A proprietorship firm is taxed as an individual and must file an Income Tax Return annually. The income of the firm is considered the personal income of the proprietor. If the firm’s turnover exceeds the prescribed limit, maintaining books of accounts and conducting a tax audit under Section 44AB becomes mandatory. ITR-3 is used for business income, while ITR-4 applies under presumptive taxation for eligible businesses with turnover up to ₹2 crores. Proper documentation of expenses, income, and assets is essential to ensure accurate tax reporting and avoid legal issues.
Conclusion: Filing ITR for a proprietorship firm is crucial for regulatory compliance, financial transparency, and uninterrupted business operations.