Closing of proprietorship business

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 March 2012 If the proprietor of the firm discontinues his business and join a service. whether the information in respect of discontinuation is necessary to trasmit at income tax office.
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CA. Hari Kishan

CA. Hari Kishan (Expert)
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23 March 2012 There in no requirement of informing the IT department regarding the closure of proprietorship business,

Sunil

Sunil (Expert)
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12 April 2012 Technically it is just that you cease to do any business in the trade name or proprietorship name as you and your proprietorship are not distinct from each other. You can discontinue when you like. The question comes up about assets and liabilities. You can continue to encash the fixed assets in your name and it will be capital gains. However, you cannot claim depreciation or other expenses on any amounts that you receive from the business. You can recover any debts from debtors but in case it was not offered for taxation in your turnover you will have to pay income tax on it. In case of liabilities, even if your proprietorship is closed you have to continue paying from your personal assets and the rule will still apply of payees a/c cheques for more than 20K etc. If your accounts were on mercantile basis and you have claimed expenses, you will still have to pay them by a/c payee cheque / draft if more than Rs.20,000. Therefore, befor closing bank accounts please ensure you at least draw up your accounts and ensure you satisfy all these to maximum extent.

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