Sole Proprietorship vs Firm vs Company: Tax Angle

A sole proprietorship has no separate legal identity; the owner and business are the same for tax purposes. Income is taxed under the individual slab rates. Audit under Section 44AB applies if turnover exceeds Rs 1 crore (Rs 10 crore if 90 percent of transactions are digital). A partnership firm is taxed at a flat 30 percent plus surcharge and cess. Salary and interest paid to partners are deductible within limits. A private limited company is taxed at 25 percent (if turnover does not exceed Rs 400 crore in the previous year) plus cess. Dividends are taxable in the hands of shareholders.