Do Taxpayers in India is Getting any Benefits from the Government?

The income tax department gives out detailed data on tax return filers each year. It has been going on from the assessment year 2012-13, or AY13, onwards. The data for AY1 has been recently published. AY19 dabbles in income earned during the fiscal year 2017-18, or FY18, (i.e. the period between the months of April 2017 and March 2018).

The data provides a number of key insights about the great Indian taxpayer.  You can get the details of the same from the auditors in Chennai. As per the data, only around ₹37,400 crores is generated as far as income from house property in a year (via rents after adjusting for home loan interest and so on) in the entire country, which shows that most of the transactions are still cash-based and outside the paradigm of the tax net. The declared salary income, however, is more than double the size of the declared individual business income, which puts a wrench in the theory about the purview of the salaried middle class.

When it comes to individual income tax, there are different types of income that are taxed. This includes salaried income, the income coming from the house property, business income, and interest income. The individual-declared total income during the AY19 stood at Rs.34.1 trillion. Of this RS 20 trillion, or the bulk of the income was declared by the salaried income. 

The government announced an income tax rebate for the salaried people to be Rs 12,500 under Section 87A of the Income Tax Act. Earlier, the rebate was Rs 2,500. This available rebate is Rs 5 lakh a year.

This spells out zero tax for annual income up to Rs 5 lakh. There is an exemption from income tax on annual income amounting to Rs 2.50 lakh. This exemption can extend up to Rs 3 lakh in the case of senior citizens.

The standard deduction by the government was up to Rs 40,000 to Rs 50,000 and it increased the income tax rebate under Section 87A income-tax Act.

Besides, there is another deduction up to Rs 1.5 lakh under section 80C for investments made in instruments such as Public Provident Fund and the expenses incurred on children's education fees and stamp duty paid for the house registration.

Investment up to Rs 50,000 in the national pension scheme makes for additional tax deduction Section 80CCD(1B) of the Income Tax Act.

However, the income tax slabs were not changed until February's interim budget. There is zero tax on income amounting to Rs 2.5 lakh, beyond this tax rate it is 5 percent on income up to Rs 5 lakh amounting to Rs 12,500.

But with the government providing a rebate of the exact amount, there is no tax payable on income up to Rs 5 lakh. But such assessees are required to file their income tax returns every year. If they don't, the Income Tax Department may send notices for the same.

Twenty percent income tax is levied if the amount comes to Rs 5 lakh but not exceeding Rs 10 lakh a year. Income tax liability may turn out to be Rs 1 lakh in this slab.

An annual income of more than 30 lakhs calls for a 30 percent income tax. Plus, four percent cess on income tax is levied.

Accounting Mistakes by Small Business Owners - Top 4 Points

Small business owners are faced by a number of challenges on a day to day basis. and it is their entrepreneurial strength that bails them through. Unfortunately, messing up on the accounting functions can lead you to the failure of a business.  So what are the top 5 accounting mistakes that small business owners tend to make?  and how can you avoid them? Find out here, 

1.       Not keeping a tab on receivables 

You need to stay on top of your receivables as it ensures a good cash flow is healthy and helps you to figure out where you stand financially each month. You can browse through software options available for freelancers to painlessly manage this part of their business. Freelancers should take help from cloud accounting tools that will allow you to send invoices and update payments from just about anywhere. Software like Fresh Books is one of the few examples, that helps send out late payment reminders and urges the clients to pay online.

2.       Not maintaining expense receipts 

Sometimes it is difficult to figure out the sudden charges slapped by banks. If you do not accurately report your expenses, you may end up paying costly penalties.

3.       Mixing personal/business finances 

When you start your own business, you should open a separate bank account where you deposit your income and from there you can pay your business account. Use a credit card will help use it for business purpose, only. Mixing your business will also make it harder to know how much money you are making so you may end up running up debt or losing track of project profit margins. 

4.       Not hiring a professional to handle taxes

Freelancers are sometimes tempted to handle taxes themselves but hiring professional benefits you in numerous ways. First, your accountant can comply with up-to-date tax laws and benefit from all the deductions you qualify for. 

Secondly, professionals such as tax consultants in Chennai or any other city can resolve discrepancies or confusions that come from guesswork ( such as incorrect tax categories, deductions) that may lead to an audit, saving the incidence of avoiding penalties.

