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A-3. Change in TDS Rate, is it really good for the taxpayers or need to be a little more cautious?
A-3. Change in TDS Rate, is it really good for the taxpayers or need to be a little more cautious?
TDA rate has been revised by the government in Union budget 2024. The government has revised the rate of few sections of TDS which is given below. This revised rate is already applicable from 01st of October 2024.
Many taxpayers are very happy with this reduced tax rate especially 194H i.e. TDS on commission and brokerage that now they can have more income in their hand after deduction of TDS. They should be happy but taxpayer should also need to be more cautious because now they are under the radar of Advance Tax Payment which need to be paid on or before the due date. If any taxpayer is failed to calculate their tax liability or failed to pay the advance tax on or before the due date then they also need to pay Interest on failure of non-payment of Advance Tax.
Let’s understand with the help of an example.
Mr. Abhishek who is working as a broker for many companies earned Rs. 10,00,000.00 in a financial year 2024-25 starting from October 2024 till March 2024. He received Rs. 10 lakhs Less 2% TDS on brokerage i.e. Rs. 9,80,000.00 in total and Rs.20,000.00 as TDS Credit is received in 26AS. Earlier the amount of TDS was Rs.50,000 (@5% on Commission) So, he could have received Rs. 9,50,000.00 in total after deduction of TDS of Rs. 50,000.00 and the same Rs. 50,000.00 as TDS was deposited in his name to the government by the TDS Deductor. But since the rate of TDS is reduced, Mr. Abhishek 26AS TDS credit will have only 20,000.00 in total. If we assume that Mr. Abhishek has opted new regime and there is no other income or deduction ha can claim then his to total tax liability would be Rs. 52000 (Including Cess). Since Rs. 20,000.00 is already paid by the TDS Deductor, he needs to Pay the balance amount of Rs. 32,400.00 along with Interest for default in payment of advance tax (section 234B) @1% per month or Part and Interest for deferment of advance tax (section 234C) @1 % per month or Part thereof.
So, Tax payer need to little more cautious and they should pay their advance tax liability on or before due date of advance tax payment to avoid interest u/s 234B and 234C. It is advisable to all the taxpayer to discharge their Advance Tax liability as per the due date as Lum sum payment of huge tax at the time of filing Income Tax return will be little more painful.
LinkedIn: https://www.linkedin.com/pulse/changes-tds-rate-really-good-taxpayer-need-little-more-rahul-rai-7wksc
#TaxCompliance, #Advancetax #SmallBusinessTax, #StartupTaxIssues, #BusinessTaxSolutions, #TaxRegulations, #StartupIndia #GST, Incometax #FinancialLiteracy #Entrepreneurship. #TaxSamadhan
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Overview of common tax compliance issues faced by startups and small businesses.
Overview of common tax compliance issues faced by startups and small businesses.
Many startups and small business owners face many tax-related challenges and issues, often due to lack of awareness or understanding. In this article, we'll try to find out the common tax compliance issues faced by startups and small businesses, including unawareness, inadequate documentation, improper business structure, and more.
Not Aware about probable tax compliances required to your business: I would like to give you the foremost issue that is faced by the small business owners and startups, that they don't know about what are the probable tax compliances they required for their business. They know how to do the business, they have their resources, knowledge, connection to start the business or some time they are doing their business from last few years but they do not know what types of compliances they will face in future or already under scanner of tax departments. They believe their tax consultants and they do as their consultant asked them to do, but they never get to know that why they are doing so, nor their tax consultants give proper overview of the requisite compliances. This non awareness leads them to feels anxiety, fear of tax related issues, loosing of pease of mind. They simply follow what their consultant asked to do or what they have seen in their peer groups, friend recommendations, etc. So, try to make yourself aware about probable tax compliances, hire a good consultant to avoid any issues in future.
Inadequate Documentation: Many startups and business face many issues due to wrong documentation which leads them to pay hefty fines and penalties. Take an example, one person register his GST registration from his own house but he sells goods from different places. Now since he didnt change the address of the GST registration or did not add that additional place in his existing GST registration, his goods get caught by the tax officials in the way of delivery of the goods and he is charged with false billing since his Address in GST and the place from where ithe goods get transported is different. So this is very important to do the proper documentation of your business. Inadequate documentation includes missing invoice details, incomplete expenses records, proper company registration and return documents, inadequate employees and staff records. This kind of inadequate documentation can lead to fines, penalty, delayed refunds or denied refunds, loss of credibility, increased scrutiny from tax authorities, etc. So it’s better to adopt basic and simple documentation techniques to avoid any issues in future.
