GST is a single tax levied on services and goods consumed in the Indian economy. Introduced by the Central Government, GST is an indirect tax treating India as one nation and market. Since its introduction in 2017, most businesses have found adhering to the GST compliance rules challenging.
As per the GST regulations, every business should pay taxes on time. Therefore, companies must compulsorily adopt the GST compliance protocols the government has created to adhere to. It is important to note that GST rules are updated regularly. However, businesses should focus on tax invoice compliance, registration compliance, and return filing compliance. With a reasonable GST compliance rate, any organisation can gain the trust of the tax authorities. And when the business gains the confidence of the government, it becomes easier to target a broad group of customers.
The GST compliance rating is a score the government provides to a business. Its primary purpose is to motivate an organisation and others operating in the same industry domain to comply with the tax department. This compliance rating is calculated based on various parameters like timely filing of returns, furnishing proper details of input credits used, taxes paid, etc.
Note that the scores are updated by analysing whether the company has a GST compliance checklist. The details of a company that has received an excellent GST compliance rating will be published in the public domain so that everyone can access them. This also allows small and medium-scale organisations to select the most GST-compliant vendor for their operations.
Here are some reasons why every company should maintain GST statutory compliance.
The GST compliance is a legal duty for businesses in India. Compliance with GST rules and regulations is crucial, as failure to adhere to them may result in strict penalties, interest payments, and even prosecution in worst-case scenarios. Non-conformity with GST provisions, e.g., not getting registration, not filing returns, or not paying taxes on the due date, could lead to financial penalties and legal issues.
Businesses that do not comply with GST will experience severe financial difficulty. Penalties, interest charges, and blocking the Input Tax Credit (ITC) might negatively affect a company's profitability and cash flow. Achieving compliance helps businesses claim eligible tax credits and calculate their tax liabilities correctly, thus improving tax management.
Those businesses that follow the GST compliance calendar are seen to be trusted by their suppliers, customers, and government bodies. One of the results of this reliability is that it helps build trust and creates new business opportunities for compliant businesses, putting them ahead of their competitors.
Timely submission of GST returns, issuance of compliant invoices, and proper documentation contribute to a seamless business operation. Non-conformity can disrupt agreed-upon arrangements, auditing, and legal disputes, which might interfere with daily operations and cause unnecessary delays.
With the GST system in place, businesses are encouraged to be more transparent and accountable. A compliant business evidences it believes in ethical practices and earns stakeholders' trust, leading to a fair and thriving business environment. This can be a decisive factor in enhancing a company's reputation and attracting new customers and partners.
Through GST compliance, businesses in India can avoid financial losses, maintain credibility, ensure smooth running, and become supportive of transparent and ethical business.
GST compliance audit is critical for Indian companies as it guarantees that the Goods and Services Tax (GST) rules and legislations are followed. In the audit, the auditor thoroughly examines the company's books and records, transactions, and processes, ranging from GST-related records to the company's financials.
The auditor is an independent chartered accountant or cost accountant. If the companies are non-compliant with GST rules, there will be very serious penalties, interest charges, and legal actions, thus making the compliance audit a key factor.
As a result of the audit, companies may expose and correct all non-compliance issues, including inaccurate tax calculations, misplaced input tax credit claims, and poor record-keeping.
Such a preventative approach reduces the probability of companies being held responsible for GST and keeps them with a clean GST compliance record. Besides that, the audit gives businesses an opportunity to simplify their GST operations, improve efficiency, and reduce possible taxation mistakes.
On top of that, a GST compliance audit strengthens a brand's credibility as an open and ethical company. Such relationships may produce a bond of trust with primary stakeholders, including customers, suppliers, or government institutions. The companies that follow GST advisory and compliance are usually considered highly reliable and trustworthy, which may open new business opportunities and foster long-term relations.
An essential step of GST audit compliance is assisting Indian companies in mitigating risks, filing a correct tax declaration, maintaining a good reputation, improving their operational efficiency, and complying with GST regulations.
Besides getting a GST compliance certificate, knowing the compliance requirements is essential. Listed are the crucial aspects of GST compliance requirements.
Companies with an annual income worth more than Rs. 20 lakhs (Rs. 10 lakhs for special-category states) need to get GST registered. This is through the provision of the required documents and application for GSTIN (Unique GST Identification Number).
Timely payment of CGST, SGST, and IGST for goods and services is required. Companies are also expected to regularly file GSTR-1 (Outward Supplies), GSTR-3B (Summary Returns), and annual GSTR-9 returns within stipulated time periods.
Getting e-way bills is necessary to transport goods worth more than Rs. 50,000 within the same state or from state to state. An e-way bill is a document used to monitor the movement of goods and check tax evasion by unscrupulous persons.
Providing GST-compliant invoices that are all-inclusive, such as GSTIN, HSN/SAC codes, and GST rates is paramount. Businesses should likewise ensure that their inward and outward supplies records and ITC claims and payments are kept. They should also be able to generate e-way bills.
Companies that achieve a specified turnover level are required to have their records audited by a chartered accountant or a cost accountant. They must also follow TDS rules and other GST regulations and processes.
You must have understood GST compliance and its importance for organisations by now. It is your first step towards establishing your business. If you want to know more about GST compliance, contact Anil D'Souza & Associates. Visit top CA firm in bangalore to get the best GST compliance services in India.
What are the benefits of GST compliance?
The benefits of GST compliance in India include the prevention of penalties, preservation of credibility, simplification of processes, and maximisation of tax administration.
Why is tax compliance necessary?
Tax compliance is required to comply with legal requirements, prevent financial losses, and enhance the transparency of business dealings.
How many types of compliance are there?
There are several types of compliances: registration, tax payment, returns filing, invoicing, record keeping, and audits.
