Your First Income Tax Return as an Indian Entrepreneur: A Step-by-Step Kickstart

Chosen theme: Steps to Filing Your First Income Tax Return as an Indian Entrepreneur. If you’ve launched your dream venture, this guide translates tax-speak into founder-friendly steps so you can file confidently, avoid penalties, and focus on building your business. Share your questions as you read, and subscribe for practical founder tax tips.

Know Who You Are (for Tax Purposes) and When You Must File

Most first-time founders operate as sole proprietors and typically file ITR-3, or ITR-4 if opting for presumptive taxation. Partners report business share in ITR-3, while companies use ITR-6. Choosing correctly prevents processing delays and frustrating portal errors.

Know Who You Are (for Tax Purposes) and When You Must File

You earn in the Financial Year (FY) and file in the Assessment Year (AY). Non-audit individuals generally file by 31 July; those needing audit typically file by 31 October. Mark these dates now, and set reminders two weeks before to avoid late fees.

Set Up Your Filing Foundation

Create or update your e-filing account

Register at incometax.gov.in with your PAN. Complete your profile, verify your contact details, and add a trusted email. If you plan to file using a desktop utility, download the latest version and keep it updated for schema changes.

Link PAN with Aadhaar and pre-validate your bank

Ensure PAN-Aadhaar linkage to keep your PAN operative and avoid filing issues. Pre-validate the bank account where you want refunds. It takes minutes, but it saves weeks of waiting if a refund is triggered after processing.

Get your books and evidence in order

Choose a consistent accounting method, gather invoices, receipts, and bank statements, and label everything clearly. If you’re new to bookkeeping, create separate business accounts to avoid mixing personal spends, which complicates expense claims and ruins clean audit trails.

Collect and Reconcile All Your Data

Download your Annual Information Statement (AIS), Taxpayer Information Summary (TIS), and Form 26AS. Confirm sales, interest, and TDS credits are complete. If anything looks off, add a feedback remark in AIS and maintain screenshots to support your position later.

Collect and Reconcile All Your Data

Legitimate business expenses include rent, internet, salaries, marketing, and software subscriptions. Keep proof and pay vendors digitally. Avoid claiming personal expenses as business costs; cash expenses above ten thousand may be disallowed, eroding savings you worked so hard to build.

Choose Between Old and New Regimes, Then Optimise

The new regime offers lower slab rates but fewer deductions, and it is now the default for many individuals. The old regime rewards investments and deductions if you have them. Compare both concretely using your actual income and planned deductions before choosing.

Claim routine business expenses and depreciation on laptops, machinery, and furniture. For a home office, allocate a fair proportion of rent and utilities. Keep photos, floor plans, and bills as backup, because reasonable documentation turns grey zones into clear green ticks.

If you opt for the old regime, consider Section 80C investments, medical insurance under 80D, and eligible donations under 80G. Keep payment proofs and donation receipts with valid identifiers. Without evidence, deductions can be disallowed during processing or scrutiny.

Prepare the Correct ITR Form

Use ITR-4 for presumptive income under Sections 44AD or 44ADA, and ITR-3 when maintaining full books or having non-presumptive business income. If you have capital gains, foreign assets, or more complexity, ITR-3 is usually the safer and correct choice.

Prepare the Correct ITR Form

Under 44AD, presumptive business income is typically six percent of digital receipts and eight percent of cash receipts. Professionals under 44ADA presume fifty percent of gross receipts as income. Keep evidence of digital collections, because percentages depend on how customers actually paid.

File Online, Pay Any Dues, and E-Verify

Upload or prepare your return on incometax.gov.in, import prefilled data, and carefully verify each schedule. Watch for red validation warnings. Save drafts often, and download the JSON copy before final submission so you have a record of exactly what was filed.

If tax remains payable, use e-Pay Tax to generate the correct challan and pay via net banking, UPI, or debit card. Record the Challan Identification Number. Reopen your draft, add the challan details, and confirm the tax ledger reflects your payment accurately.

After submission, e-verify using Aadhaar OTP, bank account EVC, demat, or digital signature. Do it within thirty days, else the return may be treated as not filed. Set a calendar reminder now; this tiny step is what makes your filing truly complete.

After Filing: Track, Rectify, and Stay Compliant

Check refund status on the portal and your bank. When Intimation under Section 143(1) arrives, compare it with your computation. Differences usually stem from AIS mismatches or missed challans. Fix promptly to avoid interest snowballing into unnecessary and preventable costs.

After Filing: Track, Rectify, and Stay Compliant

Found an error? File a revised return within permitted timelines, or request rectification under Section 154 for processing mistakes. Keep a short note of what changed and why. That little memo saves time if a future banker or investor requests explanations.

After Filing: Track, Rectify, and Stay Compliant

Store books, invoices, and workings for at least six years. If a notice arrives through the faceless system, read calmly, respond with evidence, and meet deadlines. Polite, complete responses resolve most issues faster than long arguments or hasty, incomplete replies.

Founder Stories, Pitfalls, and a Handy Checklist

Meera’s Pune cafe: a first return done right

Meera switched to digital payments early, used 44AD, reconciled AIS with GST sales, and filed by mid-July. Her refund arrived quickly. She now swears by labelled folders and weekly bookkeeping, a habit she compares to cleaning the espresso machine every night.

Mistakes we see beginners repeat (and quick fixes)

Typical errors include mixing personal and business spends, ignoring AIS mismatches, and claiming deductions under the new regime. Fix by using separate accounts, reconciling monthly, and running a regime comparison. Comment with mistakes you’ve faced, and we’ll add practical fixes.

A one-sitting checklist you can actually follow

Decide your regime, reconcile AIS and 26AS, finalise books, compute taxes, choose ITR, pay dues, file, and e-verify. Save acknowledgments and challans. Subscribe for our founder-focused tax reminders so these steps become a smooth rhythm, not a seasonal scramble.