What is Input tax credit & how to file it? What are the benefits associated with ITC.
Input tax credit (ITC)under GST is a beneficial scheme that was introduced within the framework of goods & services tax (GST). It is the credit which is given to the taxpayer for the taxes which (s) he had paid towards the input which is used in the manufacturing of the product.
Input tax credit is a way by which one can effectively eliminate the cascading effect on the indirect tax. The concept of ITC existed in the previous version of service tax/VAT in India but now with the introduction of GST its scope has been widened.
Who can claim ITC?
A manufacturer/supplier of goods or services OR an e-commerce operator OR any of the persons registered under GST can claim ITC on the purchase of inputs.
[Note: One can claim ITC under GST only if the good & services purchased is for business purpose]
How to avail Input tax credit under GST mechanism?
Payment in lieu of Integrated Goods & services tax (IGST)
Payment in lieu of Central Goods & services tax (CGST)
Payment in lieu of State Goods & services tax (SGST)
[Note: Take Input tax credit from IGST first and then considers ITC from CGST & SGST; if ITC from IGST is not sufficient]
Input tax credit can be better understood with the help of an example:
For instance consider Mr ‘X’ who purchased goods worth Rs. 20,000. Prevailing GST@18% on the product so purchased is Rs. 3600. Now he is planning to sell the goods worth Rs. 25,000; GST Payable @18% Rs. 4500.
In this case the Net GST Payable at the end of the transaction by Mr ‘X’ would be calculated as follows:
MSME stands for Micro, small & medium enterprises. MSME’s turns out to be a game changer for Indian economy to outshine and become the 5th largest economy worldwide. For a mixed economy like India, MSME’s acts as a backbone for the economy because they gives access to local people engagement hence increasing the employment opportunities, increases standard of living. Since our economy is still in the developing phase and the government is search for better business avenues for the Indian economy is providing subsidies, easy credit facilities to the MSME sector.
Who should register for MSME?
Any manufacturing or service provider, which fulfills the below mentioned conditions can apply for MSME registration. The updated & new guideline which is scheduled to be in force from 1st July, 2020 to get a MSME registration in India is:
To increase the ambit of MSME registration in India and revive the MSME sector from COVID-19 and the subsequent impact of the nationwide lockdown on the Indian economy, a new set of guidelines for MSME registration are issued by the government of India.
What are the benefits associated with MSME registration in India?
Getting a tag of MSME brings in a lot of benefits for the organization. We will briefly discuss some of the important advantages of MSME registration in India.
1.) Easy availability of credit
Since the government policies and the economy is in favour of uplifting the MSME sector in India therefore it become quite easy for a new MSME registration to get credit facility from a public sector bank (PSB).
2.) Government policies
There are various government policies to support your business if you have a MSME registration in India.
Micro unit development & refinance agency ltd. [MUDRA]
Atmanirbhar Abhiyan
Scheme of Fund for Up-gradation and Regeneration of Traditional Industries [SFURTI].
National Manufacturing policy [NMP]
Prime Ministers Employment generation programme [PMEGP]
Credit Guarantee Trust Fund for Micro & Small Enterprises [CGTMSE]
Interest Subsidy scheme
3.) Easy approval & MSME registration process
Considering the potential of the MSME sector and its importance in the growth of Indian economy, the government of India has made the process of MSME registration easy and convenient. With the help of online CA services one can get their MSME registration in minimal time.
4.) Specific grievance monitoring system for MSME
With the help of champions control room which is working with the ministry & various other institutes of MSME will be a single window system for facilitating all the grievance of MSME registration, application and other ministerial approval.
5.) Others
Minimum alternate tax (MAT), Incubation facility for potential MSME, Credit linked capital subsidy scheme, Zero defect zero effect for export oriented MSME’s are some of the benefits which help an MSME to grow in the Indian business environment.
Well India is one of the most lucrative places for investing and starting your business. Small businesses & MSME’s are the bedrock of Indian economy with a market shareholding of more than 80%. India has one of the most optimal online Startup business environments in terms of ease of compliance structure, credit facilities, multiple business setup options etc.
