Personal expenses including sole proprietorship firm

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This discussion clarifies the treatment of personal expenses for sole proprietorships when filing Income Tax Returns (ITR). It's stressed that personal expenses, such as the Rs. 1,20,000 mentioned, should not be included in business expenses unless they can be directly proven as incurred for business purposes. The advice strongly discourages using arbitrary percentages like 1/5th or 1/15th to apportion personal costs as business expenses; each expense should be assessed individually.

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)

03 May 2024 Sir,
Assessess running a proprietorship firm personal expenses rs:1,20,000/- lacs
Question:
Personal expenses including total amount rs:1,20,000/- or 1/15 share amount including sole proprietorship in itr.

Nikhil Kaushik

Nikhil Kaushik (Expert)

03 May 2024 what is 1/15 share here?

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)

03 May 2024 total amount or 1/5 th

Nikhil Kaushik

Nikhil Kaushik (Expert)

03 May 2024 what is 1/5th here...where is this percentage coming?

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)

03 May 2024 sir, assessess personal expenses rs:1,20,000/- 1/5 personal expenses amount including added profit in sole proprietorship firm is correct

Nikhil Kaushik

Nikhil Kaushik (Expert)

03 May 2024 see, if it is a personal expense, and you know it, none of it should be included in the expenses unless you can show that it is an expense incurred for business purpose. This decision should be based on specific expenses. Do not use a random percentage of expenses being apportioned as business expense.

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