Which ITR form I need to file (for sole proprietorship firm)

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This discussion addresses which Income Tax Return (ITR) form a sole proprietor needs to file, especially when the business has no profit and the proprietor takes a salary. The consensus is that a proprietor cannot take a salary from their own business, making ITR-1 unsuitable. Forms like ITR-3 or ITR-4 are recommended, depending on the business turnover and structure. The user's turnover of approximately 25 Lakh rupees is noted as a factor in determining the correct form.

Narsimha Rao Karanam

Narsimha Rao Karanam (Querist)
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21 September 2020 Hello Sir, My name is Narsimha Rao K,

This year January 2020, I formed a sole proprietorship (IT software) firm, but I dont get any profits, I am just taking salary from it and paying salaries to 3 others

Till last year I was filing my IT returns my own, as a salaried professional (ITR-1 Saral) from cleartax website

How do I have to file my returns last financial year (FY 2019-20 (AY 2020-21)), do I have to file ITR-1 or any other form...

Somebody is saying ITR-3 and somebody is saying ITR-4. I have confused a lot.

Please reply my query sir

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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21 September 2020 File ITR 3, treat 3 persons salay as expenses your salary will be considered as profit.

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Eswar Reddy S

Eswar Reddy S (Expert)
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22 September 2020 @Narasimha Rao K, If you are a proprietor then you can not take a salary from proprietorship business.So you can't file ITR-1. Proprietorship income comes under business. You have to use either ITR-3/ITR-4. Let me know your turnover

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Narsimha Rao Karanam

Narsimha Rao Karanam (Querist)
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25 September 2020 @Eswar Reddy S sir, The total turnover of my company is around 25 Lakh rupees per year(that includes my salary too).

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