If you’re looking to go & grow your business in India then you must read the complete article and get answers to almost all your queries related to Small business incorporation in India.
HOW TO START A SMALL BUSINESS IN INDIA?
Starting a small business in India or company incorporation in India is not a difficult process rather you need to have an experienced chartered accountant on your side who can guide you throughout your business journey. Follow the steps to establish your business and make it up and running.
1. Choose the business format
There are several categories of business setup in India which are as follows:
Limited Liability partnership: LLP has a limited liability on the partners of the firm. Liability under LLP is limited to the assets of the partnership firm & liability of partners is limited to the agreed contribution. No partner in anyway will be liable for any actions of other partners.
Private Limited Company: Private limited companies require less rigorous protection for their shareholders for company incorporation in India. However they possess a different relationship in terms of ownership, risk & reward as compared to other form of company registration in India.
Public limited company: According to Company Act 2013, a public limited company (PLC) refers to those types of business with limited liability & who offers their shares to the general public in exchange of stake in the company. Buying and selling of stock can be initiated through an Initial public offering (IPO) via stock exchange.
Choose a name for your business
Choosing a name could a tough job in every business incorporation in India. Since the name goes all along with the business till its life, one must keep it straight & simple and give it due importance before finalizing the company’s name. Choosing the right name for your business will make or break your company future. Before finalizing the company’s name, please get it checked from MCA website whether it is available or not and basis on that register your business.
# Apply for digital signature certificate (DSC): It is important to apply for Digital signature certificate (DSC) since it is the most trusted way of authorising and verifying the documents. The chances of tempering with a DSC are minimal as compared to a hand signature.
# Funding source: It is one of the most important steps where most of the businesses either drop their idea of business registration in India or they go ahead with their Startup plan. Funding is just another step where both private players and the interest of government lies. Private players look for funding to invest in the best plan and get the stake in that business whereas the government ease the credit process for these Startup registrations to improve the economy. There are various methods of business funding in India viz.
Business incubators & accelerators
Bootstrapping i.e. Self-financing
Loan from commercialised bank
NBFC financial assistance
Venture capitalist
Crowd-funding
Angel investor
How India has the favourable environment for FDI?
According to United Nations Conference on trade & development (UNCTAD), India is among the top 10 FDI recipients in the world. There was an increase of about 16% in the FDI from the previous year. This exponential increase in the FDI is due to ease of compliance norms in India, improved tax structure, convenient company registration and favourable environment for MSME’s.
FREQUENTLY ASKED QUESTIONS (FAQ’s)
Question: Can a foreigner start business in India?
Yes, a foreigner can start a business in India. There are various modes through which a foreigner can start their business venture in India.
Foreign portfolio investor (FPI)
Foreign direct investment (FDI)
Branch Office/subsidiary office
Question: What is DIN?
DIN refers to the Directors identification number. Getting a DIN for the directors of the company is necessary before the business incorporation in India. DIN is a unique number issued by the central government to any person intending to be a director or he/she is an existing director.
Question: How will CAONWEB help you to start small business in India?
CAONWEB is the most trusted Chartered accountants financial firm which provides all sorts of business services which will make it convenient to smoothly operate your business. Starting from business registration, income tax consultancy and GST registration, we offer various CA services which will help you to achieve your desired goals.
Do you know why people fear income tax men, because they will not spare you if you evade taxes or try to commit some acts which are against income tax rules? Fines, penalties and even imprisonment are the results of not being income tax law abiding person.
Whether business or personal, one ensures accurate maintenance of records, filing income tax returns, and following all compliances prescribed under income tax laws. In this article, we will keep our focus on who needs to file income tax returns, when, and what are the consequences of not filing income tax returns.
Not everyone isrequired to file an income tax return in India. Generally, if your total income for the year doesn’t exceed prescribed thresholds, then you don’t need to file Income tax return in India.
There are various forms of income tax return available at the Governments website however the type of income tax return you should select depends on the type of income. Since online income tax filing is possible therefore, efiling income tax in India can be done from anywhere in the world
Who needs to file an Income tax Return in India?
