Documents Required to Prepare Your Income Taxes
Copy of your Certificate of Incorporation
Copy of a NOC from the Ministry of Corporate Affairs
Company or Business Entity Bank Account Number & Details (IFSC, Registered Branches, etc.)
Bank Statements (for income earned from interest on bank account)
Records of Rent Paid, Travel Expenses Incurred, Depreciation, Tax Set Offs were claimed
Foreign companies operating in India would need to show
Registration Certificate copy by Indian authorities authorizing you to set up an office in India
Copy of Company Registration Certificate from the foreign company’s country of origin
PAN: A Permanent Account Number (PAN) is a tax identifier that the Income Tax Department uses to record and process your tax payments. Every taxpayer, whether an individual or a company, requires to register for a PAN if they earn an income in India. All of them will be issued an individual PAN card which they may receive via standard mail.
Certificate of Incorporation: This is a document that certifies that your company has been legally incorporated in India and is issued by the local office of the Registrar of Companies.
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Procedure for Tax Preparation in India
Tax professionals will ideally take scanned copies of all relevant documents and feed them into the software automatically programmed to read information off those documents.
Document Review: A tax expert will study the documents that you have submitted and advise you whether these are proper and whether any other documents may be needed.
Return Preparation: The next step is to review the computations and returns filed on the appropriate income tax return form. All documents are thoroughly checked to match calculated values and accordingly, you are advised to make changes where necessary.
Deductions for Companies and Savings on Taxes: Your consultant will advise you on the possible deductions that you are eligible to apply for. Mutually exclusive deductions and other investment plans that minimize tax outgo will also be discussed. It is possible for you to save up to 3/5th of your taxes in this way.
Submission of Returns: Finally, your tax expert will make the relevant filings and submissions online on the official income tax portal. This will ensure that you don’t miss out on procedures such as verifying your returns.
Once the submission has been made you can check the status of your returns on the income tax portal at any time.
Foreign and Domestic Companies in India
As per the Indian Income Tax Act, companies are classified into domestic and foreign companies for tax assessment. While domestic companies are liable to pay taxes on incomes they earn anywhere, foreign companies are liable to pay taxes only on income earned in India.
Classification of Heads of Income for Companies in India
Any income earned by a company incorporated and registered in India is further categorized as
Profits from the business
Income earned from renting assets
Income from sources such as dividends, interest, and so on
Tax rates on companies as well as individuals keep changing from year to year and are declared in the Annual National Budget statement in Parliament. For the Financial Year that is to end on March 31, 2022, the rates are as follows.
What are the Advantages of Filing your Returns through an Expert?
Filing your returns judiciously can affect how much tax you pay. Even if you have made mistakes in the current year you can carry forward the lessons you have learned to the returns you file in the future. Here’s a brief summary of what you can expect to gain.
Savings: Taxes are part of your total cost of doing business in India. By minimizing that outgo, you can increase your profits and returns on investment quickly.
Increased Cash Flow: We all know that cash flow is the single most important factor for determining the shape of your business strategy. By performing those transactions and investing in those opportunities that offer you the least amount of tax heads, you are effectively increasing your cash flow. This can be used for more meaningful activities that can help your business grow.
Lower Risk: Decreased tax outgo means a lower risk of being pulled up by tax authorities for suspected default. This means lesser litigation costs and a better reputation for your business.
Out-of-the-Box Solutions for Tax Issues: Quite often tax processes are cumbersome and time-consuming. In-house experts may not be able to give you solutions that someone with experience of other industries can provide.
A squeaky-clean tax record: also shows that you are a credit-worthy borrower and that you will fulfill your obligations toward vendors and customers without fail.
Taxes for Firms and Businesses in India
For the Financial Year Ending March 31, 2022:
|Type of Business Entity
||Surcharge If Annual Income between INR 10-100 million
||Surcharge If Annual Income exceeds INR 10,000,000
||Health & Education Cess
|Partnership (including LLP)
|Domestic Company where Turnover in FY 2019-20 < INR 4000 million
|Any other Domestic Company
Note: Total tax outgo cannot exceed the amount (Income – 100 million)
|Domestic Company under the Income Tax Act
(If total income between INR 10,000,000 to 100,000,000)
(If total income over INR 100,000,000)
|Manufacturing Companies that choose to be taxed under Section 115BA (those that had a turnover of upto INR 4000,000,000 in FY ending March 31, 2018)
|Companies that choose to be taxed under Section 115BAA
|New Manufacturing Companies that choose to be taxed under Section 115BAB
|Other Domestic Companies
Foreign companies are subject to the following tax rates
|Type of Income
|Royalties, fees for technical services received in India through agreements entered into before April 1, 1976
|Any other income
Yes, PAN cards are issued to every taxpayer regardless of whether that person is an individual, a partnership firm, or a company. You can apply for a PAN card at the official income tax portal of the Government of India.
