Introduction
Tax compliance is a crucial aspect of running a small business in India. Whether you’re a sole proprietor, partnership firm, or private limited company, understanding tax filing requirements can help you avoid penalties and optimize your tax savings. In this guide, we’ll break down the basics of tax filing for small businesses in India.
Types of Taxes Applicable
1. Income Tax
Small businesses must file income tax returns annually based on their revenue and profit. The tax rate varies depending on the business structure (proprietorship, partnership, or private limited company).
2. Goods and Services Tax (GST)
Businesses with an annual turnover of ₹20 lakh (₹40 lakh for some states) or more must register for GST. GST return filing is mandatory even for businesses with zero turnover.
3. Tax Deducted at Source (TDS)
If a business makes specific payments (like salaries, professional fees, or rent), it must deduct tax at source and file TDS returns.
Step-by-Step Tax Filing Process
- Obtain a PAN & TAN: Every business must have a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN) for tax-related transactions.
- Maintain Financial Records: Keep a record of income, expenses, invoices, and bank statements.
- Calculate Tax Liability: Use tax slabs and applicable deductions to determine payable tax.
- File Returns on Time: Use government portals like the Income Tax e-filing website and GSTN portal.
- Pay Tax and Keep Acknowledgments: Ensure timely payments and maintain proof of tax filing.
Common Mistakes & How to Avoid Them
- Missing deadlines leading to penalties
- Incorrect tax calculations
- Not maintaining proper records
- Ignoring GST compliance
How a CA Can Help in Tax Planning
A Chartered Accountant (CA) ensures that your business remains tax-compliant, helps with tax-saving strategies, and minimizes audit risks.