– If your gross total income (excluding deductions) exceeds the basic exemption limit of income above which tax is charged, you need to file ITR. We have listed income tax slabs and information on new tax regime that Finance minister introduced in budget 2020
– Even if income is below the limit, in certain scenarios filing ITR is mandatory. Like people spending more than INR 2 lakh on a foreign trip, withdrawing more than INR1cr in a year in a bank account or paying power bill of more than INR 1 lakh in a year
– If you wish to apply for visa or a loan
– If the taxpayer is a company or a firm, irrespective of profit or loss.
– Irrespective of your income, you may have a situation where you need to claim tax refunds, in that case it is mandatory to file a tax return. Government cannot return your tax refund in any other manner. Similarly to carry forward losses filing tax returns is mandatory.
– If you have invested in any foreign asset or have earned out of any asset in foreign or who has signing authority in a foreign bank account is also required to file ITR, irrespective of income threshold.
Income Tax Slabs & Rates 2020-2021
The Finance Minister introduced a new tax regime in Union Budget, 2020 wherein there is an option for individuals and HUF (Hindu Undivided Family) to pay taxes at lower rates without claiming deductions under various sections. Here is the new rate for FY 2019-20 or AY 2020-21:
Income tax Slab (in INR)
Tax Rate
Up to 2.5 Lakh
NIL
2.5 Lakh to 5 Lakh
5% (12,500 rebate u/s 87A available)
5 Lakh to 7.5 Lakh
10%
7.5 Lakh to 10 Lakh
15%
10 Lakh to 12.5Lakh
20%
15.5 Lakh to 15 Lakh
25%
15 Lakh and above
30%
– The tax calculated on the basis of such rates will be subject to health and education cess of 4%.
– Any individual opting to be taxed under the new tax regime from FY 2020-21 onwards cannot claim certain exemptions and deductions. Therefore one needs to make their own calculation as per old and new tax regime and calculate which one is beneficial based on the type of investments made and returns earned on those investments. Best way is to take professional advisory, for that you find a chartered accountant online who can advise you.
New tax regime slab rates are not differentiated based on age group unlike in past years. Like if the financial year 2018-19 limit was INR 2.5 lakh for general categories. INR 3 Lakh for individuals between the age of 60 years but less than 80 years and for individuals aged above 80 years, the exemption limit was INR 5 lakh.
Below is the example on how your tax could be compared if you opt for e filing income tax under a new regime for this AY 2020-21
Let’s take an example of an individual here aged 40 years has the total income of INR 11, 00,000 and investments made are: 80C of INR 1, 50,000 and under Section 80CCD of INR 50,000. He has claimed income tax deduction with medical and Leave travel allowance of INR 50000 and HRA of INR 1, 50,000 The tax payable under new and old tax regime is as follows:
Particulars
New system (in INR)
Old System(in INR)
Gross total income
11,00,000
11,00,000
Less: Deductions under 80C
0
150000
Less: Standard Deduction (Medical & Travel Allowance)
0
50000
Less: Deductions under 80CCD
0
50000
Less : HRA deduction as per section 10(13A)
0
150000
Taxable Income
1100000
700000
TAXES PAYABLE AS PER SLAB RATES
0-250000
0
0
250000-500000
12500
12500
500000-750000
25000
40000
750000-1000000
37500
0
1000000-1250000
20000
0
TOTAL TAXES
95000
52500
Income tax return filing due date:
The due date for filing income tax returns depends on the type of business you have or the category of taxpayer you are. Normally the due date is the time limit by which your income tax returns can be filed without any late fee or penalty. The taxpayers filing their return beyond such due date will have to pay interest and penalty under prescribed section of income tax laws.
Here are the due dates for AY 2020-21
Category
Due date
Individual/HUF/AOP/BOI
31st July,2020
Business (Audit not required)
31st July,2020
Business (Audit required)
30th Sep,2020
Business (TP report required)
30th Nov,2020
FAQ’s
Is online income tax filing mandatory?