It’s important that when you are unable to understand the nitty-gritty of a financial plan, you ask your accountant so they explain it all to you in simple language. If you continue to find this difficult to manage tricky get in touch with an accounting firm in Chennai or an accountant who is on the same wavelength and communicates in a way that works suits you best. There are now more free-lancer friendly accountants than ever was.

Important Functions of Chartered Accountants in India

With the rise in economic prosperity, there is a growing importance of chartered accountant services in India.  A Chartered accountant in India works on a wide number of job roles ranging from monitoring, reviewing and reporting various financial activities to providing advice on tax legislation and also business advancement advice. A certified public accountant is at the helm of operations and handles all kinds of financial affairs with alacrity such as,

Managing

Chartered Accountants work in a number of job roles such as powering your business to a strategic direction, solving a number of problems, and bringing about a change.

Reporting

Chartered Accountants also gauge the financial performance of a company or accounting firms in Chennai or anyplace else.

Advising

Chartered Accountants are financial advisors in the real sense of the word and provide a number of services to different businesses either in the capacity of a consultant or as a practicing partner.

Different Roles of Chartered Accountant

The following are the different job roles that an accounting service in Chennai or different cities of the country works in!

Tax Accountant

 Tax accountants formulate a number of corporate and personal income tax statements and make different tax strategies.

Management Accountants

Chartered accountants are in so many ways also management accountants who work in tandem with a marketing and finance personnel to develop new business. Management accountants have a much wider job role to play in companies that involves capital budgeting and line of business analysis.

Financial Accountants

For a financial accountant, there is not a dull day at the office as their job roles are as varied as they come. They make important financial decisions that involve important decisions such as mergers and acquisitions and the very next day they meet up with customers or suppliers to form a brand new account and converse about business.

Auditor

 Auditing work is highly computerized and depends on the process of sophisticated random sampling methods. Auditing allows Chartered Accountants to work in a number of sectors. A qualified accountant can help you in auditing. A computer system cannot help with the auditing process in its entirety. Auditing requires a perfect blend of sagacity and a skeptical attitude. Also, the process of auditing needs rapid evolvement, and this requirement can only be fulfilled by an auditing accountant.

Budget Analyst

Budget analysts manage and develop organization's financial plans. Budget analysts require quantitative skills and require people skills so that they negotiate better.

Keeping abreast of financial statements can help track shortages in cash flow and loss of margins. A qualified accountant can help you in this regard, and prepare all your accounts with a lot of dexterity and promptitude.

With the world economy taking giant strides towards progress, a business can only thrive with the right financial advice. However, a recorder is not there to only keep your business buoyant but also help figure out ways to increase the margin of profits and thus help your company grow.

The role of a chartered accountant in Chennai or anywhere else for that matter changes according to the changing needs of companies. While your business flourishes, the requirement of taxes and the procedures will undergo a change as well. In accordance with changing regulations, a registrar can come up with a tax strategy to reduce the amount of taxes needed to be paid to the government. Since tax laws are always changing, you will definitely need the services of an able CA to handle the management of accounting techniques and plan and prepare according to the State’s observation of regulations.

It is absolutely essential to keep track of how a particular business is progressing, a bookkeeper helps regulate that, and the best chartered accountant firms in Chennai help you to track your business with aplomb.

Today, a registered accountant can not only aid a company in the financial scheme of things but also be regarded as advisors, strategists, and able administrators.

Importance and differences between direct and indirect taxes?

Taxes are enforced by the governments on their citizens, it is an involuntary fee levied on corporations or individuals by a government entity, whether national, regional or local in order to back government activities with finances.

Taxes are a monetary burden laid upon individuals or property owners to lend their support to the government. The taxes are not a voluntary payment rather they are an enforced contribution towards the government.

Taxes collected are utilized by the government for various expenses such as defense, healthcare, education and different infrastructure facilities such as roads, dams, highways and so on.

The Two forms of taxes:

Basically, there are two forms of taxes namely Direct and Indirect taxes. Indirect taxes actually have the ability to shift the burden to the end taxpayer. Direct taxes, on the other hand, allow the government to collect the taxes directly from the consumers. Indirect taxes allow the government to bring in stable and assured returns via the society.

Difference between Direct Tax and Indirect Tax:

There are different implications of direct and indirect taxes on the country. However, both types of taxes are important for the government as taxes include the major part of revenue for the government.

Key differences between Direct and Indirect Tax are:

A direct tax is levied and paid by the individuals, firms, Hindu Undivided Families (HUF), companies etc. whereas the indirect tax is finally paid for by the end-consumer of goods and services.

