Which ITR Should a Company File?

 

 

 

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Which ITR Should a Company File?

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Filing Income Tax Returns (ITR) is a critical compliance requirement for businesses in India. It ensures transparency and accountability in financial dealings, enabling the government to maintain an efficient tax system. Different types of ITR forms are applicable depending on the nature and structure of the business. This comprehensive guide aims to elucidate which ITR a company should file, detailing the types of ITR forms available, their specific applications, and the filing process.

 

Understanding Income Tax Return (ITR) Forms for Companies

The Income Tax Department of India has prescribed various ITR forms for different categories of taxpayers. Companies need to file specific forms based on their business structure and financial activities. The primary ITR forms applicable to companies are ITR-6 and ITR-7.

 

ITR-6: For Companies Other Than Those Claiming Exemption Under Section 11

Applicability: ITR-6 is required to be filed by companies that do not claim exemptions under Section 11 (Income from property held for charitable or religious purposes). This form is applicable to:
 

  • Public limited companies
  • Private limited companies
  • One Person Companies (OPCs)
  • Companies limited by shares
     

Key Features

 

Income Details: It captures details of income from business and profession, capital gains, and income from other sources.

Deductions and Exemptions: Allows companies to claim various deductions and exemptions as per the Income Tax Act.

 

Tax Computation: Includes sections for computing total income and tax liabilities.

 

Audit Requirements: Companies subject to audit under the Income Tax Act must furnish details of the audit report.

 

Sections in ITR-6:

 

Part A: General information about the company

Part B: Computation of total income and tax liability

Schedules: Various schedules for detailing income, deductions, tax payments, and other financial information.

 

ITR-7: For Companies Claiming Exemptions Under Section 11

Applicability: ITR-7 is used by entities claiming exemption under Section 11, which includes companies engaged in charitable or religious activities.

 

  • Key Features:

Charitable Income: Details income from property held for charitable or religious purposes.

Exemptions and Deductions: Captures specific exemptions and deductions applicable to charitable organizations.

Audit Requirements: Must include the audit report for entities subject to audit.


 

Sections in ITR-7:

 

Part A: General information about the entity

Part B: Computation of total income and tax liability

Schedules: Various schedules for detailing income, exemptions, and tax payments.

 

Step-by-Step Process for Filing ITR for Companies

 

Prerequisites for Filing

Before filing the ITR, companies must ensure they have the following:

 

Digital Signature Certificate (DSC): Mandatory for companies to authenticate the return.

PAN and TAN: Permanent Account Number and Tax Deduction and Collection Account Number.

Financial Statements: Profit and Loss statement, Balance Sheet, and other relevant financial documents.

Audit Report: If applicable, the audit report as per Section 44AB.

Bank Account Details: Active bank account details for refunds and transactions.


 

Step-by-Step Filing Process

Step 1: Register on the Income Tax Portal

 

Step 2: Download the Applicable ITR Form

  • Log in to the portal.
  • Navigate to the ‘Downloads’ section.
  • Download the applicable ITR form (Java or Excel utility).

 

Step 3: Fill in the Details

  • Open the downloaded form.
  • Fill in the required details, including income, deductions, and tax payments.
  • Validate the information and generate the XML file.

 

Step 4: Upload the XML File

  • Log in to the e-filing portal.
  • Go to ‘e-File’ > ‘Income Tax Return’ > ‘Upload Return’.
  • Select the assessment year and ITR form.
  • Attach the XML file and submit.

 

Step 5: E-Verify the Return

E-verification can be done through Aadhaar OTP, Net Banking, EVC (Electronic Verification Code), or by sending a signed physical copy of ITR-V to the Centralized Processing Center (CPC) in Bengaluru.

 

Key Considerations for Filing ITR

 

Timely Filing

Ensure the ITR is filed within the due dates to avoid penalties and interest charges. The due date for filing ITR-6 is typically September 30th of the assessment year, but it may vary based on extensions announced by the government.

 

Accuracy of Information

Double-check all entries for accuracy to avoid discrepancies and potential audits by tax authorities. Ensure that financial statements reconcile with the ITR form.

 

Maintain Documentation

Keep all relevant financial documents and receipts organized and readily available for reference and verification. Proper documentation supports claims of deductions and exemptions.

 

Seek Professional Help

Consider consulting a tax professional or chartered accountant for complex returns or if you are unfamiliar with the filing process. Professional guidance ensures compliance and accurate filing.

 

Regular Updates

Stay updated with changes in tax laws and regulations that might affect your company’s tax filing requirements. The Income Tax Department often introduces amendments that could impact the filing process or tax liabilities.

 

Common Mistakes to Avoid

  • Incorrect PAN or TAN

Ensure that the PAN and TAN entered are correct and match the records. Errors in these identifiers can lead to rejection of the ITR.

  • Ignoring Audit Requirements

If your company is subject to audit under Section 44AB, ensure the audit report is prepared and uploaded on time. Non-compliance can result in penalties.

  • Not Reconciling Financial Statements

Reconcile your financial statements with the ITR form to avoid discrepancies. Inconsistencies can trigger audits and scrutiny by tax authorities.

  • Missing Deductions

Ensure all eligible deductions are claimed to reduce taxable income. Review the Income Tax Act for available deductions applicable to your company.

  • Delay in E-Verification

Complete the e-verification process promptly to avoid the return being considered invalid. E-verification is a critical step in the filing process.

 

Conclusion

 

Filing the correct Income Tax Return (ITR) is essential for every company to ensure compliance with tax regulations, avoid penalties, and maintain financial transparency. Understanding the specific ITR form applicable to your company, whether ITR-6 or ITR-7, and following a systematic filing process can simplify tax compliance. By adhering to the prerequisites, completing accurate filings, and staying updated with tax laws, companies can navigate the complexities of tax filing efficiently. Seeking professional assistance when needed and avoiding common mistakes further ensures that the ITR filing process is smooth and compliant with the legal requirements.

 

 

 

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Authors

Rohit Yadav

Business Legal Advisor

Rohit Yadav A business legal advisor, also known as a business attorney or corporate lawyer, is a professional who provides legal guidance and support to businesses. Their role is crucial in helping businesses navigate legal complexities.

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