Yes it is mandatory to file the income tax returns online for all the registered taxpayers. However, manual income tax returns can be filed by those who are above 80 years of age and do not have any income from regular business or profession.
How to claim tax refund online?
The Income tax department doesn’t automatically issue refunds without a tax return, so if you want to claim any tax refund due to you, then you should go for online income tax filing
Remember, with CaonWEBincome tax filing services, we’ll ask you simple questions and determine the best filing method for you. We’ll find every tax deduction and credit you qualify for to get you the best tax refund.
What are the steps to file my Income Tax return for online income tax filing or efiling income tax?
– Collect required documents such as TDS certificates (Form16/16A), capital gains statements Download and check Form 26AS.Chartered accountants advise that one should keep track of your Form 26AS during the financial year to avoid any discrepancies at time of filing ITR.
– Compute total income for the related financial year. Total income is computed by adding incomes from different heads and claiming all the relevant deductions allowed under the Income-Tax Act and setting off losses, if any. Go for professional advice if you are not aware of such things. Take help by searching for an online chartered accountant near you .
– Calculate final tax payable, if any
– Deduct the taxes that have been already paid by you through tax deducted at source, TCS and Advance Tax during the year.
– File ITR after all taxes are paid
– The last step is Verification of ITR, There are 6 ways to verify your Income Tax Return.
– Once the IT Return is processed, the I-T department inform the same to you via email to your registered email ID. In case any error are found, they may ask you to explain further or correct the mistakes made while filing the original ITR.
How do I pay taxes online while efiling income tax?
Consult an online chartered accountant if you have any confusion.
What are the disadvantages of not filing income tax return?
If you file your ITR after the due date but before 31 December, a penalty of Rs 5000 will be levied. For returns filed later than 31 December 2020, the penalty levied will be increased to Rs.10,000. However for small taxpayers, the Government gives some relief, as per income tax department if the total income does not exceed Rs 5 lakh, the maximum penalty levied for delay will be Rs 1000 for small taxpayers. Small tax payers here means having income less than 5 Lakh in a year.
Finance is the basic lifeline to operate any business, be it labor intensive or capital intensive business model. The quantitative requirement might be different for different forms of business but one cannot operate ignoring the financial position of its company. There are multiple ways of making your business profitable but the most important one which every rational businessman focuses on is (i) increasing the total sales revenue of your business, OR; (ii) saving on the cost involved in running the business.
Here in this blog, we will discuss some of the measures related to the cost-saving tips for a business. We will cover all the aspects related to it such as outsourcing bookkeeping & accounting services, outsource GST filing, bookkeeping cost, tax-saving and various other measures of finding the best online CA services and how will it benefit your organization.
1- OUTSOURCING
Outsourcing could prove to be one of the most fruitful decisions for your business since it helps you focus on your core business agenda and don’t let you divert from this. It is always advisable to assign the work to some expert professionals who possess the required experience and skills to do that task. On the basis of this, there are certain business outsourcing models that will eventually help in cost saving your business.
Outsource bookkeeping & accounting services
If you want your business to be compliance-friendly and do not want to indulge in any compliance issue then the first and foremost step is to have a reliable online bookkeeping service. Now bookkeeping is not just about maintaining your books of accounts but it is a statutory requirement. This requirement of online bookkeeping services & online accounting services is irrespective of the size of the business; whether it’s a large business or an MSME everyone has to fulfill the requirement of online bookkeeping as per the statutory requirement. Components which are included in outsource bookkeeping & accounting services are:
Outsourcing GST filing services to the indirect taxation experts will help to save the compliance filing cost of your business. An expert is having in-depth knowledge and is well aware of all the costs included in GST return filing, due dates, documentation and the penalties associated with the same, if not filed on time. So outsourcing GST filing services will help to save your business cost and makes your business GST Compliant.
