Full Overview of Tax Structure in India

India has a competent tax-structure system and it caters to a humongous population. Like it or lump it, you just cannot ignore taxes, as it is the largest source of income for the government. This money is then utilized for different purposes and projects which then can lead to the development of the nation. 

 Central and State Governments along with local authorities such as municipal corporations call the shots on taxes. The government is unable to levy any tax unless it is passed as a law.

Here are some of the important features of the taxation system in India. Get a better understanding of this from tax consultants in Chennai or CA firms in Chennai. A responsible citizen is one who understands the tax structure and caters to the norms associated with it. 

1.       The Important Role of the Central and State Government

There are specific roles for both of the central and state government. The Central Government of India imposes taxes like customs duty, service tax, income tax, and central excise duty.

The state governments, on the other hand, imposes taxes such as professional tax, income tax on agricultural income, value-added tax (VAT), land revenue, state excise duty, and stamp duty. The local bodies are also allowed to collect some taxes such as property tax, octroi and some other taxes on different services such as drainage and water supply.

2.       Different Types of taxes

Taxes can be categorized under two headings namely direct and indirect taxes. The implementation of the two is what separates the two, in other words, there lies the difference. The assessee pays the direct taxes and indirect taxes are levied on goods and services.

A) Direct taxes

Direct taxes are administered to individuals and corporate entities and simply cannot be transferred to others. The plethora of taxes include income tax, gift tax, and wealth tax.

Income tax

According to the Income Tax (IT) Act, 1961 every assessee with total income more than the maximum exempt limit has to pay this tax. Both the tax structure and rates are annually prescribed by the Union Budget. This tax is imposed at the time of each assessment year, starts on 1st April and ends on 31st March.  

B) Indirect taxes

Indirect taxes are, as the term denotes, not directly paid by the assessee to the government authorities. These indirect taxes are levied on goods and services and collected by those who sell goods or offer services. Check out the most common indirect taxes in India. Some of the important indirect taxes are value-added tax (VAT), customs duty, octroi, excise duty, service tax, and goods and services tax.

3. Revenue Authorities

CBDT or The Central Board of Direct Taxes is an integral part of the Department of Revenue under the Ministry of Finance. This body not only provides inputs for policy but also plans direct taxes in India besides being responsible for the administration of direct tax laws via the Income Tax Department.

CBEC
The CBEC or The Central Board of Excise and Customs is like the CBDT is also an integral part of the Department of Revenue under the Ministry of Finance. It is a nodal national agency whose services include administering central excise duty, customs and service tax in India.

CBIC

Under the GST regime, the CBIC or the Central Board of Indirect Taxes & Customs provide post-legislative approval. The CBIC would look after all the directorates, field formations and provide assistance to the government in policy making in lieu of GST, continuing with central excise duty levying customs functions.

The Indian taxation system has undergone several modifications over the years. The income tax rates have been standardized providing income tax rates with simpler governing laws helping common people understand the same.

What are the Important Services of a Chartered Accountant besides the Traditional Services

The accountancy profession has seen a rapid growth in the recent times, it is mainly because of the change in economic growth. The important types of functions performed by the various CA firms in Chennai  and other places are the following,

Accountancy
Accountancy means having writing up of accounts and also preparing financial statements. It includes a wide range of services from simple bookkeeping to other financial analysis.

Auditing
Auditing is one of the most important functions of a Chartered Accountant, as it amalgamates different skills such as specialized training, and judgment. Auditing helps show a true view of the affairs of the organization.

Taxation
A Chartered Accountant has immense experience in accounts and helps prepare the returns for tax purposes, representing assesses before the Income-Tax authorities and offering general advice on taxes to his clients.

Cost Accountancy
A Chartered Accountant helps to determine the varied costs of production and of processes at various levels of operations in manufacturing product and helps in the rendering a service. He/she provides costing information guiding the management and also provides cost control methods that would help the management in providing the right selling prices.

 Company Work
 Chartered Accountants provides the perfect financial structure and the liquidation of limited companies.  They also undertake secretarial and registration work along with the duties of a receiver besides other company work.

Investigation
Chartered Accountants sometimes carry out investigations to find out the financial position of business in matters such as the purchase of a business, reconstructions, and amalgamations. Their services help in providing an efficiency in management or administration etc.

