1How is a sole proprietor taxed?
On business profit, at your personal slab rates — there's no separate company tax. Every legitimate expense and old-regime deduction reduces that profit, so good records pay off directly.
As a sole proprietor your business and personal tax are one and the same — profits are taxed at your slab rate. That's simple, but it means every legitimate expense and deduction matters. Here's how sole proprietors save tax.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-15
Quick answer
Sole proprietors are taxed on business profit at personal slabs — so presumptive schemes, real expenses, NPS and advance tax are the key levers. Here's how.
If you run a business, 44AD lets you declare 8% of turnover (6% digital) as income within Rs 2 crore turnover; if you're a professional, 44ADA lets you declare 50% of receipts within Rs 50 lakh. Both skip audit and detailed books and often reduce tax for small operators — choose the one that matches your activity.
If you keep books instead, deduct all real costs of running the business — rent, internet and phone, software, travel, professional fees, and depreciation on your equipment. A home office means a fair share of rent and utilities can be claimed too. Keep invoices.
Without an employer pension, NPS and PPF do double duty — they build your corpus and cut tax. The Rs 50,000 NPS deduction over and above 80C is particularly valuable for the self-employed.
With no TDS on your business income, pay advance tax in the four instalments if your tax exceeds Rs 10,000, to avoid 234B/234C interest. Also track your turnover against the audit thresholds — crossing them, or opting out of presumptive, can trigger a tax-audit requirement.
On business profit, at your personal slab rates — there's no separate company tax. Every legitimate expense and old-regime deduction reduces that profit, so good records pay off directly.
44AD if you run a business, 44ADA if you're a professional. 44AD declares 8% (6% digital) of turnover within Rs 2 crore; 44ADA declares 50% of receipts within Rs 50 lakh — both skip audit.
Yes — a fair share of rent, utilities and internet used for the business is deductible when you keep books. Keep a reasonable basis for the split and retain the bills.
Just gone solo? Write to the firm and we'll set up the simplest compliant way to file and save.