Compliances of Sole Proprietorship
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Compliances of Sole Proprietorship
Compliance refers to the act of adhering to laws, regulations, standards, or guidelines. Compliances refers to the process of ensuring that a company or organization follows all applicable laws, regulations, and all internal policies that governs its operations. Annual compliances of private limited company encompass a range of regulatory obligations that the company must fulfill on an annual basis to ensure legal compliances, transparency and accountability to its operations.
Compliances include:- GST Compliance
- Income Tax Compliance
- ESIC/EPFO Compliance
- Accounting
GST Compliance
1. GSTR-1
GSTR-1 is a monthly or quarterly return that must be filed by registered GST taxpayers to report their outward supplies (sales) of goods or services.
- Purpose:
- To declare sales invoices, credit notes, and debit notes issued during the period.
- Enables buyers to claim Input Tax Credit (ITC) via auto-populated GSTR-2A/2B.
- Facilitates transparency and tax reconciliation under GST.
- Due Date:
Filing Type Due Date Monthly 11th of next month Quarterly 13th of month following quarter - Penalty:
Type Penalty Late Filing Fee ₹50/day (₹25 CGST + ₹25 SGST) Nil Return ₹20/day (₹10 CGST + ₹10 SGST)
2. GSTR-3B
GSTR-3B is a summary return that must be filed monthly or quarterly by all regular registered taxpayers under GST. It captures outward and inward supply summaries, GST liability, and ITC claims.
- Purpose:
- To declare summary of sales and purchases.
- To compute and pay GST liability.
- Mandatory for claiming Input Tax Credit (ITC).
- Due Date:
Filing Frequency Due Date Monthly 20th of next month Quarterly (QRMP) 22nd or 24th of next month (depends on state) - Penalty:
Type Late Fee Normal Return ₹50/day (₹25 CGST + ₹25 SGST) Nil Return ₹20/day (₹10 CGST + ₹10 SGST)
3. GSTR-9
GSTR-9 is an annual return that must be filed by regular GST-registered taxpayers, summarizing all monthly/quarterly returns (GSTR-1 & GSTR-3B) filed during the financial year.
- Purpose:
- To provide consolidated summary of outward/inward supplies, ITC, taxes paid, and refunds.
- Ensures reconciliation with books of accounts.
- Acts as self-certification for annual compliance.
- Due Date: 31st December of the assessment year
- Penalty:
Type Late Fee Standard ₹200/day (₹100 CGST + ₹100 SGST) Maximum 0.25% of turnover in the State/UT
4. GSTR-9C
GSTR-9C is a reconciliation statement between the figures reported in the GSTR-9 (Annual Return) and the audited financial statements of a taxpayer. It must be certified by a Chartered Accountant (CA) or Cost Accountant.
- Purpose:
- To reconcile differences between:
- Annual return filed in GSTR-9
- Audited financial statements of the company
- Acts as a self-certified audit to ensure correctness of declared GST liability.
- To reconcile differences between:
- Due Date: 31st December of the assessment year
- Penalty:
- If not filed along with GSTR-9, late fees of GSTR-9 apply:
- ₹200 per day (₹100 CGST + ₹100 SGST)
- Maximum: 0.25% of turnover in the State/UT
- Additionally, the department may issue notices for non-compliance or misreporting.
Income Tax Compliance
Income tax compliance means timely and accurate fulfilment of obligations under the Income-tax Act, 1961, including return filing, TDS, advance tax, and reporting disclosures. Here's a complete guide to what’s required.
1. Income Tax Return
An Income Tax Return (ITR) is a form filed with the Income Tax Department of India to report income, expenses, taxes paid, deductions claimed, and other relevant tax details for a financial year (April to March).
- Purpose: Filing an ITR serves legal, financial, and compliance-related purposes for both individuals and businesses.
- Due Dates:
Person Applicable ITR Form Due Date (FY 2023-24) Individual/Proprietor (Audit Not Required) ITR-1 / ITR-3 / ITR-4 31st July Company / Firm (Audit Not Required) ITR-5 / ITR-6 31st July Company / Firm (Audit Required) ITR-5 / ITR-6 31st October Transfer Pricing Case ITR-6 + 3CEB 30th November - Penalty: ₹5000 (₹1000 if income < ₹5 lakh)
2. Tax Audit
A tax audit is an examination or review of accounts of any business or profession carried out by a Chartered Accountant (CA) to ensure compliance with the Income Tax Act, 1961.
- Purpose: Ensure accuracy, proper maintenance of books, reduce tax evasion, and support tax administration.
- Due Date: 31st October of the assessment year
- Penalty:
- Under Section 271B: 0.5% of turnover or ₹1,50,000 (whichever is lower)
- No penalty if a reasonable cause is proven
3. TDS Deposit
TDS Return is a quarterly statement filed by a person/deductor who deducts tax at source (TDS) while making certain payments such as salary, rent, professional fees, interest, etc., as per the Income Tax Act, 1961.