2. Reduce compliance filing cost
Every business has to consider a compliance filing cost in their financial budget because this is something which cannot be ignored. Compliance filing cost cannot be ignored but can be tackled with very carefully with the help and guidance of an expert. In this globalized and technologically updated era where there is no scope for geographical boundaries and businesses are not just limited to an area but expanding throughout. This gives emergence to the need of a compliance filing cost expert who will help you reduce the compliance filing cost.
How to reduce your compliance filing cost?
Due
date compliance
Proper
documentation
Proper
planning & administration
Follow
the rules specified under the law
3. Income Tax Saving
Income tax saving is not easy if not consulted with some experienced income tax experts. Businesses need to think of various income tax saving options as they approach towards the end of the financial year to bring down their income tax liability.
Ways of income tax saving?
Keep updated with recent changes in the law
Avail the benefit of deduction on various investments
Finding the best online CA services in India is the need of the hour because there are various aspects in a business that needs to look after for the smooth functioning of the business. For instance, you have a brilliant business idea but even a brilliant idea cannot be executed properly without the direction of a chartered accountant. An experienced chartered accountant will help you optimizing compliance filing cost, income tax saving tips, bookkeeping & accounting services, etc.
Today’s Blog features the challenges faced by an assessee while filing an ITR:
1. Which ITR forms to file?
In general, Seven (7) ITR filing forms are issued by the Income tax department and its applicability depends on your revenue sources. The number of forms will vary depending on the sources of your Income. In most cases a salaried individual the basic ITR form is ITR-1. There are however certain requirements that a person must fulfill in order to be eligible for ITR-1 filing. This is why understanding the income tax slabs and knowing which ITR form you need to fill becomes the need of the hour. This is the situation where you need to consult a chartered accountant/ITR Filing consultant who will guide yours throughout.
2. Accuracy of the data
Although the e-filing process has been simplified over the years to a great extent, the official website of the income tax department still requires you to enter the income details manually. Also, the ITR forms carry a number of rows and columns to be filled by the taxpayer.
There is a standard format in which the taxpayers are required to fill in the information. There are high chances of taxpayers entering inaccurate information and thus making mistakes. After selecting the “ITR filing”, fill the form with the required details correctly by giving it a recheck. Most people ignore the accuracy of the basic details.
3. Accuracy of computing Income tax
There are many income tax slabs & Income tax exemptions under the heads of employment, and taxes from which deductions and exemptions are permitted. For example, you can receive revenue from several sources, such as fixed-deposit interest, household rental income, savings account interest, short-term/long-term income, etc. So, keeping a track of income from different sources to compute taxable income can become complicated.
4. Tax deducted at source (TDS)
During ITR filing, the TDS should ideally have to be the same in Form 26AS and Form 16 or 16A. There are several reasons because of which there is a mismatch in the automatically generated details of Form16 & Form 26AS. For instance, if the employer has not deposited the amount with the tax department on time, it is likely that the TDS details mentioned in Form 16 will not match with Form 26AS and so on.
You must also know that the TDS is not the only deductible from your salary but also from other incomes such as interest income from fixed deposits. Therefore, if the details entered by you in the ITR filing form do not match with Form 26AS, the Income tax return filed can be termed incorrect.
5. Login credentials
Many taxpayers are entirely dependent on qualified chartered accountants who are responsible for ITR filing. The CAs also run their ITR accounts much of the time. If your CA connection is broken or the records of the CA are erased/lost then how can you access your account? It’s a must know your User ID (which is your PAN number) and password.
Besides this, many of us appear to forget the password of our e-filing account, as the account is only accessed once a year. In such a long time, taxpayers usually forget the password for their account. In a scenario like this, recovering the account can become a difficult process.
6. Investment declaration
Investment the declaration is something that will provide you a safety net and save onto your income tax for the corresponding financial year. Various investment options mentioned under section 80C of the Income tax act, 1961 helps you as a rational income taxpayer to save your income tax by parking your extra funds in some the productive side where it will grow and your income tax liability will also come down.
7. Claiming deduction/exemption
You can save tax by claiming deductions up to Rs 1.5 lakh in a financial year under section 80C of the Income-tax Act, 1961. Several other financial products that allow section 80C benefit or by way of specified expenses like paying your child’s tuition fee, etc.