In case of direct taxes, the burden of tax cannot be shifted while burden can be shifted as far as the indirect taxes are concerned.

• Tax evasion is possible in the collection of direct taxes while tax evasion is not possible as far as the indirect taxes are concerned as the taxes are charged on goods and services.
• A direct tax is instrumental in reducing inflation, whereas indirect tax may increase inflation
• Direct taxes have better allocative effects when compared with indirect taxes as direct taxes put much lesser burden over the collection of indirect taxes. This is where the collection is scattered across the various parties and consumers’ preferences of goods are distorted because of the price variations because of indirect taxes.
• Direct taxes helps in reducing inequalities and are far more progressive than indirect taxes which enhance inequalities and are hence considered to be regressive.
• Indirect taxes involve far lesser administrative costs owing to the stable and convenient collections, while direct taxes include a number of exemptions and also incur higher administrative costs.
• Indirect taxes are veer towards growth and progress as they discourage consumption and help increase savings. Direct taxes, on the other hand, reduce savings and also discourage investments.
• Indirect taxes have a larger coverage as different members of the society are taxed on the sale of goods and services, whereas direct taxes are collected only from specific people in respective tax brackets.
• Additional indirect taxes are levied on detrimental-to-health commodities such as cigarettes, alcohol and so on. This dissuades over-consumption and thereby helps the country in a social context.
• Both the direct and indirect taxes are important for the country as they impact the overall economy.  Direct tax includes income tax, wealth tax, corporation tax etc. Indirect taxes, on the other hand, are applied to the sale and manufacture of goods and services. Both direct taxes and indirect taxes are collected by the central and respective state governments and it depends on the kind of taxes to be levied.

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What's the importance of GST bill in India?

GST or Goods and Services Tax (GST) is defined as the tax levied when a consumer makes a purchase. It can be defined as a comprehensive indirect tax and all-in-one tax which amalgamates the manufacture, sale, and consumption of goods taxes along with the services.

It is a simplified version of taxes as GST is set out to replace all indirect taxes which are levied on goods and services by both the Indian Central and State governments. 

This simplification of taxes puts it under a single umbrella to eliminate the impact of taxes on the production and also the distribution of prices of various goods and services. Accounting firms ina Chennai can help you unravel the nitty-gritty of the GST for of tax regulations.

Impact of Taxes

The current complex tax structure involves the taxes to be levied by the State and Union governments separately leading to the increasing and complicated tax structure. The taxes are implemented at various rates and at multiple points which bamboozle most taxpayers and that is why the help of a tax consultant in Chennai or any other place in India can make things easier for you.

As far as the Centre is concerned there are various taxes it levies on the common people like the Income tax, excise duty, service tax, central sales tax and security transaction tax. And at the state level, it includes VAT or sales tax, property tax, state excise, entry tax and agriculture tax. 

It almost acts as a double whammy as it leads to an increased tax burden on the Indian products making the prices and sales of products in the domestic, as well as international markets, shoot up.

So is GST the Savior in Disguise?

The cascading effect of multiple taxes proves to be a burden on the common man and the only solution as of now is the GST. The framework of the proposal of dual GST means that will have a federal structure. 

To explain further the GST will basically be divided into three kinds of taxes that includes Central, State and another one known as the integrated GST that helps handle inter-state transactions. Under the present GST tax reform, different kinds of services are included in sale, transfer, barter, exchange, and rental which will include a CGST and SGST.

 The Importance of GST

 The impact of indirect taxes can be explained in a number of ways, the example which can explain things well is if one person lets call him A sells goods to another person B after levying sales tax and then again when B re-sells those goods to C after levying sales tax on it.

So, when B includes the sales tax paid on the previous purchase it becomes a tax on tax. This is how GST can simplify things and makes things easier to the common consumer.

Is there any Con to the GST Tax?

In India, there are two forms of GST namely the Central GST or CGST and the state GST or SGST. The only obstacle to the implementation of GST can be the coordination amongst the different states. The Centre and States have to agree on one thing that is the uniformity of GST rates, the inter-state transaction of different goods and services, there should be a sea change in the infrastructural standpoint. The transition from the old form of taxes to the new form of taxes that is the GST pattern must be smooth without any loopholes.

The GST being a destination based tax there has to be a clarity as to where the goods are going and for that there needs to be a proper methodology that would ensure proper management in terms of services provided.

A uniformity of GST in all states at the same time and the same rates is the only way that will help improve tax governance.