- Purpose: TDS (Tax Deducted at Source) deposit refers to the process of remitting the tax amount deducted from payments (like salary, interest, rent, contractor fees, etc.) to the Central Government. It serves multiple compliance, regulatory, and fiscal purposes.
- Due Dates: 7th of every next month (30th April for March deductions)
- Penalty: Interest @ 1.5% per month
4. TDS Return
TDS Return is a quarterly statement filed by a person/deductor who deducts tax at source (TDS) while making certain payments such as salary, rent, professional fees, interest, etc., as per the Income Tax Act, 1961.
- Purpose: The purpose of filing a TDS return is to report the details of tax deducted at source (TDS) and ensure transparency, tax credit availability, and compliance with the Income Tax Act, 1961.
- Due Dates:
Quarter Period Due Date Q1 Apr – Jun 31st July 2024 Q2 Jul – Sep 31st October 2024 Q3 Oct – Dec 31st January 2025 Q4 Jan – Mar 31st May 2025 - Penalty: ₹200 per day (maximum up to the TDS amount)
5. Advance Tax
Advance Tax, also known as the "pay-as-you-earn" scheme, refers to the income tax paid in installments during the financial year before the end of the year, instead of a lump sum at year-end.
- Purpose: Advance Tax is designed to streamline tax collection and promote a more efficient and transparent taxation system. It means paying your income tax liability in installments during the financial year, instead of a lump sum at the end.
- Due Dates:
Due Date Minimum Amount Payable 15th June 2024 15% of total tax liability 15th September 2024 45% of total tax liability (including earlier payment) 15th December 2024 75% of total tax liability (including earlier payment) 15th March 2025 100% of total tax liability - Penalty:
- Non-payment/shortfall in advance tax: 1% per month
- Delay in installment payment: 1% per month
ESIC / EPFO Compliance
1. ESIC Compliance
ESIC (Employees’ State Insurance Corporation) is a social security scheme under the Employees’ State Insurance Act, 1948, designed to provide medical, cash, maternity, disability, and dependent benefits to employees and their families.
- ESIC Contribution Rates:
Contributor Rate of Contribution Employer 3.25% of gross wages Employee 0.75% of gross wages - Due Dates for ESIC:
Particular Due Date ESIC Monthly Payment 15th of next month Half-Yearly ESI Returns 11th Nov & 11th May (approximate) Employee Registration Within 10 days of joining - Penalty:
- Late payment of contribution: Interest @ 12% p.a. for each day of delay
- Non-registration: Fine up to ₹5,000 plus prosecution
2. EPFO COMPLIANCE
EPFO (Employees’ Provident Fund Organization) is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. EPF is a social security scheme designed to ensure retirement savings and other financial benefits for employees.
- EPFO Contribution Rates:
Contributor Rate Contribution To Employer 8.33% NPS Employer 3.67% EPF Employee 12% EPF Total 24% - Due Dates for EPFO:
Particular Due Date PF Contribution Payment 15th of the next month ECR Filing (monthly PF return) On or before payment date Annual Return (Form 6A) 30th April (following FY) - Penalties:
Default Penalty / Interest Late payment of PF Interest @ 12% p.a. (simple interest) under Section 7Q Damages (penalty) for delay 5% to 100% depending on length of delay Failure to register Prosecution + penalty up to ₹5,000 False return / non-filing Fine + imprisonment
Accounting
Accounting compliance refers to adhering to the statutory requirements for maintaining books of accounts, financial statements, and related disclosures as per applicable laws such as the Companies Act, 2013, Income Tax Act, 1961, and Accounting Standards/IND AS.
Due date of accounting: Before AGM
Penalties: Fine of Rs. 50,000 to Rs. 5,00,000.
FAQs
While there is no specific “annual compliance” under corporate law like companies, a Sole Proprietorship must comply with tax, GST, and business license requirements.
No, DSC is not mandatory for Sole Proprietorship unless specifically required under a licensing or e-filing portal.
Yes, any licenses obtained such as:
• Shop and Establishment
• FSSAI (for food businesses)
• Trade License
must be renewed annually or periodically as per local laws.
Yes, if turnover in the previous year exceeds limits specified under the Income Tax Act, TDS provisions may apply for payments to contractors, professionals, rent, etc.
If the income is above the basic exemption limit or turnover exceeds certain thresholds, then books of accounts must be maintained under Section 44AA of the Income Tax Act.
GST registration is mandatory if:
• Turnover exceeds ₹40 lakhs (goods) or ₹20 lakhs (services) (₹10 lakhs in special category states)
• Inter-state supply or e-commerce selling is involved
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