An individual runs a sole proprietorship business. How are its profits taxed under the Income-tax Act, 2025?
Question and options
An individual runs a sole proprietorship business. How are its profits taxed under the Income-tax Act, 2025?
As the income of an association of persons, at the maximum rate
As the income of a separate business entity, at the company rate
As the income of a separate firm, at the flat rate for firms
As the proprietor's business income, at the slab rates for individuals
Answer and explanation
A sole proprietorship has no existence apart from its owner, so it is not a separate person under the Income-tax Act, 2025. Its profits are the proprietor's income under the head ‘Profits and gains of business or profession’ and are taxed with the rest of the individual's income at the slab rates of the regime applicable. A firm needs two or more partners, so the flat rate for firms cannot apply.
Practice for these exams
-
All India Bar Examination (AIBE)
Subject revision
See pack details on LawMint.net -
IIT Kharagpur LL.M. Entrance
Subject revision
See pack details on LawMint.net -
CLAT PG
Subject revision for a passage-based exam
-
AILET PG
Subject revision
Related exam syllabi
More solved explanations in Income tax - basic concepts, residence & heads of income
- A person owns a building and lets it to a tenant solely to earn rent, not as part of any business. Under which head is the rent assessed?
- For an individual who has opted out of the new tax regime under section 202 of the Income-tax Act, 2025, which of the following contributions does NOT qualify for…
- What is the income-tax residence status of an Indian company under section 6(10) of the Income-tax Act, 2025?
- For tax year 2026-27, an individual who has opted out of the new tax regime under section 202 of the Income-tax Act, 2025 pays interest on a loan taken to…
- Which provision of the Income-tax Act, 2025 requires computation having regard to arm’s-length price for a covered specified domestic transaction?