Taxes and Filings to Be Done by SMEs in India
Different Taxes and Filings to Be Done by SMEs in India
Every SME (small and medium business enterprise) operating in India is required to comply with certain taxes and filings, failing which the business is exposed to greater risks in the future, the worst being lawsuits or criminal prosecution. So, let’s find out what exactly these taxes and filings are -
Business tax return filing
The business’s income tax return is known informally as the business tax return. This is a consolidated and detailed statement regarding the income earned and expenditure incurred by a business during a specified financial period. It also specifies the assets and liabilities of the business such as fixed assets, creditors, debtors and loans allowed or received. Returns may be of many other types as well such as GST tax return.
The return is important because it is this document where the business declares how much profits it has earned or losses it has incurred. The government estimates the amount of tax chargeable, tax already paid and exemptions from taxation on the basis of the return filed. Therefore, the business return should be complete, accurate, relevant and reliable.
In India, small businesses enjoy a number of benefits when it comes to calculation and payment of income tax. One of these is the presumptive taxation scheme. As per this scheme, any business with an annual turnover of less than or equal to Rs. 2 crores in a financial year is required to file a simplified income tax return known as ITR 4 or Sugam. They are exempted from having to pay advance tax every quarter and can pay the entire amount of tax at the year-end on 31st March. They are also not required to maintain any books of account specifically for tax purposes.
However, to avail the benefits of this scheme, the business must have adequate records to prove the turnover amount. They should also pay their taxes and file returns in a timely manner.
Financial statement audit
To encourage growth of small businesses in India, the government has provided a number of relaxations in terms of compliances and procedures. However, if your small business has been incorporated as a company, there are some compliances which you must abide by. For clarity, a small company in India is one which has a paid-up share capital of less than Rs. 50 lakhs and an annual turnover of less than Rs. 2 crores in the immediately preceding financial year. Here are the regulatory requirements -
i) Appoint auditors - An auditor should be appointed in the Board meeting within 30 days of incorporation of the company. Such an auditor should be approved in the first annual general meeting and he shall remain auditor till the sixth annual general meeting
ii) Audit of accounts – The books of account must be audited and an Audit Report must be issued by the auditor appointed
iii) File financial statements – A copy of the audited financial statements must be filed with the Registrar of Companies (ROC) every year
iv) File Annual Corporate Tax Return – This document must be declared with the ROC after paying any income tax due for the year
v) File GST return – If the business is registered under GST laws, a separate GST return must also be filed
GST - Goods and Services Tax
Different Taxes and Filings to Be Done by SMEs in IndiaWhen it comes to the enforcement of Goods and Service Tax too, the government has provided several relaxations to small businesses and taxpayers. As per the GST Audit Plan for 2019-2020, small taxpayers are those assesses whose audited financial statements report a turnover below Rs. 7.5 crores. Medium assesses, on the other hand, are those who report a turnover between Rs. 7.5 to Rs. 10 crores. The turnover will include not only taxable goods and services but also zero-rated and exempted goods and services in the previous financial year. It will, however, exclude any supplies made during the financial year. Once the annual GST return is filed, the GST audit can begin.
Small assesses will be spared from GST officials visiting their business to conduct audits. Their audits will be conducted by officials off-site. This is to encourage small business, reduce red tape, promote intelligence enforcement, and provide a non-intrusive and friendly (yet efficient) compliance environment for the taxpayer. However, the taxpayer is required to cooperate with officials and answer queries, provide documents and vouchers and also allow a visit to the business site if required. If the taxpayer does not cooperate, GST officials may visit his business to conduct audit.
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