Business tax filing, audit and advance tax

Law

Income-tax Act 1961 (to FY 2025-26); Income-tax Act 2025 from 1 April 2026

Return forms

ITR-5 (firms, LLPs), ITR-6 (companies)

Due date

31 October with audit, 31 July without

Audit report

One month before the return due date

How each type of business is taxed

A company paying tax under the normal provisions must also compute Minimum Alternate Tax under Section 115JB: if tax on book profit at 15% exceeds the normal tax, MAT is payable, and the excess becomes a MAT credit usable in later years. The Section 115BAA option, once exercised in Form 10-IC, cannot be withdrawn, so we model both routes over several years before you choose. LLPs are not subject to MAT but may pay Alternate Minimum Tax if they claim specified deductions.

When a tax audit is required

Section 44AB requires accounts to be audited by a chartered accountant, and the report filed in Form 3CA or 3CB with 3CD, where:

• business turnover exceeds ₹1 crore, or ₹10 crore if cash receipts and cash payments are each not more than 5% of the total;
• professional gross receipts exceed ₹50 lakh;
• a business on the presumptive scheme declares profit below the presumptive rate while its income exceeds the basic exemption limit.

The audit report is due one month before the return due date, so by 30 September for most audit cases. Failure attracts a penalty under Section 271B of 0.5% of turnover, up to ₹1.5 lakh. Companies and many LLPs also need a statutory audit under company or LLP law, which is separate and comes first.

Presumptive taxation for small businesses

Small businesses can avoid detailed books and audit by declaring income at a fixed percentage:

Companies and LLPs cannot use these schemes. A business that opts out of Section 44AD after using it cannot return for five years, and must have its accounts audited in that period if its income exceeds the exemption limit. Presumptive taxpayers pay their entire advance tax by 15 March.

Advance tax: the quarterly obligation

Any business whose tax for the year, after TDS, is ₹10,000 or more must pay advance tax during the year:

Short payment attracts interest at 1% a month under Section 234C for each instalment, and under Section 234B if less than 90% of the tax is paid by year end. We estimate profit before each instalment from your management accounts, so the payment is neither short nor locked up as an unnecessary refund.

Partners, directors and what the business pays them

How owners take money out of the business changes the tax bill on both sides. In a partnership firm or LLP, salary, bonus and commission paid to working partners are deductible only if the deed authorises them and only up to the limits in Section 40(b). For FY 2025-26 the limit is the higher of ₹3 lakh or 90% of book profit on the first ₹6 lakh of book profit (or a loss), and 60% of the balance. Interest on partners' capital is allowed up to 12% a year. Since 1 April 2025, firms must deduct TDS at 10% on such payments to a partner above ₹20,000 in a year.

In a company, directors' salary is taxed as salary with TDS, and dividends are taxed in the shareholders' hands at their slab rates with no deduction to the company. Loans by a closely held company to substantial shareholders can be taxed as deemed dividend. We review the deed or board resolutions before year end so that the payouts you plan are fully deductible and correctly taxed.

Disallowances that inflate business tax

Most additions in business assessments come from a short list of provisions:

• TDS failures: 30% of an expense is disallowed under Section 40(a)(ia) if TDS was not deducted or deposited. A TAN and regular TDS returns prevent this.
• Cash payments above ₹10,000 a day to one person are disallowed under Section 40A(3).
• Late payments to micro and small enterprises: under Section 43B(h), amounts owed to MSME suppliers registered under Udyam and unpaid beyond 45 days (or 15 days without an agreement) are allowed only when paid.
• Statutory dues such as GST, PF and ESI are allowed only when actually paid, and employees' PF and ESI contributions only if deposited by the due date under those laws.
• Unexplained credits and cash deposits taxed under Sections 68 and 69 at a high flat rate.

Filing the return and what follows

Firms and LLPs file ITR-5 and companies file ITR-6, signed with a digital signature where audit applies. A loss from business can be carried forward for eight years only if the return is filed by the due date under Section 139(1); a late return loses that benefit. Transfer pricing cases have a later due date of 30 November.

For income from 1 April 2026, the same obligations continue under the Income-tax Act, 2025, with sections renumbered and the tax year replacing the previous year. We map your existing positions to the new provisions so that elections such as the Section 115BAA option carry over cleanly. Business returns also feed your ROC annual filings, and turnover must reconcile with your GST returns; mismatches are now among the most common reasons for scrutiny.

Our fee is quoted per year and depends on the entity type, the volume of transactions, whether we also maintain the books, and whether a tax audit is needed.

Documents you need

For a firm, LLP or company return, we need:

• PAN of the entity, and PAN and Aadhaar of partners or directors
• Partnership deed, LLP agreement or certificate of incorporation with MOA and AOA
• Books of account, or Tally or other software backup for the year
• Bank statements for all accounts
• Audited financial statements and statutory audit report, if applicable
• GST returns and Form 26AS for the year
• Advance tax and self-assessment tax challans
• Fixed asset register and loan statements

How we handle it for you

1. Year-end review

   We review the books and identify disallowances and audit applicability before closing.

2. Finalise accounts

   Accounts are finalised and reconciled with GST returns and Form 26AS.

3. Tax audit

   Where required, the audit report in Form 3CA or 3CB and 3CD is completed by the due date.

4. File the return

   ITR-5 or ITR-6 is filed, with the 115BAA or other elections made correctly.

5. Plan next year

   We set the advance tax schedule and a calendar for TDS and other compliance.

Why clients choose ProudLegal

Frequently asked questions