5 Reasons why your company
should file tax returns on time?

Filing tax returns for business means reporting the income and expense to the Income Tax (IT) department, it also includes the assets and liabilities a company has. It’s clear that tax filing for companies can be more intricate than for individual tax returns, underscoring the importance of being extra vigilant and ensuring the timely submission of tax returns.

Different company structure

Various company formation structures, such as partnerships, proprietorships, limited liability partnerships, or private limited companies, entail specific tax liabilities. Therefore, it is crucial to carefully choose the type of company one intends to establish. Different company structures come with specific conditions that must be met, including mandatory accounting practices for businesses earning over Rs. 1,20,000 in income and with total sales or turnover exceeding Rs. 10,00,000. In certain instances, businesses are obliged to conduct tax audits within the specified filing deadlines.

Income tax rates vary depending on the business structure. For instance, partnership firms and LLPs are subject to a flat tax rate of 30 percent. If their income exceeds Rs. 1 crore, an additional 12 percent charge applies. Following the computation, there is an extra 3 percent levy for health and education cess. On the other hand, domestic companies must pay a 30 percent tax rate if their income surpasses Rs. 250 crores in the previous year. There is a surcharge applicable at 7 percent and 12 percent respectively for income between Rs 1 crore to 10 crore and greater than 10 crores.

The purpose of an income tax audit is to verify the authenticity and accuracy of the income, expenses, and deductions reported by the company. In accordance with the provisions of Section 44AB of the Income Tax Act, businesses are required to undergo an audit of their accounts.

Let’s explore various reasons to comprehend the importance of filing tax returns.

Get approved loan

Whether you run a small or large business, there may come a time when you require financial support for expansion, mergers and acquisitions, or research and development. Financial assistance becomes a necessity at some point. Applying for a business loan is often the most straightforward and expedient way to secure these funds. Additionally, if you intend to attract investors, they typically require recent tax filings as a sign of financial reliability. To obtain approval for a business loan, organizations must provide income tax returns from recent years along with income statements. Therefore, the importance of filing these returns cannot be overstated.

Avoid bad reputation

Failing to file taxes promptly or intentionally neglecting tax obligations can lead to penalties for the business. This, in turn, can harm the business’s reputation and result in paying more than the originally owed taxes. While some might believe they can avoid tax payments without consequences, it’s important to note that income is eventually traceable under the registered company’s PAN number.

Report losses

Some individuals might assume that because their company is currently operating at a loss, they can forgo filing tax returns. However, it’s important to remember the provision for carrying forward business losses to the following year. This provision allows businesses to report the loss under a special head, effectively reducing the income for the next year by the amount of the reported losses. This can be advantageous for the business as it results in a decrease in the reported income.

Have good due diligence

If your business necessitates interactions with government entities or securing contracts with government firms, it’s essential for your business to maintain a strong financial track record. Whether you seek investments or loans, the company must successfully pass due diligence assessments. To ensure any of the above you need to make sure your business file tax returns that are audited. In most government tenders they keep track of 5 years of past audited reports.

Claim special cases

Certain businesses are eligible for the presumptive taxation scheme, which can significantly reduce the tax burden for small enterprises. Under this scheme, small businesses with annual incomes of less than Rs 2 crores can benefit by paying taxes on only 8% of their earnings. Additionally, businesses that have not opted for the presumptive tax scheme can still claim depreciation on their assets, but their taxable income is calculated after accounting for all expenditures and depreciation. Therefore, timely filing of tax returns offers multiple advantages in terms of tax savings.


Filing taxes promptly offers numerous advantages. As a business owner, it provides you with insights into your business and enables more effective management of its growth. Furthermore, it enhances the confidence of customers and all stakeholders. Hence, it is imperative to ensure the timely submission of tax returns.