What is GST yearly compliance?
GST yearly compliance involves preparing and filing GSTR-9 returns, GST audits and reconciliation of accounts for the financial year.
For regular taxpayers, the Goods and Services Tax Return 1 (GSTR 1) form is a return form. Taxpayers who cross a turnover of more than 1.5 crores annually have to file details of outward supplies on the 11th of the next month. Such taxpayers have to file quarterly returns, according to the rules and regulations. For filing GSTR 1, every registered taxpayer shall submit the complete sales details i.e. outward supplies in the GSTR-1 form. These details should be submitted within 11 days from the end of the succeeding month for regular taxpayers.
GSTR 1 filing online must done on the 13th of the consecutive month in the succeeding quarter. In case registered taxpayers have witnessed no sales or supplies during the month or the quarter, they will be filing nil GSTR1 or GSTR-3B to avoid a late fee of Rs 500 (Rs.250CGST + Rs.250SGST). However, the return does not apply to composition vendors, those with Unique Identification Numbers, and non-resident foreign taxpayers.
The following prerequisites are a must for taxpayers to file GSTR-1;
- GSTR1 filing can be done only if the registered taxpayer has a 15-digit PAN-based GSTIN under the GST regime.
- Taxpayers must keep detailed invoices with unique serial numbers for all transactions ready before filing GSTR1 online quarterly. This includes intra-state and inter-state transactions, business-to-business (B2B), and Business-to-customer sales. Transactions associated with nil-rated exempted and non-GST outward supplies and stock transfers between different business locations beyond the state are also included in the ambit of this return.
- Registered taxpayers will need an OTP that is received on the registered phone to verify using EVC or a digital signature. Taxpayers can also use Aadhar-based e-sign here.
According to the GST Council, every late payment of taxes will attract an annual interest of 18 percent of the GST tax. This is applicable just after the commencement of the due date and is valid till the taxes are paid to the government.
The rules and regulations calculate the interest in case certain taxpayers drop any of the deadlines for the GST tax payment. If Rs. 1000 is assumed as the tax payment, an interest of 18 percent will be calculated on every single delay from the due date. In this case, interest will amount to 1000*18/100*1/365 i.e. Rs. 0.49 per day.
However, in case a taxpayer faces GSTR1 filing issues and is not able to file their return within specified due dates, the taxpayer is obliged to pay a late fee of Rs. 50 daily.
While first filing GSTR1 online, the assessee will have to mention the aggregate turnover of the previous tax period. It is crucial to note here that this data should not be auto-populated from the next returns.
Any person with less than 1.5 crores of aggregate turnover is required to provide HSN codes and SAC. For B2B supplies, specific details of invoices have to be uploaded. In the case of B2C supplies, only invoices worth more than Rs. 2.5 lakhs in outward inter-state supplies have to be mentioned.
Taxpayers will have to produce 12 HSN wise summary of outward supplies calculated by adding supplies made to the registered businesses and supplies made to consumers. Here, supplies made to registered businesses include credit notes, debit notes, and refund vouchers created for registered business customers, and supplies made to consumers include credit notes, debit notes, and refund vouchers created for consumers.
There are three ways to file GSTR1:
- Online entry through the GST portal
- Uploading data using the offline portal (recommended for businesses with numerous invoices)
- Using third-party applications like authorized GST Suvidha Providers (GSPs)
The GSTR1 file return step-by-step guide includes a total of 13 sections. Although not all sections are mandatory, some will be prefilled. Here is a step-by-step guide for GSTR1 filing online.
- As soon as taxpayers reach the GST portal, they will first need to log in using their credentials.
- Next, they can go to services and click on Returns and Returns Dashboard.
- While selecting the filing period, taxpayers will have to choose the financial year, quarter, and month for which they are filing GSTR1.
- Now click on 'Prepare Online' in the GSTR-1 tile and enter the details as prompted.
- The details required are:
~ B2B Supplies: Taxpayers can add details of taxable outward supplies to registered businesses within the state.
~ B2C Supplies: These details will include sales to unregistered individuals or consumers within the state.
~ Credit Debit Notes: Details of any debit or credit notes issued or received for earlier tax period must be mentioned.
~ Amendments: This section can be used to rectify any errors in previously filed GSTR1.
~ B2C others: This section will have details of supplies made to unregistered consumers outside the state.
~ HSN Summary: This section is auto-populated based on the HSN codes mentioned in invoices.
- Once the details are entered, taxpayers can click on 'Generate GSTR-1 Summary' to validate the data consistency and preview to review the final return before submission.
- Further, taxpayers choose either File with DSC or File with EVC.
- Once the GSTR-1 is successfully filed, taxpayers shall receive an Acknowledgement Receipt Number (ARN) confirming the return submission.
These steps can ensure smooth and compliant filing of GSTR1 while avoiding penalties. It is advised that taxpayers maintain accurate records and file revisions or corrections within the prescribed time limit. However, to ensure smoother GST compliance do not hesitate to seek professional advice and answer specific questions regarding tax situation.
What is the limit for filing GSTR 1?
The limit for returns filing for GST GSTR1 for regular taxpayers who have to file details of outward supplies on the 11th of the next month is Rs. 1.5 crores. This means those who cross a turnover of 1.5 crores annually have to fill out the GSTR1 form. Taxpayers under this threshold limit have to file quarterly returns.
How do I file GSTR1 monthly?
For filing GSTR 1, every registered taxpayer shall submit the complete sales details i.e. outward supplies in the GSTR-1 form. These details should be submitted within 11 days from the end of the succeeding month for regular taxpayers. GSTR 1 filing online must done on the 13th of the consecutive month in the succeeding quarter.
