ITR Filing for Small Business Owners

Income Tax Return (ITR) filing is a crucial responsibility for every small business owner, especially those classified as MSMEs (Micro, Small, and Medium Enterprises). Whether you operate as a sole proprietor, run a small shop, or manage a service-based enterprise, filing your ITR correctly not only ensures tax compliance but also strengthens your business profile for loans, tenders, vendor registration, and subsidies.

In today’s regulatory environment, timely and accurate ITR filing has become an essential part of financial transparency and trust-building - both with the government and financial institutions. Here’s everything a small business owner needs to know.

What Is Form 16 and Why Do You Get More Than One?

Form 16 is a certificate issued by an employer that shows the salary paid to you and the tax deducted on your behalf during the financial year. It acts as proof that TDS (Tax Deducted at Source) has been deposited with the Income Tax Department against your PAN.

You receive a separate Form 16 from each employer you worked for during the financial year. So, if you switched jobs — even if it was only once — you will have more than one Form 16 for the same financial year.

Each employer calculates tax on the salary they paid you, assuming they were your only employer for that period. This leads to two potential issues: your tax liability might have been under-calculated overall, and certain deductions like standard deduction, HRA, or 80C may have been claimed twice.

Why You Should Be Careful with Multiple Form 16s

When you file your income tax return, you need to report your total income for the year, not just what one employer paid you. This means combining the salary figures from all Form 16s and ensuring that deductions like standard deduction (₹50,000) or Section 80C (₹1.5 lakh limit) are applied only once in total.

If you blindly input figures from both Form 16s into your ITR, you could end up underreporting your income, over-claiming deductions, or missing out on reporting TDS properly. These discrepancies can trigger tax notices or delay your refund.

How to Consolidate Income from Multiple Employers

The best way to start is by collecting all Form 16s issued to you. Then, create a combined salary statement for the full year. Add up the total gross salary, allowances, exemptions (like HRA or LTA), and deductions mentioned in both Form 16s. After removing duplicates and applying limits correctly, you can arrive at your total taxable salary.

For example, both employers might have considered Section 80C deductions separately. But the ₹1.5 lakh limit applies once. So if your first employer declared ₹1 lakh under 80C and your second declared ₹1 lakh again, you must cap your claim to ₹1.5 lakh in the ITR.

The same logic applies to the standard deduction - you can claim it only once, no matter how many Form 16s you have.

Verifying TDS Using Form 26AS and AIS

Before submitting your return, always cross-check the TDS amounts in your Form 16s with what’s recorded in Form 26AS and the Annual Information Statement (AIS) on the income tax portal. These consolidated statements list all the taxes deposited under your PAN.

If you find any mismatch - for example, an employer deducted TDS but it doesn’t show in 26AS - follow up with them immediately. You may need a corrected Form 16 or confirmation that TDS has been deposited.

Also, if your total tax liability exceeds the TDS deducted by your employers (which happens often when combined salary pushes you into a higher tax bracket), make sure you pay the balance amount using self-assessment tax before filing your return.

Which ITR Form Should You Use?

If your only source of income is salary and interest (and no capital gains, foreign income, or more than one property), you can use ITR-1 (Sahaj). However, if you have capital gains or own multiple properties, you’ll need to use ITR-2.

Choosing the correct ITR form is very important. Using the wrong one can lead to rejection of your return or delays in processing.

Common Mistakes to Avoid

Claiming deductions twice: Standard deduction, 80C, HRA, and other exemptions should be claimed only once.

Missing out on one Form 16: Even if an old employer paid you for just a few months, don’t forget to include that income.

Mismatch with PAN records: Make sure all income and TDS is reflected in Form 26AS and AIS.

Incorrect employment dates: Mentioning wrong start/end dates may confuse the department or lead to employer mismatch.

Bank account errors: Ensure your correct bank account is linked for quick refund processing.

1. Is it mandatory to report all Form 16s when filing ITR?

You must report the total salary received from all employers during the financial year, even if the income was for just a few months.

2. Can I claim standard deduction for both jobs?

You can only claim one standard deduction of ₹50,000 in total — not per job.

3. What if my total income puts me in a higher tax slab?

You must recalculate your tax as per your total income and pay any shortfall via self-assessment tax.

4. What if one employer hasn’t issued Form 16?

You can use your salary slips, bank statements, and Form 26AS to file your return. Form 16 is helpful but not mandatory.

5. How do I check if TDS has been properly deposited?

Log in to the income tax portal and check Form 26AS and AIS. All TDS entries under your PAN should match the ones on your Form 16s.