Tax Compliances for Doing Business in India, 2023-2024

Irrespective of the market, mode or form, businesses must adhere to specific legal provisions and norms that are mandatory to sustain and grow in India. The Indian tax laws have been automated to ensure more clarity, allow predictability and guarantee fairness towards all businesses. These efforts have increased ease of doing business in the country, which has further allowed for India to rank 37th in 2022 as per Annual World Competitiveness Index, 2022.

In India, not only do both the Central and State Governments levy some taxes, but local bodies like municipalities levy some minor taxes as well.

The Income Tax Act, 1961 provides guidelines for taxation of all companies in India, be it resident or foreign. Companies resident in India are taxed based on their global income, while non-resident companies have to bear taxes only on the income they receive, have earned or generated, or are bound to earn or generate in the country.

What are some Tax Compliances for doing Business in India?

GST Registration & GST Return Filings

The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. It has replaced a number of different taxes in India and follows a similar tax slab as Value-Added Tax (VAT).

Any individual or entity that offers any service or sells any goods and has an annual turnover of more that INR 40 lakhs (INR 20 lakhs for some special-category states) must register themselves with the GST. This shall enable them to levy GST on their goods/services as well.

When it comes to filing GST returns, it basically depends on the type of business in question. Based upon the business, you may be expected to file GST returns at different intervals, such as monthly, quarterly or annually. In addition, you must ensure to file these returns before or on the deadline assigned for each period without fail to avoid any unnecessary hassles.

Entities that must register with the GST are:

• Any individual/company that adhered to the pre-GST tax structure, like VAT, excise, etc.
• Entities engaged in interstate supply of goods and services.
• Input Service Distributors.
• Any non-resident taxable individual.
• Individuals/companies supplying goods/services through e-commerce platforms.
• Casual taxable individuals.
• Individuals needed to deduct the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS).
• E-commerce platforms that allow supply of goods/services through their platforms.
• Individuals acting as principal/agent selling in place of someone else.
• Any other individual/company as notified by the Central and/or State Government.

When it comes to filing GST returns, you must visit the returns section on the GST website to file them as per the frequency assigned for your business-type.

Forms required when filing GST returns:

• GSTR-1: Data pertaining to sales must be filed through this with the Government. You do not need to pay any tax post filing this return.
• GSTR-3B: Used to declare GST liabilities for any specific period.
• GSTR-9: Taxpayers who are registered with GST and have a turnover of over INR 2 crores in any financial year file this return on an annual basis. It is basically a combined version of all the monthly and quarterly taxes returns filed in any financial year.
• GSTR 9C: Acts like a reconciliation statement between the annual returns in GSTR-9 for any financial year and the numbers mentioned in the audited financial report of the taxpayer.

Filing Income Tax Return

The Income Tax Department has classified the different incomes of tax paying individuals in India into five specific categories depending upon their source of income - salary, business, house/property, capital gains, and other sources.

• Any individual earning income in India must pay certain income tax to the Government of India before the deadline, complied with as per their business-type. It must be noted that failing to do so in time may result in penalties.
• Guidelines provided under Section 139 of the Income Tax Act, 1961 act as the guide to how any late Income Tax Return filing shall be taxed and are referred to when a taxpayer fails to timely file their income tax returns.
• Section 139 aims to help correct the error of filing to file tax returns in time. It is divided into several sub-sections that aim to address the different circumstances that may surround any late return filings.

Section 139(1) provides a structure that states how mandatory return policies must be treated when filing an income tax return. Following entities must file Income Tax Returns:

• Individuals with a total income that is more than the exempted limit.
• All firms, including Limited Liability Partnerships (LLP) and Unlimited Liability Partnerships (ULP).
• Any resident or foreign, public or private entity doing business or located in India.
• Residents that have assets in a foreign country.
• Every Association of Persons (AOP), Hindu Undivided Family (HUF) and Body of Individuals (BOIs).

Filing Registrar of Companies (RoC) Returns

All companies registered under the Companies Act, 2013 or Companies Act, 1956 are required to file yearly returns with the Registrar of Companies (RoC). When fulfilling the annual compliance requirement, you must file the following forms without fail:

• Form 23 AC
• Form 20B or Form 21A
• Form 66

Filing TDS Returns

The tax deducted at the time of any transaction is known as TDS; it is levied by the Government of India. This tax is deducted when the transaction takes place or when the money is credited to the payee’s account, whichever comes first.

TDS returns are filed on a quarterly basis to the Income Tax Department and can be submitted online. It must be filed within the specified deadline to avoid any issues in the future. Further, once a TDS return is submitted, all the information therein shall show up on Form 26AS.

Following details must be mentioned when filing TDS returns:

• Permanent Account Number (PAN) of both deductor and deductee.
• Amount of tax paid.
• TDS challan details.
• Others, if required.

Companies or employers who have availed a valid tax collection and deduction number, commonly referred to as ‘TAN,’ manage TDS return filings. If you make specified payments provided under the Income Tax Act, 1961, you need to deduct taxes at the source and deposit the same before the deadline to make the below-mentioned payments:

• Insurance commission.
• Payments related to the National Saving Scheme and several others.
• Salary payments.
• Earnings on securities.
• Earnings on winning horseraces.
• Income from winning lottery, puzzles, etc.

Maintaining Books of Accounts

Considering it is necessary to maintain apt books of accounts, you must set up an effective bookkeeping framework that allows you to easily access details related to any transaction. This framework shall prove to be an effective solution for the entire organization and present a clearer picture of the company in front of its investors and stakeholders. As such, irrespective of whether you are a startup, a growing business or an established corporation, you must pay extra attention to the bookkeeping systems of your company at all times.

Conclusion

Anyone planning to conduct business in India must familiarize themselves with the various rules and regulations along with the crucial tax compliances they must adhere to. While the efforts of the Government have proven to help the country gain exponential growth and climb the global ranks when it comes to competitiveness, it is essential for all businesses to aptly meet the compliance requirements.