Proper business structure for your business: Do you know if you know the answer of this question that what is the best structure for your business can solve many issue arises in future. First we should know that what is business structure like Sole proprietorship form, Partnership form, Private limited company, Limited Liability Partnership structure and one new structure called One person company. If Startups or business owner know the answer of this question then you are in a right path to grow your business. In present time of digital era or i can say that startup culture, every one want to have their startups which is good things but first know the proper and best structure for your business. I can give you a good example, one person wanted to start a business and he incorporated a private limited company without knowing complete compliances requirement he need to fulfill which ultimately leads to huge cost of incorporation, maintenance cost of the business without doing single rupee business in whole year, government fees for filing return, professional fees, delayed filing fees which is very high in his case. Now he wanted to shut down the business but there is again a high cost which he had paid. So before starting a business must ensures what will be the best structure for your startups and this will save you great amount of money.
Requisite Tax Registration for your business and Startups: Starting a new business is always very exciting and challenging as well. So it is very important for entrepreneur to know all types of required registration they need to apply like Trade Licence, Professional tax, GST registration, PAN & TAN Application, Provident Fund and ESIC Registartion, Labour license, FSSAI Licence, MSME Registration, Startup Registration, Import Export License, and the list will go on. But you should know when this kind of registration will be required, which licence is compulsory to take beforehand and which license is required as per business working model. This is very important if you want to avoid any penalty or fine due to non-compliance of taking proper registration and regulatory requirements.
Proper Record Keeping of the business transaction: Many businesses person and startups must have felt this issue as they do not know how to keep proper records of the business transactions. In this digital era many startups for ease of doing make transaction from different accounts without keeping the records of the transactions. If you have a small business or startups then it is very necessary to keep record of all transaction either in a excel file or online google docs, drive or if not possible atleast to maintain a diary of all the transactions. One can maintain different diary or files for petty expenses of the business and the different files for purchase invoices and issued sales invoices, filed copies of return month wise and also year wise. This step will help the startups or businesses to gradually improve their record keeping and maintenance of books.
Incorrect return filing, delayed filings, non-filing of proper returns: This is one of the most occurred tax compliance issue faced by a startups or businesses which leads to huge fines, penalty, delayed refund, denied refunds, denied tax exemption, denied tax benefits, denied tax deductions and more. So it is very important to business person or startups that they must ensures all the return are filed correctly, before due date which will help them to avail all the benefits. A good example on this that even if you have filed incorrect income tax return before due date, you will have option to correct it, option to carry forward the losses which can be setoff with future tax liabilities. So never file your return incorrect, avoid delay in filing with proper care and attentions.
Over smartness or cunning attitude towards tax compliances: This is my personal view that sometimes a business owner or any startups try to over smart the government or sometime they have cunning attitude towards the tax compliances. Now a days with implementation of digitalization, AI, Data analysis module into the system make department stronger than before. Official are now more vigilant, strict, not lenient as they were earlier, data of other department is cross checked by the different departments. So do not try to be a over smart as it can leads to tax evasion detection, penalties, fines, legal action, and even prosecution. Over smartness or cunning attitude towards tax compliances can prove to be disastrous for businesses even closure of business. Always remember tax compliance is not a game.
Conclusion: Tax compliance is a very important aspect of running a successful business. Startups and small business owners should be aware of the common tax compliance issues that can hinder the growth of the business. By knowing the importance of proper documentation, business structure, tax registrations, record-keeping, and timely return filing, startups and businesses can avoid costly penalties and fines. Moreover, startups and businesses should try to adop a transparent and honest approach towards tax compliances. Remember, tax compliance is not a game, and over smartness, unawareness can lead to disastrous situations. Stay informed, stay compliant, and focus on a growing your business Afterall it’s your business, matter of your bread and butter.
#TaxCompliance, #SmallBusinessTax, #StartupTaxIssues, #BusinessTaxSolutions, #TaxRegulations, #StartupIndia #GST, Incometax #FinancialLiteracy #Entrepreneurship
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Tax compliance is crucial for Indian startups and small businesses, and here's why it matters.
Tax compliance is crucial for Indian startups and small businesses, and here's why it matters.
