-filling of tax return: Where the taxpayer fails to file the return, then the AO may ask the taxpayer to file the return. In case the AO requires additional information or further details, it may issue a notice asking for such additional information or details.
2. Assessment Proceedings:
   • Scrutiny Assessment: Where the return is selected for scrutiny, the taxpayer receives a notice u/s 143(2), which informs the taxpayer that their return will be subject to detailed examination, and assessment will be conducted u/s 143(3).
   • Best Judgment Assessment: If the return is not filed, the income tax department may proceed with the best judgment assessment u/s 144. This means that the department will estimate the income and tax liability based on available information and potentially levy additional taxes.
   • Income Escaping Assessment: Where the department identifies income that was not reported or correctly assessed in previous tax returns through the issue of notice u/s 148. This process is meant to address cases where income that should have been taxed was not included or was incorrectly reported in the taxpayer’s filings, and the assessment will be conducted u/s 147.

Conclusion

For non-individuals, such as businesses, partnerships, trusts, and companies, filing income tax returns is crucial for managing financial commitments and guaranteeing tax compliance. Organizations are required to submit their returns using the proper forms, adhering to deadlines, and revealing all of their revenue and spending sources. Therefore, it is advised that Non-Individual Taxpayers consistently file their returns and, if applicable, seek the benefit of a refund.

At Mercurius, our dedicated team of professionals provides comprehensive support covering all types of documentation, filing, and processing of income tax returns for all non-individuals. If you have any questions or wish to know more about your corporate tax filing or custom to your business, kindly contact us.