Companies Secretarial Work
In a group of companies, the Secretary is a man who comes with a professional qualification such as chartered accountancy. This helps the professional accountants to offer the right secretarial services to small companies.

Executors and Trustees
A Chartered Accountant often carries out the administration of the estate or settlements and he/she is an appointed executor under a will or trust. Here the chartered accountants need to work in tandem with the lawyers or solicitors. Lawyers too carry out different works to provide them the right assistance in the accounting part of their work.

Management Accounting
In this field too a Chartered Accountant is regarded as invaluable. He/she offers a number of services such as everyday control,  formulation of policies,  performance evaluation and so on.

So, a chartered accountant in chennai or other cities of the country has numerous services to offer besides the more traditional services. No wonder, the need for chartered accountants has been on the rise.

Importance of Chartered Accountant Services 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. 

The Main Functions of a Comptroller

Some of the important functions of an actuary are the following:             

Prepare financial statements.

Organize financial plans.

Look after audits.

File taxes.

Bookkeeping and so on.

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 sea 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.

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.

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

VRamaratnam & Company is one of the leading Indian Chartered Accountants firm in Chennai, helmed by extremely skilled and experienced Chartered Accountants along with other professionals. Their work is backed by the experience of many years

The firm has worked hard to provide a wide range of financial and consulting services to its clients. Their services include Auditing and AssuranceServices, Direct and Indirect Taxation especially focussing on Business Entity Registration in India for Non-Resident Indians, and Start-up business valuation and accounting, Payroll outsourcing services. 

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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One Person Company: Full Step By Step Overview

One Person Company is as the name suggests is a company which has only one member.  Section 3 catogorizes OPC as a Private Company for different legal purposes and with just one member. All the provisions that are linked to the private company are applicable to an OPC unless it is expressly excluded. As far as OPC is concerned it is true that one Person is a sole proprietor and his liability to the debtors of the Company is only restricted to the shareholding of the company and that his personal assets are never linked for the payment of the company’s liability, this only holds true when the Proprietorship never happens.

The Main Features of One Person Company (OPC)

1. It has one shareholder:

 
A person who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company.  What does the term "Resident in India" mean? It is a person who has stayed in India for a considerable period of of time, that means not less than 182 days that immediately precedes one calendar year.

2. Nominee for the Shareholder:
One Shareholder shall nominate another person to become the shareholders at times of death or incapacity of the original shareholder.  Such nominee shall give his/her consent for being appointed as the Nominee for being the sole Shareholder.  The only person eligible for being the sole member of a one person company is an Indian citizen.

3. Director: 
The company must then have a minimum of One Director and the sole shareholder can be the Sole Director. The Company may then proceed to have a maximum number of 15 directors.

The Terms and Restrictions of OPC

A person cannot be included more than a One Person Company or even become the nominee in more than one such company.

A minor cannot become a member or be a nominee of the One Person Company or even can hold a share with beneficial interest.

Incorporation and conversion of OPC into a company under Section 8 of the Act cannot be done [Company not for Profit].

It is not possible for an OPC to carry out Non-Banking Financial Investment activities and that includes investment in securities of any body corporate. 

An OPC is unable to voluntarily convert into any kind of company unless at least two years have gone from the date of implementation of One Person Company. The only exception is the threshold limit (paid up share capital) which is increased beyond Rs.50 Lakhs or its average annual turnover exceeds Rs.2 Crores, during the relevant period.  If the paid-up capital of the Company exceeds Rs.50 Lakhs or the average annual turnover at the time exceeds Rs.2 Crores, then the OPC need to invariably file forms with the ROC for conversion into a Private or Public Company, which if it breaches above threshold limits within a period of six months.

How to Incorporate One Person Company (OPC)- A Few Guidelines

•  For the proposed Director(s) one has to obtain digital signature certificate [DSC].
• For the proposed director(s) one has to obtain Director Identification Number (DIN).
• Select a suitable company name, and for the availability of a name, one can make an            application to the Ministry of Corporate Office. 
• Draft both Memorandum of Association (MOA)and Articles of Association ( AOA)
• Sign and file different documents which include MOA & AOA with the Registrar of Companies electronically. 
•  Payment of the requisite fee to Ministry of Corporate Affairs and also for Stamp Duty. 
• A perusal of documents at Registrar of Companies [ROC] with great details.
•  Provide of receipt of a certificate of Registration/Incorporation from ROC.