Tax Compliance: The Secret to Your Business Success! Don't let tax worries hold your business back. In this guide, we'll show you why tax compliance matters and how you can get benefits by doing proper tax compliance.
1. Avoid Penalty, Late Fees, Interest, and Other Charges: It has been seen that many small businesses and startups try to cut their cost of filings by doing the compliances on their own or hiring some freelancers without any adequate degree or experience or knowledge. But after some time, startups or Businesses had to pay the huge amount of penalties, fines, interest, and late fees to the government for non-compliance or doing wrong compliances. You must have experienced that consultant charges would be much cheaper than the penalties and interest. So, it’s always better to hire someone who is good at the compliance part, can do all the compliances in a timely and correct manner. So always try to be tax compliant to avoid unnecessary interest and penalties.
Arey, it's like avoiding a 'challan' from the tax department!
2. Building trust with investors and financial institutions for funding: Many startups and businesses need some funding or monetary help from someone to expand their business. So it is very important that your business is fully tax-compliant in every manner. I can give you a real-life example that came to my attention: a person needs a loan, and that's why he needs to submit his income tax return for the last three previous years to the bank for approval. But after verification, it is found that all the past three-year income tax returns were not e-verified by the person, which he was also not aware of. His consultant forgot to do the same before the due date. Now all three years return is invalid, and his loan application got rejected due to this. So it is very important for every business to be properly tax compliant. Ignorance can lead to huge losses and opportunities. Banks or any investor want to give a loan or invest in those businesses that are tax compliant; these things give them trust about your business.
Paisa ke liye trust zaroori hai!
3. Enhancing Reputation: The question is that if a business or start-up is fully tax compliant, how can it enhance the reputation of the company? But this is very much true in this time of digital world. For instance, a startup or business that regularly files its GST returns or TDS returns on time is viewed more favorably by clients and vendors because their clients or vendors get GST input or TDS credit on time, ultimately enhancing their reputation and credibility in the market.
Arey, yeh toh business ki credibility hai!
4. Eligibility for Government Benefits: The Indian government offers various subsidies, grants, and incentives for startups or small businesses. However, to avail all these benefits company require proof of proper tax compliance like Last Three years' income Tax return copy, and GST return Copy. There are various kinds of schemes run by the government like Startup India where you can have 3 years of Tax Exemption on your Income, the Pradhan Mantri Mudra Yojana is a flagship scheme of the Government of India aimed at providing funding to small businesses upto 10 Lakhs, the Credit Guarantee Fund Trust for Micro and Small Enterprises s a government scheme aimed at providing collateral-free loans to small businesses upto 50 lakhs, Standup India Iniative for Women belonging from SC/ST community, The National Small Industries Corporation iniative, and business can also apply for related business government tenders and the list of benefits will go on. But buinesses can have all these benefits only if your business is properly tax compliant.
So you can say, “Arey, yeh toh business ka future secure karta hai!”
5. Smooth Business Operations: If your business is fully tax compliant i.e you get your all required return filed within due dates and in a correct manners, so it will make all the business process very much smooth. So ultimately you can focus on growing your business, opening new branches or outlets, or instaling new machineries to produce more, hiring new talents, etc. So never think that tax compliances is costly or it will disrupts your business operation rather it will help you to grow faster.
So again you can say, “Arey, yeh toh business ki strength hai!”
6. Financial Health and Planning: Suppose you regularly visit your doctors, get your health checkup regularly, so it will help you to detect potential health risk, will reduce healthcare cost in long run, identify of underlying health issues and foremost can give you peace of mind and reduce anxiety and also it can enhance self-awareness. In the same way, being tax-compliant business ensures good financial practices and planning. Startups or small business that regularly track their income and expenses for tax purposes, get insights about their business financial health. So ultimately maintaining corrects records for tax filing helps you to track business costs, analyze pricing of the products, can identify profitable areas of the business, can optimize marketing spends for business growth and eventually peace of mind.
So you can say, "Tax compliant hone ke fayde bahut hai!"
Summary
In short, tax compliance is not just a legal obligation; it’s a smart business practice and solution that can help your startup or small business to grow, attract investment, and operate efficiently and smoothly. By priotising your tax responsibilities, you’re preparing your business for success in the competitive Indian startup ecosystem.
So ultimately we can say that “Arey, yeh toh business ki lifeblood hai!”
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#TaxCompliance #StartupIndia #GrowthHacking #FinancialLiteracy #Entrepreneurship, #MSME, #PMMY,
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