Learn the Basics of Taxation Process in India

Taxation plays a vital role in the economic development of any country.  It is a system used by government of any country to raise or collect revenue from the public. Any government makes use of the collected revenues for the wellbeing of society in different forms such as by paying wages to police or soldiers, by constructing dams or roads, by operating hospitals and schools, by providing meals and medical services to the poor people, and so on. It is difficult for any government to exist without collecting taxes. For maintaining equality in a society, it is necessary to impose taxes on society.

Understand the term ‘Tax’

Tax can be defined as the part of income collected by government from us to provide several facilities like school, medical, water and drainage system, roads constructions, etc. It is a required payment charged by government of any country on individuals or companies for meeting the expenditure which is requisite for the welfare of a society.

Let’s walk through some the features of Tax:

  • Tax is a compulsory payment for the benefit of society
  • It needs legal sanction
  • It is considered as a personal responsibility
  • Tax is waged out of the total income earned by the tax payer

Taxation Structure as per Indian Viewpoint

In India, mainly two types of taxes are implemented:

  1. Direct Tax: This tax is paid directly by people of India to the government. Direct tax is further divided into various types as given below:

1.1 Income Tax: As its name implies, it is a tax on the total income of a tax payer

1.2 Wealth Tax: This tax is charged on the net assets

  1. Indirect Tax: This tax is indirectly paid by the people of India to the government. Indirect tax is further divided into various types as given below:

2.1 Central Excise Duty: It is levied on manufacture or production of goods

2.2. Custom Duty: This type of tax is charged by central government on the import and export of goods from India

2.3 Value Added Tax: It is a tax on the sale of goods which is implemented within the states only. VAT is a multi-stage tax and is paid by the wholesaler, retailers, manufacturer, and is also transferred on consumer.

2.4 Service Tax: Service Tax is a tax levied on taxable services. In this, usually service provider pays text and then recovers it from the consumer from the receiver of the taxable service

Here’s Everything You Need to Know About Income Tax

Income tax is a tax levied directly on the earnings of an individual, association, and business by the government to finance its several operations. Income tax is of two main types: Direct tax and the newly introduced Goods and Services Tax (GST) that subsumes almost all the State as well as Central taxes, including excise, VAT, and service tax.

In addition to funding the government activities, taxes also serve as a fiscal stabilizer helping distribute wealth equally among the population. Taxes are even influential in mitigating the effects of financial cycles. The payment of income tax in India is made as per the terms defined under the Income Tax Act.

In accordance with the Indian Income Tax laws, income from five main sources is deemed taxable. Allow us to explain them briefly:

  1. Income from Salary

In case there’s a relationship of an employee and employer between the payer and the payee then an income can be taxed under Salaries. In contrast, if there’s no such relationship, the income will not be considered to be income from salary.

  1. Income from House Property

This type of income tax is referred to the tax on rental income that is being earned from the House Property. Nevertheless, if the property is not being leased, tax will be charged on the anticipated rent that would have been received if this property was leased. Income from House Property is possibly the only income, which is levied to tax on a national basis.

  1. Income from Profits and Gains of Business or Profession

Under this income head, any earnings received from any manufacturer, business or trade will be liable to tax after deducting particular expenses.

  1. Income from Capital Gains

Any revenue or gain resulting from the transfer of a capital asset effected in the financial year will be chargeable to income tax.

  1. Income from Other Sources

Under this head of income, any earnings that are not liable to tax under the aforementioned four heads of income will be chargeable, given that earnings are not exempted from the calculation of total income.

In India, the tax rates differ as per the income of an individual, alias Income Tax Slab. The slab is modified every year by the government during Budget Session of Parliament.

GST Return Filing Procedure: Everything You Need to Know

Ever since the inception of the Goods and Services Tax, taxpayers are required to fulfill a bunch of compliances which mandates them to file several returns for each Financial Year. In simple words, GST Return filing is compulsory for all those folks who have GST Registration. In order to make you better understand the procedure of Goods and Services Tax Return filing, we’ve come up with this tutorial. Let’s delve in.

What are GST Returns?

Returns are a set of forms boasting a pre-approved reporting format. This make terms of essential information easier for the taxpayers for the entire disclosure. Each form has been intended to make sure the complete disclosure of transaction made between sellers and buyers.

Who Should File GST Returns?

Under the GST administration, any regular business is required to file three monthly returns (GSTR 1, GSTR 2, and GSTR 3) along with one annual return (GSTR 9). There’s one more return dubbed GSTR 4 that is submitted on a quarterly basis by composition taxpayers.

Types of Returns under GST

  1. GSTR 3B

To make the migration process of taxpayers easier than ever, Government introduced an interim return form of GSTR 3B for the month of July and August. The form doesn’t require you to provide invoice level information. However, you must need to provide the total values for each field.

  1. GSTR 1

This form requires you to give all the details of the outward supplies of goods and services to the department. It’s worth notable that you should file the form by the 10th of every following month.

  1. GSTR 2

Through this form, you’ll get the details of the inward supplies of goods and services as sanctioned and approved by the recipient of the goods or services. This form must be filed by 15th of the following month.

  1. GSTR 3

This is the auto-populated form consisting of all the details filed under GSTR 1 and GSTR 2. This would let the department estimate the tax payable after making an allowance for Input Tax Credit availability. The form is recommended to be filed by the 20th of every following month.

  1. GSTR 4

This form includes all the details given in the auto-populated form of outward supplies. The form has to be filed by the 18th of the succeeding month after each quarter.

  1. GSTR 5

The form comprises of the details about input tax, outward supplies, tax paid, reaming month, and imports. This is a monthly submission form which must be filed by 20th of the succeeding month.

  1. GSTR 6

This form is all about the details regarding return for input service distributor. This form is recommended to be filed by input service distributor by 13th of every following month.

  1. GSTR 7

This form is to provide all the details about the tax deduction. It needs to be filed by 10th of the every following month.

  1. GSTR 8

This form includes all the details concerning supplies made by the e-commerce seller. It also incorporate details of the tax deducted at source. You have to file the form by 10th of every following month.

  1. GSTR 9

This is an annual return form that requires to be filed by every taxpayer by 31st of the following financial year.

  1. GSTR 10

This form provides all the details of final return, which requires to be filed by taxable person whose registration has been cancelled or surrendered within 3 months of the date of cancellation or surrender whichever is later.

  1. GSTR 11

This form gives you the details of inward supplies that must be provided by a person who has Unique Identification Number (UIN). This form has to be filed by 28th of the month following the month for which statement is filed.

In order to file GST Returns, there’s a need of GST complaint sales and purchase invoices. You can contact a consultant to help you in generating GST complaint invoices with ease.