Sole proprietor hiring employees

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A proprietorship hiring 7 to 8 employees must comply with Shops Act, GST if applicable, TDS, Professional Tax, and labour laws. PF applies if 20 or more employees, ESI if 10 or more. Timely returns and statutory compliance are required.

Prapti

Prapti (Querist)

31 March 2023 What are the statutory compliances proprietorship firm needs to follow if hiring 7-8 employees?

CA Sanat Pyne

CA Sanat Pyne (Expert)

31 March 2023 If a proprietorship firm is hiring 7-8 employees, it needs to comply with various statutory regulations. Here are some of the key compliances:
Registration under the Shops and Establishments Act: The proprietorship firm needs to register under the applicable Shops and Establishments Act in the respective state where it operates. The registration needs to be done within 30 days from the date of starting the business.
Registration under GST: If the annual turnover of the proprietorship firm is above the threshold limit (Rs. 20 lahks for most states and Rs. 10 lahks for northeastern states), it needs to register under the Goods and Services Tax (GST) Act.
TDS and TCS: If the proprietorship firm is making payments to its employees, it needs to deduct tax at source (TDS) and deposit the same with the government. If the proprietorship firm is engaged in specified business activities, it needs to collect tax at source (TCS) and deposit the same with the government.
Provident Fund: The proprietorship firm needs to register with the Employees' Provident Fund Organisation (EPFO) if it has 20 or more employees. The employer and employee need to contribute a certain percentage of the employee's basic salary towards the provident fund.
ESI: The proprietorship firm needs to register with the Employees' State Insurance Corporation (ESIC) if it has 10 or more employees. The employer and employee need to contribute a certain percentage of the employee's salary towards the ESI scheme.
Professional Tax: The proprietorship firm needs to pay professional tax to the respective state government where it operates. The amount of tax and the due date for payment may vary from state to state.
Income Tax Returns: The proprietorship firm needs to file its income tax returns on time. The due date for filing the returns may vary based on the type of taxpayer and the amount of income earned.
Labor Law Compliances: The proprietorship firm needs to comply with various labor laws, such as the Minimum Wages Act, Payment of Bonus Act, Payment of Gratuity Act, and others.
It is advisable to seek professional help to ensure compliance with all statutory regulations.

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