Is GSTR1 monthly or Quarterly limit?
In case taxpayers opt for the QRMP scheme, both Form GSTR1 and GSTR 3B will be required to be filed at a quarterly frequency. Despite this, the payments for tax dues will have to be made monthly through a challan.
Who is eligible for monthly GSTR return?
Businesses with an annual turnover of more than Rs. 5 crores in the previous financial year are eligible to file monthly returns. This means the filing frequency is once a month or 12 times a year.
Navigating the intricacies of the Indian tax regulations can be complex especially while dealing with audit reports. Different types of audits have been prescribed under Indian law including company audits, cost audits, etc. Certain taxpayers have to get their business or professional books of accounts audited under the Income Tax Act 1961. This is also known as a tax audit.
In compliance with the Act and the Income Tax Rules (1962), two tax audit forms; Form 3CA and Form 3CB govern the process of filing income tax returns in India. Understanding the difference between form 3CA and 3CB is crucial for taxpayers as well as for their chartered accountants to ensure accurate and compliant reporting. Moreover, while 3CA and 3CB pertain to tax audit reports, their applicability and underlying requirements differ significantly.
The primary difference between 3CA and 3CB lies in the mandatory audit requirement.
- Form 3CA: Under Section 44AB of the Income Tax Act 1961, in case a person who carries a business or profession and is required to get his accounts audited shall file an audit report in Form 3CA. This includes companies, LLPs, and certain cooperative societies.
- Form 3CB: Under Section 44AB of the Income Tax Act 1961, in case a person who is business or professional and is not required to get his accounts audited shall file an audit report in Form 3CB. This applies to individuals, professionals, and partnership firms with a turnover exceeding ?1 crore. Also, they should not opt for the presumptive taxation scheme.
The main difference between Form 3CA and Form 3CB is its audit requirement clause. While the audit requirement for submission of Form 3CA is compulsory, no such mandatory requirement exists in the case of Form 3CB. Here is the table below to show 3CA and 3CB differences.
| Feature | Form 3CA | Form 3CB |
|---|---|---|
| Mandatory Audit | Required | Not Required (but applicable if income exceeds ?1 crores under section 44AB) |
| Applicability | Companies, LLPs, certain cooperative societies | Individuals, professionals, and partnership firms |
| Turnover Threshold | Not Applicable | Total sales turnover or gross receipts of ?1 crore or more under Section 44AB |
| Supporting Documen | A detailed statement of particulars Form 3CD | A detailed statement of particulars Form 3CD |
| Filing Due Date | On or before September 30th of the relevant assessment year* | July 31st of the relevant assessment year |
*In case, a taxpayer is obtaining Form 3CE audit report, the due date is November 30 for that relevant assessment year.
The format and content for both Form 3CA and 3CB may be subject to changes based on the updates from the government. It is advised to consult a qualified tax consultant or chartered accountant for the latest guidance.
The key 3CA and 3CB difference lies in the audit requirement clause. While it is compulsory for submission of Form 3CA, there are no such mandatory requirements for Form 3CB. Additionally, Form 3CD is a very detailed statement of accounts supporting Form 3CA.
The particulars of Form 3CA include name and address of taxpayer and auditor, date of audit report, date of balance sheet, period of profit and loss account, and law under which accounts have to be audited. It also mentions the place and date of signing the audit report, name, address, and membership number of the Auditor with his or her stamp or seal.
The particulars of Form 3CB include the date of the balance sheet, period of profit and loss account, name and address of the taxpayer with his or her Permanent Account Number, address where books of accounts are kept, and its branches.
For many Indian taxpayers, Form 3CD can evoke confusion and apprehension. Since it plays a vital role in tax audits, demystifying its purpose and key elements empowers individuals and professionals to comply with ease.
Form 3CD is a statement of particulars that are required to be submitted by Rule 6G and Section 44AB of the Income Tax Act 1961. This is an addition to audit forms 3CA and 3CB. These primary forms filed by the taxpayers mandatorily audited under other laws (Form 3CA) or exceeding the exceeding ?1 crore income threshold (Form 3CB), require supporting details about their income, expenditure, and tax computations.
Form 3CD bridges the gap as it provides a comprehensive statement of particulars. There are 41 clauses in Form 3CD. These clauses are divided into Part A and Part B each containing disclosures related to loans, deductions, TDS, etc.
The form also specifies the name, address, membership number, FRN no., and signature of the auditor along with a stamp or seal.
In case, a taxpayer does not get his accounts audited or file an audit report, the assessing officer from the income tax department can impose a penalty under Section 271B. A minimum penalty of 0.5 of the Income Tax Act 1961 i.e. 0.5 per cent of the total sales turnover or gross receipts is applicable. This can go up to Rs. 1.5 lakhs. Furthermore, failure to file form correctly or meet the filing deadlines can attract penalties and interest charges too.
Under the provisions of Income Tax Act, no penalty will be imposed if the taxpayer gives one of the following reasonable cause for non-compliance;
- Delays caused due to the physical inability or death of the partner who is responsible for accounts
- If a delay in filing income tax is caused by the resignation of the tax auditor.
- Delay caused by labor issues like strikes or lock-outs is exempted.
- No penalty is imposed in case of a natural calamity.
- Delay in filing 3CA and 3CB accruing to the loss of books of accounts audited for reasons about theft or fire, or an incident that is not under a taxpayer’s control.
Is 3CA mandatory for Companies?
Form 3CA is compulsory specifically for businesses or professionals who are required to get their accounts audited under any other law. Companies Act 2013 mandates a company to get its accounts audited compulsorily.
Who is Eligible For 3CB-3CD?
