If business is staganant then do we file taxes and accounts
Answers
1. Selecting the Legal Entity
it should be set up as. Depending on the nature and size of the business some of the legal entity options available are:
a. Sole Proprietorship
b. Limited Liability Partnership
c. Private Company
d. Public Company
e. Joint Venture
2. Maintaining Books of Accounts
If as a business any of the following criteria are met, then maintaining the books of accounts as per the income tax act is mandatory:
a. Income is more the Rs. 1,20,000; or
b. Total sales, turnover or gross receipts are more than Rs. 10,00,000.
In any of the three immediately preceding previous years. This condition has further been relaxed for individuals and HUF where they will be bound by the mandate of maintaining books of accounts only if :
a. Income is more than Rs 2.5 lakhs or
b. Total sales, turnover or gross receipts are greater than Rs 25 lakhs in any of the three immediately preceding previous years.
Note:
The penalty for non-maintenance of books of accounts:
If you have not maintained the accounting records which you should have maintained as per law, you would be liable for a penalty of up to Rs 25,000.
3. Tax Audit
For businesses having gross receipts of more than Rs 1 crore in a financial year are liable for tax audit.The due date of filing the tax audit report is 30th September of the assessment year. The tax audit report must be filed electronically via Form 3CD. For taxpayers subject to tax audit, the due date for filing of return of income is also 30 September of the assessment year.
Under normal circumstances, revision of a tax audit report is not possible. However, in cases where the accounts have been revised it is possible to revise the tax audit report.
4. Due Date
a.Due date for filing of tax audit report – 30th September of the assessment year
b.Due date for return filing (if tax audit is applicable) – 30th September of the assessment year
c.Due date for return filing (if tax audit is not applicable) – 31st July of the assessment year
5. Presumptive Taxation
Presumptive taxation for businesses is covered under section 44AD of the income tax act. Any business which has a turnover of less than Rs 2 crore can opt to be taxed presumptively. They must declare profits of 8% for non-digital transactions or 6% for digital transactions, whichever one is applicable.
The following businesses are excluded from presumptive taxation:
a. Life insurance agents.
b. Commission of any kind.
c. Running the business of plying, hiring or leasing goods carriages.
A. Computation of Presumptive Taxation
Example:
Lalit Traders have gross receipts of Rs 1.5 Crore for FY 2017-18 and do not maintain books of accounts. Lalit traders have opted for presumptive taxation. During the year Lalit Traders received Rs. 70 Lakhs through non-digital transactions (cash payments) and Rs. 80 Lakhs through digital transactions.
What will be the income under the head business and profession?
National Defence Fund set up by the Central Government.
Prime Minister’s National Relief Fund.
In presumptive taxation under Section 44AD, your net income is considered as 8% of your turnover and you will pay tax on that income.
If your receipts are in digital (non-cash) form then only 6% of your receipts is your net income and you will pay tax on that income.
You don’t have to maintain accounting records.
You have to pay advance tax – but instead of estimating income and paying tax each quarter, you can pay all your advance tax before March 31. Advance tax, for taxpayers having opted for the presumptive scheme, is to be paid by 15th March of the relevant financial year if you expect that your income tax liability will exceed Rs.10,000 in the financial year.
6. International Transaction
a. TDS deducted by the foreign client
If you work for clients out of India, payments may be received by you via paypal or as a direct credit to your bank account. Mostly, the foreign client would deduct taxes before releasing the payment to you in accordance with the local tax laws there. You, as a resident of India, would anyway be liable to income tax on all your income. However, you can claim credit for taxes paid overseas, in your return of income.
b. TDS not deducted by the foreign client
If no TDS has been deducted, there is nothing to worry. You need to include these receipts in your total income while making income calculations and pay applicable tax on them since you will be a tax resident of India. To meet advance tax requirements you may have to estimate your annual income from all sources.
7. Return of Income
An individual of HUF carrying on business will be bound to file his return of income in form ITR 3 For a taxpayer who opts for presumptive tax is supposed to file his return in ITR 3