Any contributions made by an individual towards NPS is allowed as a deduction under section 80CCD (1) up to Rs 1.5 lakh. However, if you make an additional Rs 50,000 donation to NPS (over and above the Rs 1.5 lakh limit) it can be claimed as a deduction under section 80CCD (1B). And the total deduction you can assert for NPS contributions is Rs 2 lakh under two different parts of the income tax law.
Similarly, you can claim the amount charged to the insurer as a deduction under section 80D for a health insurance policy. There are several other eligible deductions available under Section 80 which you might not be aware of and can become a challenging task for you when it comes to doing proper tax-saving calculations at the time of ITR filing.
8. Missing on the due date
ITR filing due date is much important because of the penalty associated with it are much more complex. So it is must that you must have a reliable & experienced chartered accountant on your side who will help you in all ITR filing due dates & lets you focus your focus on your business growth.
9. The Multiplicity of Form 16S
Often it can become difficult to file your ITR if you have switched jobs during the financial year and invested money regularly during the year in different tax-saving products. ITR Filing Returns with multiple Form 16s can be a bit challenging.
It’s common for people to switch jobs during the financial year going after better pay or better work. When you change your job in the middle of a financial year, it is very likely to happen that you end up with multiple form 16s. During such situations, the tax calculations need to be performed while considering different form 16 documents.
Income tax Filing with multiple Form 16s can be problematic due to which the taxpayers are often confused and are not sure about what to do.
10. Finding a Reliable ITR filing Expert
For every ITR filing expert, it is important to understand under which income tax slabs an individual falls under and rest the ITR filing expert will figure out how to manage & fix onto income tax of an individual. Saving on the income tax is an art as well as science which an ITR filing expert is good at.
Ministry of corporate affairs (MCA) or {http://www.mca.gov.in/MinistryV2/} is a government portal where anyone could get the status of their company Registration. MCA regulates corporate rules & regulations under the companies act, 2013. This portal acts a gateway to all services & guidance which an investor or a new entrant wants to get before kick start their business.
You can check the Company registration number, type of company, company registration date, directors of the company etc. by following the below mentioned steps:
Enter your company/LLP Name, company CIN & enter the captcha code then click “submit”
Details will be displayed on the screen.
FREQUENTLY
ASKED QUESTIONS (FAQ)
What
is Master data?
This facility is made available to the general
public interest by the government to make the process more transparent and
easy. As its name suggest it is a data which contains the master details of any
company registration with Registrar of companies (ROC).
How
can I register my company?
Company registration through Simplified Performa for
Incorporating Company electronically (SPICe -INC-32), with eMoA (INC-33), eAOA
(INC-34), is the default option and most companies are required to be
incorporated through SPICe only.
What are the documents required for Company registration?
Fill the details as mentioned in the Aadhaar card issued by UIDAI.
OTP Verification: OTP will be send to the registered mobile number with UIDAI.
Category: Applicant must mention the social category to which it belongs (General, SC, ST, OBC).
Gender: Male/female/transgender whichever category you fall under.
Name of Enterprise: Legal name of enterprise under which all the transactions of the business will be done, should be mentioned.
Permanent Account Number (PAN): Applicant must mention the PAN details in case of co-operative, public limited, Limited liability partnership while it will be optional in any other type of organisation.
Official address: Postal address of the organisation
Date of Commencement of business.
Bank details: IFSC code of the bank branch and the account number where an individual account exist must be mentioned.
Person employed: Details of employees who are directly working under the payroll of the company must be mentioned while applying for MSME registration.
Investment: While computing the total investment, the original investment (purchase value of items) is to be taken into account.
Submit: The Applicant must click on Submit button to generate OTP which will be sent to email id mentioned for registration.
How can I get my private limited company registration?
Acquire Digital Signature Certificate (DSC).
Obtain Director Identification Number (DIN).
Application for the approval of name of proposed company.
Application for Certificate of incorporation (COI)
Apply for Memorandum of Association (MOA) & Articles of Association (AOA).