Any taxpayer who files Form 3CA or 3CB needs to submit a corresponding Form 3CD. The form includes companies, LLPs, and certain cooperative societies that are subjected to mandatory accounts audits under other laws. Individuals, profession, and who is required partner firms exceeding the Rs. 1 crore income threshold specified in Section 44 AB of the Income Tax Act 1961 must fill this form.
What are The Types of 3CA?
Under the existing rules, audit reports have to be provided either by filling out Form 3CA or 3CB. Professionals and self-employed businesses mentioned under section 44AB are mandated to get their books of accounts audited under prevailing Income Tax laws. Additionally, auditors of companies should furnish Form 3CA. This must be submitted with Form 3CD.
Goods and Services Tax (GST) audit plays an essential role in complying with the tax regulations in India. The process is conducted to ensure that businesses comply with GST rules and regulations. Further, section 65 of GST Act empowers the tax authorities to conduct the audit of any registered person under the GST regime.
Section 65 GST Act allows the Commissioner or any officer authorized by the registered person to conduct the audit at any time during the financial year. It can also be conducted within two years from the date of filing of the annual return for the financial year to which the audit relates.
It is important to note here that GST audit Section 65 extends the time limit by the Commissioner for six months if he is satisfied that there is no reasonable cause of delay.
Understanding the time limits associated with Section 65 GST audit is crucial for both taxpayers and tax authorities. This article delves deep into the various aspects of the tie limit for GST audits under Section 65.
Under the Goods and Services Tax (GST) regime in India, a GST audit is an examination of the books of accounts and other relevant documents of registered taxpayers to ensure compliance with the various provisions of the GST Act.
GST Department conducts the audit to verify the books for accuracy and completeness of the return filed, claiming input tax credit, and payment of taxes due. The audit focuses on the maintenance of proper records, accuracy of documentation, and other compliance requirements under the law.
The objective here is to ensure that the registered taxpayer is complying with the provisions of the GST Act 2017 and to detect non-compliance issues that might require corrective action. Audit under Section 65 has to be conducted either once a year or at any time deemed necessary by the department. The outcome can have a significant impact on business and non-compliance can result in penalties and interest charges.
The Commissioner or any officer authorized undertakes an audit of any registered person for such period at a frequency prescribed under GST audit Section 65. This audit can be conducted at the place of business of the registered person or their office. Before the conduct of an audit, the taxpayer has to be informed by way of a notice at least fifteen working days in Form GST ADT-01. As per Section 65(4) of GST Act audit of taxpayers has to be completed within three months from the date of the inception of the audit.
However, in case the Commissioner is satisfied that the audit of the taxpayer cannot be completed within three months, he shall extend the period for a further six months after recording genuine reasons for doing so.
In case the assessing authority thinks that the value has not been correctly declared by the taxpayer or the credit availed is not within the normal limits, the Commissioner or any officer can direct the taxpayer to get his books of account examined and audited by a Chartered Accountant.
Section 65 and 66 of the GST Act also mandate to inform registered persons about the audit finding in Form GST ADT-04 after the audit is concluded. In case of discrepancies in terms of tax short paid, tax not paid, or input tax credit wrongly computed, the officer shall initiate action under Sections 73 and 74 of the Act.
- Taxpayers remain prepared for potential audits by maintaining proper records and adhering to compliance norms.
- Taxpayers must seek clarification in case they receive an audit intimation outside the stipulated timeframe.
- Taxpayers must engage constructively with authorities during the audit process.
The timeframe in the GST audit is essential. Exceeding the stipulated timeframe might raise concerns but it doesn't automatically render the audit invalid. Despite this, if the taxpayer feels that the extended period is unreasonable or unjustified, they can approach higher authorities with their grievances.
The Commissioner can commence an audit anytime within the ongoing financial years. The audit can be conducted within two years from the date of filing the annual return for that relevant financial year. This means that even if the return is filed after the due date, an audit is mandatory. The GST Act does not prescribe any specific frequency for conducting audits. The authorities can select taxpayers for audit based on various factors; turnover threshold, potential non-compliance indicators, and risk assessment.
As per Section 65(4) of GST Act, the audit ideally has to be completed within three months from the date of the inception and can be extended for six months only if the Commissioner is satisfied that the audit could not be completed due to genuine reasons.
The commissioner can give in writing extend the period for the following factors affecting the time limit:
- In case there are complexities of the case like complex transactions, large turnovers, or suspected irregularities, an audit might require more time for scrutiny, potentially leading to an extension.
- The taxpayer's promptness in providing necessary records and other documents and cooperating with the audit process can expedite its completion. In case a taxpayer fails to cooperate with the audit or provide account or other documents, Section 62 of the CGST Act empowers the authorities to resort to a best judgment assessment. This assessment can be made within a period not exceeding five years from the due date of the annual return for the relevant financial year.
- The overall workload of the tax departments and their assessing officers in a particular jurisdiction can influence the audit duration.
In Conclusion, it is crucial to remember that the time limits outlined in the Act serves as a guideline for authorities and taxpayers. While adhering to these time limits is essential, transparency and communication help to adhere to the process. it ensures a fair and efficient GST audit process.
What are the documents required to be maintained for GST Audit Under Section 65?
Registered taxpayers must have the following documents for the GST audit;
- Invoices received and issued
- Purchase orders
- Payment vouchers
- Debit and credit notes
- Receipt vouchers
- Input tax credit registers
- Stock registers
- Output tax liability registers
- Book of accounts
- Annual financial statements
- Bank statements and reconciliation statements
- Other documents maintained under the GST
All these documents are required from the date of last used to at least six years from the end of the relevant financial year.
What is the Timeline For GST Audit Completion?
The entire audit process conducted under Section 65 of the CGST Act has to be completed within 3 months from the date of inception of the audit. Delays caused beyond the reasons mentioned by the jurisdictional Commissioner are subjected to penalties and interest charges.
