Do you always fear that your team is missing out on meeting tax compliances? Are you awaiting the impending doom of being punished with penalties? With several different types of compliances to meet, it can be slightly difficult to choose which compliances are applicable to your company.
Here, we’re giving an exact list of compliances as per your company type, and everything you need to know on the subject.
So, if you thought you only had to file your taxes, you were wrong.
Tax compliance, in simple terms, refers to nothing but a set of rules & regulations made by legal authorities to ensure timely and accurate tax submission. Sometimes, it can be tough to abide by each law, especially in India. But not complying with those laws might lead to legal troubles and loss of future business opportunities that might come along.
A basic example of tax compliance is Income Tax Return (ITR) filing. Individuals or companies that fail to file their ITRs before the due date are considered noncompliant. Failure to comply with the tax can lead to penalties and legal troubles.
Do you think that filing your tax alone can work? You might be wrong because there are two types of compliances that your business has to comply with. Here is a definition of two most important compliances that you are likely to misunderstand.
A statutory audit is one that is required by The Companies Act of 2013. The goal of this audit is to verify the accuracy and fairness of accounting records.
A tax audit, on the other hand, is described as an examination of a taxpayer’s books and records in order to meet the requirements of Section 44AB of the Income Tax Act of 1961 for determining the exact income of the assessee.
Here is a quick brief on both types of compliances.
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A statutory audit is one that is required by The Companies Act of 2013. The goal of this audit is to verify the accuracy and fairness of accounting records.
A tax audit, on the other hand, is described as an examination of a taxpayer’s books and records in order to meet the requirements of Section 44AB of the Income Tax Act of 1961 for determining the exact income of the assessee.
Here is a quick brief on both types of compliances.
| Point of Difference | Statutory Compliance | Tax Compliance |
| Governing Act | The Companies Act of 2013 (section 143) | The Income Tax Act of 1961, Section 44AB |
| Applicability | All companies registered under the Companies Act 2013 and previous Companies Acts are subject to statutory audits. | All Corporations, LLPs, Partnership Firms, as well as Individuals or Professionals, whose turnover or Gross Receipts exceed the threshold level, are subject to a tax audit. |
| Threshold Limit | For Statutory Audit, there is no limit on Turnover or Gross Receipts. It is required of every firm, even if it has no revenue or has not yet started doing business. | Businesses whose total sales, turnover, or gross receipts for the year exceed Rs. 1 crore are required to undergo a tax audit.
Professionals whose gross receipts for the year exceed Rs. 50 lakhs are required to undergo a tax audit. |
| Purpose | The goal of the statutory audit is to guarantee that the Company’s financial statements are reliable, transparent, truthful, and fair. | The goal of a tax audit is to ensure that the books of accounts are properly maintained to accurately reflect the assessee’s taxable income, as well as the production and submission of a Tax Audit Report and an Income Tax Return. |
| Due Date | The Statutory Audit should be completed within 6 months of the Financial Year’s end, but before the Annual General Meeting at which the Audited Accounts are presented to the Shareholders. | For a Financial Year, the deadline for completing a Tax Audit and filing a Tax Audit report with the Income Tax Department is September 30th of the following year (Assessment Year). |
| Penalty for Non-compliance | Non-compliance carries the following penalty: For the business: The price ranges from Rs. 25,000 and Rs. 5,00,000/-. For each officer who is in default: A year in prison is possible. OR Fines ranging from Rs.10,000 to Rs.1,000,000 |
If a Taxpayer fails to conduct an Audit of Accounts, he or she will be fined the lesser of the two amounts: 0.5 percent of total sales, turnover, or gross receipts. a sum of Rs. 150,000 |
These compliances might vary from business to business. The different types of legal entities in India are as follows.
Types of legal entities in India
There are seven types of entities legally recognised in India, namely the Private Limited Company, the Limited Liability Partnership (LLP), the Sole Proprietorship, the Public Company, the One Person Company, and the Partnership.
Private Limited Company
A private limited company is a corporate entity owned by private investors.
Limited Liability Partnership (LLP)
Restricted liability partnerships (LLPs) are a type of partnership in which each partner’s liability is limited to the amount invested in the company.
Sole Proprietorship
A sole proprietorship, also known as a sole tradership, individual entrepreneurship, or proprietorship, is a type of business owned and operated by one person in which the owner and the business entity have no legal distinction.
Public Company
An initial public offering (IPO) is when a firm sells all or part of its stock to the public (IPO). A new example of this is Paytm.
One Person Company
According to Section 2(62) of the Firms Act, 2013, a one-person company is one that has only one stakeholder and can be distinguished from private companies.
