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.

What is an audit? How do Auditing Firms get Audited?

There are many auditing clients you may encounter and there are different reasons that each of them require auditing. As you gain experience here are a number of clients and types of audits you may need to carry out. 

Wikipedia describes audit in the following words, “An audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial.”

Here are different ways that different types of auditing are carried out and where they are carried out.

How do Auditing Firms get Audited?

In any big Audit firm, you will find there are "Audit Partners" and there is also a tax and advisory division. The tax and advisory along with all other non-audit lines of service are formed under the paradigm of Limited Liability Company (or equivalent). The audit practice will then be called "Partnership".

This stems from an age-old policy that Auditors, Lawyers, and Accountants should not have limited liability for providing wrong advice or assurance to third parties.

The current times dictates that most country legislation will still require an audit firm to be in a partnership with the audit partners.

As it is a partnership you do not require a legal document to be audited.
The partners, however, are required to provide for their personal income tax and are audited by the tax authority (IRA/IRS) personally.

Large audit firms get audited by the licensor of the firm's brand name such as individual KPMG, PWC, EY, and Deloitte have to follow some specific financial guidelines internally so that they can stick to the brand name, and hence these KPIs are under the scanner and monitored closely. However, it is in no way comes near to a full audit that some of the private companies face.

VRamaratnam & Company are distinguished auditors in Chennai that meet up to applicable reporting standards with perseverance. There are a number of by-products of the audit process such as finding out the internal management issues and other important insights that can cater to the present and future challenges too.

While some of the rules of the game stand transformed as of today some of the basic fundamentals remain unchanged.  The investor must add accuracy, completeness, and fair presentation of information in the financial statements and disclosures. The auditing process helps maintain the confidence of both the company and the financial system too. For the accountingfirms in Chennai and the other cities of the country, the main challenge is keeping up with a fast-evolving corporate reporting environment.