In India, Tax Deducted at Source (TDS) acts as a tax collection mechanism computed at the source of income. This ensures a steady flow of revenue to the government and also helps to minimize tax evasion. Understanding various types of TDS return forms is essential for individuals and businesses responsible for deducting TDS.
TDS is an advance tax that is paid or credited to the receiver's account. The TDS deductor or the collector has to submit a TDS return quarterly. These returns can be submitted in TDS return form depending upon certain conditions;
- For quarterly statements for TDS from salaries, TDS return Form 24Q is applicable.
- For quarterly statements for TDS in respect of all payments other than salaries, TDS return Form 26Q is applicable.
- For quarterly statements of deduction of tax from interest or dividends, TDS return Form 27Q is applicable. It is also valid for sums payable to non-residents or foreign companies.
This is a comprehensive guide that consists of all relevant information about different types of TDS return forms, highlighting their specific purposes and filing requirements.
TDS return filing form 24Q has to be filled up for the declaration of citizen's TDS returns in detail. It has to be filed by employers to declare and deposit TDS deducted from employee salaries during the specific quarter.
This TDS return filing form has to be filled with information based on citizen’s salary payments, Permanent Account Number (PAN) of Deductor and Deductees, deductions made for taxation, and Challans. The declaration and payment have to be made quarterly by Indian companies and firms. With all the other relevant information, the deductor must submit the Form 24Q to the Income Tax Department.
There are different variants of one can download TDS return forms, such as Form 24Q-Q1, Form 24Q-Q2, Form 24Q-Q3, and Form 24Q-Q4. It needs to be filed electronically for the four quarters of the financial year (April to March). Further, each form filed for the respective quarter is essential for compliance on part of the employer. This ensures accurate reporting of TDS on salary payments.
The form is also supported by Annexure I and Annexure II wherein Annexure I is to be submitted by the deductors for every quarter of the financial year. Annexure II has to be furnished and submitted only in the fourth quarter of the financial year. This annexure also contains the details of the salaries paid to the employees in an entire financial year.
Form 26 TDS return is a quarterly statement of tax collected at source from payment other than salary under Section 200 (3), 193 and 194 of the Income Tax Act 1961. People who are living and working in India or are Indian citizens must file TDS return Form 26Q. This form caters to the declaration if TDS is deducted on rent, director's remunerations, interest on investments, professional fees, and includes interest on securities dividend securities, etc.
Similar to Form 24Q, it is filed quarterly and requires information like PAN details of the payee, the nature of payment, and the amount of TDS deducted under different sections. The due date to file Form 26 TDS return electronically is 15 days after the quarter's end.
It needs to be indicated in the Income-tax TDS return Form 26Q whether the deductor is Government or non-government. TDS return filing form 26 Q requires the non-government deductors to furnish PAN. Non-government deductors will have to mention 'PANNOTREQD'.
Form 27Q is made under Section 206c of the Income Tax Act 2017. 27 A form for TDS return is compulsory for non-government deductors to mention the PAN in the form and government deductors mention “PANNOTREQD”. In case the deductors are from the Central or State Government, the ministry or department must be mentioned.
Here tax is collected by the Seller from the buyer for certain goods while debiting the amount payable to the account of the buyer. It is applicable on the amount received from the buyer for selling goods mentioned under Section 206C. amount can be received in the form of cheque, cash, demand draft, or any other mode of payment.
Form 27EQ TDS return is a quarterly statement that shows TCS, tax collected by the seller. This form furnishes the details and information of tax collected at source. Therefore, it is mandatory to furnish TAN.
Form 27D is a TDS revised return form that also serves the purpose of revising previously filed TCS/TDS statements due to errors and omissions. Although there is no specific due date for this, it is recommended to file this GST TDS return form as soon as possible to avoid penalties. Filing a TDS return requires details about the revised information, along with the original challan number and date of the statement being revised.
E TDS Return Form has to be submitted in four categories wherein a taxpayer will have to choose the particular category for which he or she has to file a TDS return accordingly.
- Taxpayers will first visit the official website of NSDL to begin e-filing for the TDS return form.
- Then click on the downloads tab and choose E-TDS/E-TCS from the drop-down list menu to select between different types of TDS return forms i.e. Form 24Q 26Q 27Q 27EQ.
- Once the applicant clicks on “Quarterly Returns” and chooses the 'regular' option, he or she shall be redirected to the new page.
- Lastly, taxpayers can choose the TDS Return Form from section “Form” as per the requirements mentioned in the Income Tax Act 1961 details.
Considering the summary of the Income Tax Act 1961, here are a few considerations that taxpayers can consider.
Every deductor is required to obtain a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department before deducting or collecting tax. Timely filing of TDS returns is essential to avoid penalties and interest charges. Detailed guidance is owed to the Income Tax Department and online tools for filing TDS returns electronically.
How Many Types of TDS TDS Are There?
According to the Income Tax Act 1971, an individual earning above a certain threshold is required to file TDS. There are various types of TDS return forms depending on the purpose of the TDS. Form 24Q Form 27Q Form 26QB Form 26QC Form 26Q TDS.
What Is Form 16A?
Form 16A is a TDS certificate that every employer is provided as a TDS certificate. It is only for salary income, and Form 16A applies to income sources apart from salary. It will be issued when TDS is deducted for fixed deposits and carries all amounts of TDS nature being deposited with the Income Tax Department.
Which Form Is Used For TDS?
Tax laws in India mandate TDS returns to be submitted in various forms depending on certain conditions. TDS returns are filed quarterly according to the specified payments mentioned under the Income Tax Act.
