Income tax compliance is a vital aspect of doing business in India. As per the Income Tax Act, individuals, businesses, and other entities that earn income in India are required to comply with various income tax compliances. In this article, we will discuss the essential income tax compliances that businesses must follow in India.
8 Tax compliances in India
Income tax compliance is a critical aspect of doing business in India. Here is a complete guide on income tax compliance in India:
- Obtain a Permanent Account Number (PAN)
A Permanent Account Number (PAN) is a unique identification number issued by the Income Tax Department. It is mandatory to have a PAN if you are earning income in India. PAN is used to track your tax payments and filings. You can obtain a PAN by submitting an application form to the Income Tax Department or through online registration.
- File Income Tax Returns
Individuals, businesses, and other entities that earn income in India are required to file income tax returns every year. The due date for filing returns is typically July 31st for individuals and September 30th for businesses. Filing of income tax returns is mandatory, even if the business has not earned any income in a particular year.
- Deduct and Deposit TDS
Tax Deducted at Source (TDS) is a system of deducting tax at the source of income. Businesses that make payments to contractors or employees must deduct TDS and deposit it with the Income Tax Department. TDS is deducted at different rates depending on the type of payment made, and the deposited TDS can be claimed as a credit at the time of filing income tax returns.
- Collect and Deposit TCS
Tax Collected at Source (TCS) is a system of collecting tax at the source of income. Businesses that collect certain types of payments, such as sales of goods or services, must collect TCS and deposit it with the Income Tax Department. TCS is collected at different rates depending on the type of payment collected.
- Maintain Books of Accounts
All businesses are required to maintain books of accounts that provide a record of their income, expenses, and financial transactions. The books of accounts must be maintained for a minimum of 6 years. The books of accounts should be updated regularly to ensure that they reflect the true and fair view of the financial position of the business.
- Comply with Transfer Pricing Regulations
If a business has transactions with related parties, such as its parent company or subsidiary, it is required to comply with transfer pricing regulations. Transfer pricing refers to the pricing of goods and services transferred between related parties, and the regulations are designed to ensure that transactions are conducted at arm’s length. Transfer pricing documentation must be maintained by the business to support its transfer pricing policies.
- Comply with Tax Audit Requirements
Certain businesses are required to undergo a tax audit every year. A tax audit is an examination of a business’s financial records and accounts to ensure that they comply with the Income Tax Act. Tax audits are conducted by chartered accountants who are approved by the Income Tax Department.
- Pay Advance Tax
If you have an estimated tax liability of more than INR 10,000 in a financial year, you are required to pay advance tax. Advance tax is paid in installments throughout the year, and failure to pay can result in penalties.
In conclusion, income tax compliance is a critical aspect of doing business in India. It is essential to obtain a PAN, file income tax returns, deduct and deposit TDS and TCS, maintain books of accounts, comply with transfer pricing regulations, comply with tax audit requirements, and pay advance tax. Non-compliance with income tax regulations can result in penalties and legal consequences. Therefore, businesses should seek professional guidance to ensure that they comply with all income tax compliances in India. Businesses should seek professional guidance to ensure that they comply with all income tax regulations in India. ASC Group have top industry professionals of Direct Tax providing complete services to individual and companies.