Partnership
By definition, a partnership firm is formed when two or more persons pool their resources to form a company and agree to share risks, profits, and losses.
Cooperative
A cooperative is described as a user-owned and managed firm that derives and distributes advantages equitably based on usage, or a business owned and controlled by the people who use its services.
Are you wondering what compliances your company needs to meet? Below is a table to give you a better idea.
A complete list of tax compliances
There are almost nine types of taxes in India that break into two: Direct and Indirect tax. When talking about tax compliances for companies, there are two types of compliances;
External Compliance
Every tax in India is backed by law and controlled by legal authorities. External compliance refers to the rules, laws and standards set by the government authorities to protect the organisation’s goodwill. Complying with these laws help companies build strong public relations, trust, and transparency. Furthermore, it assists in eliminating unwanted duplication of resources.
Internal Compliance
Internal compliance refers to the set of rules and regulations followed by the internal members of the company, including employees, owners, traders, and clients. Complying with these regulations ensures the company’s utmost quality of services and products. An organisation can only abide by external compliances if it aligns with internal rules & regulations.
| Type of Business | Compliance Applicable | Due Date |
| Pvt. Ltd. and OPC |
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| Sole Proprietorship and Partnership |
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| LLP |
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Here’s What These Compliance Mean And Why You Need To Abide By These
Managing tax compliances can be a tough job; that’s why most people turn to taxation and accounting professionals. However, as a business owner, you must know what these compliance mean for your business. One way to simplify the process is by using accounting software for small businesses. Such software can help you keep track of your finances, generate reports, and assist you in filing your tax returns accurately.
Using accounting software for small businesses can make managing tax compliances much easier. The software can keep track of important deadlines for tax payments and filings, and it can also help you prepare and file your tax returns accurately. Additionally, accounting software can help you keep track of all your business expenses, including tax-deductible expenses, which can help you minimize your tax liability.
Moreover, accounting software for small businesses can help you maintain accurate financial records, which is essential for complying with tax regulations. The software can generate reports such as profit and loss statements, balance sheets, and cash flow statements, which can help you understand your business’s financial health and make informed decisions.
In summary, while managing tax compliances can be challenging, using accounting software for small businesses can simplify the process significantly. By automating key tasks and generating accurate financial reports, the software can help you stay compliant and avoid costly mistakes.
• MSME Form 1
The MSME I Form is used to send information to the Registrar of Companies on a half-yearly basis regarding unpaid payments to Micro or Small Enterprises for more than 45 days (ROC).
• DPT 3
The DPT-3 form is a one-time loan return form that must be filed by any business with outstanding loans that are not considered as deposits.
• Income Tax Filing
The Income Tax Department of India requires businesses to file an Income Tax Return (ITR). It gives details on the company’s earnings and the taxes that must be paid during the year.
• Director KYC
The Ministry of Corporate Affairs (MCA) launched a new approach in 2018 called Directors’ KYC to verify the existence of company directors. The Directors’ KYC is updated using this form.
• AOC 4
Every financial year, Form AOC 4 is filed with the Registrar of Companies to file the company’s financial statement.
• MGT7
MGT 7 is an electronic form that the Ministry of Corporate Affairs assigns to all corporations for the purpose of filing yearly return information.
• ADT-1
After the annual general meeting, a business must submit Form ADT-1 to the registrar of companies to notify him or her of the appointment of an auditor (AGM).
• PAN Registration
The company’s PAN card serves as documentation of its existence. When filing the firm’s income tax returns, the partners must present the partnership deed or certificate of registration, as well as PAN card form 49A.
• PTEC for Individual
The acronyms PTEC and PTRC stand for Professional Tax Enrolment Certificate and Professional Tax Registration Certificate, respectively.
• Form 8
A “current report” is a filing that corporations must make with the Securities and Exchange Commission (SEC) to disclose significant events that shareholders should be aware of. When it comes to tax planning for your business, there are several financial opportunities to be gained if executed under the right framework. However, it’s always best to work with a professional tax and accounting company to ensure intelligent decision-making and hassle-free execution. At Brego Business, we provide full-service taxation and accounting services to help you reduce tax deductibles and maximize profits. Our experts can even assist you in finding the best accounting software to streamline your business processes and improve financial outcomes. Don’t miss out on financial opportunities – contact us today to learn more about how we can help you optimize your business’s tax strategy!
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One of the biggest advantages of working with Brego Business is that they keep track of all the changes in the compliance landscape. This means you don’t have to worry about missing any deadlines or updates that could potentially put your business at risk. By utilizing accounting software basics, they’ll make sure you’re always up to date and compliant with all the relevant regulations.
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