Form 49A or Form 49AA can apply for a new PAN. Fill out the form and present it to the income tax portal online. When the form is submitted online, recognition with a unique acknowledgment/coupon number becomes available. This acknowledgment must be saved and printed for use in the future.
The acknowledgment form must be submitted to the PAN Service provider. You must provide proof of identification, proof of residence, and proof of the date of birth with the acknowledgment form before mailing it. Your name in these papers should be the same as the name requested on the PAN form. Please keep this in mind when implementing the PAN application form.
Two up-to-date colored pictures must be included in the acknowledgment form in the particular place. They must make signatures at the precise location. The photograph should be fresh and obvious, as it will come into view on your PAN card.
For communication addresses within India, the PAN application price is Rs.105 (including taxes). Payment methods comprise checks, demand draught, online banking, credit, and debit card. If the communication address is outside of India, the PAN charge is Rs. 971 demand draught, credit, or debit card can pay (for NSDL) and by the draught or credit card. If a deposit is made by online banking, credit card, or debit card, the payment must be completed at the time of filling out the PAN application form, following which payment will be sent. Please print this deposit receipt and fasten it to the acknowledgment form. Photographs, evidence of identification, proof of address, proof of the date of birth papers, and payment/payment proof must escort a fully signed acknowledgment form. This must be sent to the PAN Service provided within 15 days following the date of the online PAN request.
In order to encourage zero-tax companies to fulfill their tax obligations, tax authorities in India introduced the Minimum Alternate Tax (MAT) in 1988. At present, if your tax outgo as a company is found to be less than 15.5% of your book profits, as computed under the Companies Act, 2013, you can pay a tax of 15% (the minimum tax according to the MAT scheme) of your book profits and carry forward the difference between your actually computed tax outgo and the amount paid to complete the 15% cap. This difference can be claimed as tax credit for a future period tax assessment.
You can use this MAT tax credit to inflate profits or to pay off tax liabilities during lean years. You would still have to pay the relevant surcharge and cess in the financial year for which you use MAT credit or MAT tax outgo.
The Presumptive Tax scheme, meant for companies who have a turnover of less than INR 200 million in a year, is defined in Section 44AD of the Income Tax Act, 1961. Those who opt for this scheme can either declare profits at 8% for offline transactions and at 6% for online or digital transactions.
Presumptive tax rates are not applicable to
- Life insurance agents
- Those engaged in operating, leasing, or hiring of goods carriages
- Those who take commissions of any kind for services rendered
TDS (Tax Deducted at Source) is an indirect mechanism of tax deduction under the Income Tax Act of 1961 at the point of income formation. The payer deducts tax and remits it to the government on behalf of the payee. A TDS Return is a quarterly declaration that must be filed to India’s Income Tax Department. If you are a deductor, you must file a return. It contains information concerning the TDS you deducted and deposited. It is the duty of the person depositing someone for particular goods or services to take off TDS and file a TDS return. Salary, interest, commission, brokerage, specialized fees, royalties, contract payments, and so on are all incorporated in the acknowledged payment. The person who deducts is transferred to as the deductor, while the individual whose tax is being deducted is referred to as the deductee.
The TAN, or Tax Deduction and Collection Number, is a ten-digit alphanumeric code that any person who is liable for Tax Deduction at Source or Tax Collection at Source on behalf of the government must procure. The individual who is responsible for this tax liability must pay the deduction to the Central Government using his/her TAN number. Salaried people do not need to get a TAN or have charges deducted at source. With sole proprietorship firms and other organizations, tax must be deducted at the source when certain payments are made, such as salaries, payments to contractors, and lease payments above Rs.1,80,000 per year. Businesses with a TAN registration must file TDS returns every quarter.