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Income tax for proprietorship company

Ankur Tyagi (student) (36 Points)

28 May 2015

I have proprietorship company registered and do software development for overseas client. I get 1800 Euro every month in current account of my proprietorship company.

I transfer 60% of that amount to my saving account and 40% to my colleague's account.

What are my tax liabilites if my colleague file ITR1 as normal salary account?

Should I pay tax of 60% of the amount which I transfer to saving account?

I assume that ITR4 is for me. Do I need to audit of my books? What books are required for audit?

I am really confused. Please help.

Thanks

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7 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 28 May 2015

If your colleague considers it as salary income, then such amount can be deducted as expense when u file itr4. Entire 100% is your income but you can deduct 40% towards salary expense n also can deduct other official expenses to arrive at your taxable income. If turnover or gross receipts of your business is more than 1 crore, then u need to get your books audited u/s 44ab

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Ankur Tyagi (student) (36 Points)
Replied 29 May 2015

Hi Poornima

Thank you for your response.

In this case, then my colleague need to pay income tax on that 40%?

I have some short term capital gain from equity too ( 30,000 ). Will I pay 15% tax on that and tax as per slab on proprietorship income [ 100% - 40% (colleague salary) - any other office expense] ?

Is investing in equity required audit by CA, what is limit for that?

Thank you.

CMA Poornima Madhava (CMA) (13097 Points)
Replied 29 May 2015

Yes, your colleague has to pay tax on 40% (s/he will be able to claim deduction/exemption if any)
If you have paid STT on STCG, then tax @ 15% else at normal rate
I don't think any audit is required for investment in equity by CA
You can claim deduction u/s 80C etc if any (but not on STCG on which tax is paid @ 15%)

1 Like