Gone are the days when paper trails and manual filing made the tax paying a tedious task. Electronic Tax Deducted at Source (E-TDS) return filing is the procedure of sending online the TDS returns to the Income Tax Department of India. With this, filing returns becomes a breeze, eliminating the paperwork woes. It is governed by the Income Tax Act 1961 and businesses must comply with the tax rules to receive return benefits of TDS and avoid fines.
eTDS translates to convenience and accuracy. Taxpayers can avail the advantages of TDS without worrying about getting cheated as they are automatically deducted. Pre-filled data ensures fewer errors and timely filing. Further, the government keeps a check on taxpayers to avoid evasion.
In simple words, TDS or tax deducted at source is the amount of income tax reduced by the person who is paying salaries, educational fees, rents, etc. as per the rates prescribed by the government. Section 23 of the Income Tax Act requires employers to deduct TDS from their employee's salary. The amount of TDS deducted acts as a stable revenue for the government and helps to manage their expenses
Any person or business making payments defined under the Income Tax Act of 1961 is obligated to withhold tax at source and submit a TDS report. This includes Hindu Undivided Families, partnership firms, businesses, LLPs, and other entities that incur different types of payments like rent, wages, interest, or any form of professional fees.
In recent years, discussions surrounding TDS rates have garnered increased attention within the financial landscape. The Financial Bill of 2016 introduced TDS rates of 25% for individuals and HUFs and 30% for other resident entities.
TDS is applicable to the employee's tax slab rates for the relevant financial year. The TDS rates on salary are determined by the employee's tax slab rates (based on their annual income). It is deducted on a specified transaction only when the payment exceeds the specified threshold limit. For instance, Section 194 J mentions no TDS is required to be deducted if the professional fee is less than Rs. 30000. So, the threshold limit here is Rs. 30000.
While the rates vary from year to year, employers need to keep themselves updated on changes in tax laws. Recent Union Budget 2024-25 announced by Finance Minister Nirmala Sitharaman on February 1, 2024, did not mention any changes in the income tax slabs or tax rates.
Before we begin understanding the advantages and disadvantages of TDS, it is crucial to know its main objectives.
- While it helps the government keep a check on taxes paid by taxpayers, it also creates transparency between the government and taxpayers ensuring no discrepancies or evasion.
- A deduction and collection account is one of the most stable income sources for the government.
- It is automatically deducted, allowing seamless and easier for taxpayers and reducing the burden on tax collectors.
- TDS certificate serves as proof of tax payment. E-filing of TDS returns can be used in availing loans, claims, and record keeping.
Lastly, the implementation of E-TDS assists in broadening in tax base as it includes a large number of individuals within the tax bracket.
Faster Processing and Acknowledgement
For taxpayers, one of the major advantages of TDS returns is quicker processing and recognition of returns. since returns are submitted electronically, it cuts down the scope for inaccuracy too. Further, to ensure tax regulations are being followed in a timely, transparent and effective manner, the income tax department allows taxpayers to check their filing status online and receive a rapid acknowledgment receipt on acceptance of the e-TDS return.
Cost Effective While Being Efficient
One of the greatest benefits of TDS is that it is economical and efficient when compared to traditional paper filing. Moreover, access to previous returns is simple and businesses can focus on their main business activities while streamlining their tax compliances. At the same time, taxpayers can reduce their overall tax burden by claiming TDS as a credit against their tax liability.
Reduced Chances of Error & Possibility of Correction
Filing TDS returns reduces the possibility of making mistakes as the data is input electronically and verified by the system. While it ensures correct reporting and adherence to tax laws, it also allows you to make corrections online without any physical correction forms. The errors can be immediately found and fixed, ensuring correct tax reporting.
Timely Compliance
The TDS return is filed by the deductor on the income of the deductee, which means the deductee will not have to file tax again. This reduces the job of the deductee automatically. The tax collection authority also takes into account the earnings of every person to ensure no person escapes the tax slabs and pays taxes on time. E-filing of TDS returns makes it easy for the Income Tax Department and for the deductee as the tax system ensures timely tax payment.
Income Tax Laws in India are strict and businesses or employers will have to face serious consequences for non-compliance. Moreover, the TDS tax deducted every month must be remitted to the government within a specific time.
These consequences can act as a major disadvantage to businesses. Here are a few consequences of non-compliance:
- Late filing costs of Rs. 200 per day of delay are charged in case returns are filed after the due date
- Section 271 H of the Income Tax Act also permits the imposition of fines.
- An interest at the rate of 1 percent per month on the tax amount withheld at source is also chargeable.
- Any failure to file eTDS returns may be followed by penalties and legal action.
Who gets the TDS benefit?
TDS helps a deductee to reduce his or her burden for filing taxes. It is collected after earnings reach a certain limit. A maximum of 30 percent TDS is applicable on money won from lotteries, horse races, and other games.
How is TDS beneficial?
E-filling of TDS ensures timely compliance as it helps taxpayers avoid penalties for non-payment or delayed payment of taxes. Taxpayers have to deduct and remit taxes on time to the government. Tax amount is deducted at the source of payment, making it easier for them to pay taxes and reduce their tax liability (overall tax burden).
Can Deductor Revise TDS Returns?
TDS Returns are filled with NSDL by the deductor at regular intervals. However, if any mistake or misinformation is noticed, existing returns will have to be changed to file a revised eTDS return. However, only those TDS returns can be revised for which the statements have been issued after the fiscal year 2007-08. To begin online rectification, a taxpayer will have to register on the online portal.
Can Payee Claim Refund on TDS?
TDS is deducted by the employer before the salary is credited to the employee's account. You can claim a TDS refund when filing income tax returns for the financial year. If you have made declarations at the beginning of the year that are lower than your actual investment proofs, you are eligible for a TDS refund. The process is easy and is not time-consuming.
