Similar to other incorporated firms like Partnerships Firm Registration and LLP Registration, Sole Proprietorship Registration is also required to pay taxes on its earnings. According to the law, proprietorship and the proprietor are regarded as a single entity and are thus subject to income tax returns. Consequently, the regulations governing the payment of the proprietor’s income tax return also extend to the proprietorship.

However, unlike registered companies that have fixed income tax rates based on flat rates, a sole proprietorship is not taxed as a separate legal entity. Instead, business owners must file their taxes as individual returns, similar to other individual taxpayers in the country. The tax rate for the proprietorship is determined based on the Income-tax rules and the applicable slab rates, which determine the deductions applicable.