Is TDS Applicable on Foreign Payments?
TDS is applicable on foreign payments from a range of 10 to 40 percent, depending upon the type of payment and nature of transactions. These deductions must be made at the time of the payment and the payment recipient shall be entitled to receive the balance amount after reducing the TDS.
In 2017, the Goods and Services Tax (GST) replaced the complex web of Central and State taxes. GST is an indirect sales tax on goods and services sold for domestic consumption. Some essential commodities have been exempted from GST.
The implementation of this GST regime in India showcased a monumental shift in the country's tax structure. Major advantages of GST in India benefited businesses and the economy as the tax regime became more unified, efficient, and transparent.
Further small businesses (with a turnover of Rs. 20 to 75 lakhs) can avail the advantages of the GST as it gives them an option to lower taxes by utilizing the GST Composition Scheme.
Before you jump to a conclusion, go through all the advantages and disadvantages of GST for different sections of people.
GST is a comprehensive indirect tax designed to bring indirect taxation under one umbrella. It provides a comprehensive input tax credit mechanism to prevent cascading effects of taxes or 'tax on tax effect'.
Moreover, uniform GST rates have reduced the incentive for evasion by eliminating rate arbitrage between neighboring states.
Before the introduction of the GST regime in India, any business with a turnover of more than Rs. 5 lakhs (variably different in states) was liable to pay Value Added Tax or VAT. Also, service tax was exempted for service providers which incurred a turnover of less than Rs. 10 lakhs. The advantage of GST tax India is that the threshold has been increased to Rs. 20 lakhs. This limit exempts small traders and service providers. The table below shows how the threshold limit was different in different tax systems.
| Tax | Threshold Limit |
|---|---|
| Excise Tax | Rs. 1.5 Crores |
| VAT | Rs. 5 lakhs in most states |
| Service Tax | Rs. 10 lakhs |
| GST | Rs. 20 Lakhs (Rs. 10 lakhs for North Eastern States) |
This indirect tax regime has made the entire process of filing GST returns online. It is super simple and beneficial for small businesses that do not have to run from pillar to post to get different registrations.
Businesses now have to file 11 GST returns annually, out of which 4 are basic returns that apply to all regular taxable persons under GST. Only GSTR-1 is manually populated while GSTR-2 and GSTR-3 are automatically populated.
Before the implementation of GST, there were several indirect taxes and naturally, there were several compliance rules that businesses had to abide by. Filing a single unified return has been one of the greatest benefits of GST in India.
One of the most important advantages of GST to businesses is that they no longer need to pay state-level taxes during interstate movement. This has improved logistics and operations. This brought in advantages of GST tax in India for the e-commerce sector. Earlier, states like Kerela, West Bengal, and Rajasthan considered e-commerce platforms as facilitators. Online websites delivering goods to another state had to file a VAT declaration and mention the registration number of the delivery truck. Tax authorities could seize goods if documents were not produced.
GST regime mapped out common provisions applicable to e-commerce sectors. Now they can take advantage of registration under GST and face no complications in the inter-state movement of goods anymore.
While it is important to understand the advantages of goods and services tax GST, it is equally important to understand why critics call it a regressive tax. This means it takes a relatively larger percentage of income from lower-income households in comparison to the higher-income households.
Businesses with the goods and services tax GST registration levy tax uniformly on the consumption of goods and services, rather than on income and wealth. This means lower-income households tend to spend more of their income on consumables, which are subjected to GST.
While many businesses benefited from the merits of GST, it is also true that GST has raised complexity for many business owners across India. Small and medium enterprises with a total income of Rs. 75 lakhs could avail of the composition scheme. They can pay a mere 1% tax on turnover and abide by lesser compliances. However, they cannot claim input tax credit.
GST has received criticism for being called a 'Disability Tax; as it is levied on articles used by physically and mentally challenged people. Braille paper, wheelchairs, and hearing aids are some of the articles that have not been exempted from this single tax.
The finance sector is one sector that incurred the implications of both advantages and disadvantages of GST in India.
The GST transaction fees within the financial sector have become more expensive. It increased from 15 to 18 percent. Insurance premiums became more expensive.
Why is GST Important?
GST has transformed the Indian economy since its introduction in 2017. It has replaced the complex web of indirect taxes like excise duty, octroi, and VAT, with a single unified tax structure. The integrated goods and services tax GST allows simplified compliance for businesses, has streamlined the supply chain, eliminated cascading taxes, and encouraged free movement of goods across the nation.
What are the 4 Types of GST?
The four different types of GST in India are Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). Besides, the government has fixed different taxation rates under each of these taxes.
What are the features of GST?
Key features of GST include:
- It is a single levy on goods and services
- It comprises Central GST (CGST) and State GST (SGST).
- Allows businesses to claim credit for taxes paid on purchases and reduces tax liability.
- It tracks the movement and supplies of goods and services through an E-way bill system.
What is the scope of GST?
The scope of GST extends from supplies of goods and services with a few exceptions. It includes groceries, clothes, electronics, vehicles, transportation, healthcare, communication, and professional services. Understanding this scope is crucial to provide the benefit of GST to businesses and individuals as it determines their tax obligations and claims the input tax credit.
Introduced in the Union Budget 2020, the new tax regime launched an era of dual system of taxes for individuals and Hindu Undivided Families (HUFs). With new tax slabs and rates, individuals can opt for either of the two methods in place, i.e. old and new tax regimes. However, once you choose either of the two methods, the taxpayer will have to stick to the chosen regime for that financial year.
Tax season can be a daunting time for taxpayers who want to maximize their deductions. New tax regime deductions are expenses that you can subtract from your taxable income. It effectively reduces the amount of income taxes you pay, thus lowering your tax liability. Think of it as chipping away at your taxable income.
Not all expenses qualify as deduction allowed in new tax regime, numerous deductions are available under various sections of the tax code. While most deductions and exemptions have been discontinued, some deductions allowed in new tax regime include HRA, LTA, 80C, 80D, and more.
Understanding the deductions in your specific tax regime is crucial to minimizing tax burden and saving your hard-earned money.
Let’s look into some of the deductions and exemptions that are still allowed:
Deduction under Section 80 CCD(2): This deduction applies to salaried individuals as they can claim a deduction for the employer’s contribution to the pension scheme. Employees working in the private sector can claim 10% of their salary. Under the subsection of Section 80CCD, the new tax regime deductions for government employees is up to 14% of basic salary + dearness allowance.
- Standard Deductions: Budget 2023 has extended the standard deduction of Rs. 50000 to the new tax regime for FY 2023-24 onwards. With this, the benefit from standard deduction remains the same under new and old tax regimes.
- Gratuity: Gratuity payouts i.e. the amount paid on completion of 5 years or more of continuous service is a deduction under new tax regime. The limit for gratuity that is tax-free is Rs. 20 lakhs during the lifetime of a taxpayer. Gratuity paid on the death of a taxpayer is fully exempted.
- Leave encashment: Section 115 BAC, allows non-government employees to use leave encashment as tax exemption. This income is not taxable up to a limit of Rs. 3 lakhs.
- Public Provident Fund (PPF) and Sukanya Samriddhi Account earnings: The interests earned and maturity amounts received from both these schemes are tax exempted.
- EPF Contribution by Employer: Employer contribution to Employee Provident Fund (EPF) which is up to 12% of basic and dearness allowance is a deduction available in new tax regime. The exemption applies to a maximum contribution of Rs. 7.5 lakhs annually for all such accounts.
- Amount withdrawn from NPS: An amount withdrawn up to 60% of your NOS account balance at maturity is tax deductible. Partial withdrawals of up to 25% of your self-contribution are tax-free.
- Voluntary Retirement Scheme (VRS) Proceeds: VRS proceeds of up to Rs. 5lakhs are exempted from tax.
- Allowances for Official Duties: The permissible deductions in the new tax regime include; transport allowances for specially-abled individuals, allowances to cover transportation costs, compensations for travel expenses from official tours, and daily allowances.
There are many new tax regime deductions, however, several major deductions from the old tax regime are not allowed in the new tax regime. These include:
- Section 80D deduction for health insurance payment
- Section 24 (b) deduction for interest paid on home loan
- Section 10 (5) Leave Travel Allowance (LTA)
- Deduction from family pension under 57 (iia)
- House Rent Allowance (HRA) under section 10 (13A)
| Total Deductions | Tax Regime Beneficial |
|---|---|
| Rs. 1.5 Lakhs or less | New regime |
| Rs. 1.5 lakhs to Rs. 3.75 lakhs | Depends upon Income level* |
| Rs. 3.75 lakhs or more | Old regime |
*If gross total income is less than R.s 7.5 lakhs or Rs. 10 lakhs any tax regime can be followed. For gross total income Rs. 8 to 9 lakhs, old tax regime shall be beneficial and for gross total income above Rs. 10 lakhs, the new tax regime will be beneficial.
The government introduced the new tax regime to simplify calculations and reduce tax burden on Indian taxpayers. Taxpayers can select from either of the two tax regimes for efficient tax planning. While choosing two tax regimes consider the two main parameters; the tax exemption you currently avail, and the deduction you currently claim.
You will loose exemptions under the new tax regime if your taxable income includes;
- HRA (if you are living in rented accommodation)
- Food coupons
- Leave allowance, and
- Compensation for phone bills.
The new tax regie excludes the following:
- Home loan EMI for self-occupied property
- 80C investments like life insurance premiums
- 80D investments like health insurance premiums
Taxpayers should find out the total amount of exemptions and deductions to avail. Subtract it from the income and calculate the tax payable under the old regime.
Further, taxpayers can compute taxable income without claiming such benefits. Compute the tax payable as per the new tax rates.
Taxpayers can compare the tax amounts to make a wise decision. For better understanding, it is advised that taxpayers use the comparison tool available on the official website of the income tax department.
Remember, not to make your investment decisions solely based on tax savings. For instance, the old tax regime is appropriate for life insurance policyholders as tax deductions will translate to greater savings. While life insurance does provide tax savings, it should not be the only reason for this investment.
Is there any exemption in the new tax regime?
There are many exemptions in the new tax regime. However, taxpayers will have to forego 70 deductions in the new tax regime if they choose the new tax regime over the old one.
Is interest deduction allowed in the new tax regime?
Yes, homeowners can claim a deduction for interest on home loan under the new tax regime if the said home is put on rent. The deduction for interest paid on home loan if restricted to Rs. 2 lakhs in case of self-occupied property.
What are the benefits of new tax regime?
The government introduced the new tax regime to reduce the tax burden for taxpayers. While this new tax regime simplified the tax laws, it also removed the complicated calculations of the deduction percentages. Moreover, the new tax regime helps to save on taxes on long-term investments too.
Can we claim 80C and 80D in new tax regime?
Deductions under new tax regime including the popular ones like 80C (for investments), 80D (for medical insurance premiums), and 80E (for education loan interest) are no longer allowed.
What is the Section 10 exemption in the new tax regime?
Certain exemptions are considered special allowances under Section 10 of the Income Tax Act. These exemptions are granted to specific individuals who are high court judges, UNO employees, Supreme Court and High Court judges entitled to receive Sumptuary Allowance, and Indian citizens working as government employees outside India.
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