You have a lot to learn as a new business owner. You must select personnel, determine the most effective marketing strategies, and, of course, manage your accounts. That last item is a little more complicated, and if you’re new to small business accounting, you might be unsure what kind of taxes you’ll have to pay. The specific taxes you pay will depend on your firm, but here’s a rundown of the nine most frequent small business taxes.

  • Individual Income Tax (IIT)

Individual income tax is a type of tax imposed by the government on income made by individuals. Taxpayers are required by law to file an income tax return each year in order to establish their tax obligations. The revenue generated here is a significant source of income for the Indian government. Wages, salaries, and other types of income such as pensions, interest, and dividends are all subject to this type of income tax.

  • Tax on Wages

The tax that is withheld, charged, or levied on an employer’s payroll is known as payroll tax. Wages, gross salary, incentives, and any other type of remuneration paid to employees shall be included. The tax withheld, charged, or levied on an employer’s paycheck is known as payroll tax. This covers all gross salaries, wages, perks, and other types of compensation given to his or her employees. This tax is imposed without regard to the employee’s residence, family status, or any other personal factors. Payroll taxes are taxes that an employer is compelled to pay or withhold on behalf of his or her employees.

  • Tax on Extraneous Benefits

The fringe benefit tax is imposed on the advantages that a firm provides to its employees. Employers pay this fee to the government in exchange for providing these fringe benefits. In the fiscal year 2010-11, this was abolished. Let’s take a closer look at what fringe benefits are before we talk about a tax on them. Simply explained, a fringe benefit is anything that a business provides to an employee that is not covered by the employee’s wage. Reimbursements, tickets, company vehicles, donations to superannuation accounts, and other items fall under this category. Basically, if a company spends anything on an employee, including leisure charges, it is considered compensation.

  • Tax on Goods and Services

The GST is a federal indirect sales tax paid on the purchase price of certain goods and services. The GST is added to the product’s price by the business, and the buyer pays the sales price, which includes the GST. The tax collected on Goods and services by the business or vendor is then forwarded to the government.

  • Excise tax

An excise tax is a statutory tax imposed at the point of sale on specified goods or services such as fuel, tobacco, and alcohol. Excise taxes are domestic taxes levied within a government infrastructure, as opposed to international taxes levied over national borders. Motor fuel, airline tickets, cigarettes, and other goods and services are frequently subject to a federal excise tax.

  • Duty or Customs Tax

The fee levied on commodities when they are carried across international boundaries is known as customs duty. Simply put, it is a tax placed on imported and exported goods. This duty is employees by the government to improve revenue, protect domestic industries and organizations, and regulate the movement of products.

Customs duty rates differ based on where the goods were created and what materials they were comprised of. The Customs Act of 1962 defines custom duty in India, and the Central Board of Excise & Customs is responsible for all matters pertaining to it (CBEC).

  • Income Tax on Corporations

Corporation tax, often known as corporate tax, is a direct tax applied on the net revenue or profit generated by corporate entities. According to the requirements of the Income Tax Act of 1961, the tax is applied at a certain rate.

  • Tax on Dividend Distributions

Dividend is a payment made by a corporation to its stockholders from the company’s profits in a given year. Dividends are income in the hands of shareholders, and they should ideally be subject to income tax. However, Indian income tax regulations exempt dividend income received from Indian corporations by investors by levying a tax on the company delivering the dividend, known as the Dividend Distribution Tax (DDT). Section 115O governs the provisions relating to DDT.

  • Tax on Capital Gains

The capital gains tax is a tax levied on the profit made from the sale of an investment.

When stock shares or other taxable assets are sold, they are referred to be “realised.” Unrealized capital gains or unsold assets are exempt from the tax, therefore stock shares will not be taxed until they are sold, regardless of how long they are held or how much their value increases.

Consult an accountant if you need assistance deciding which taxes apply to you. They can assist you in calculating your taxes and providing filing advice. If you are having trouble filing your income tax return in Tambaram, Chennai, phoenixTax- Tax consultants are always willing to assist you.

The following are the corporate entities that must pay corporation tax in India

  1.  Incorporated corporations.
  2. Corporations that obtain revenue from India and conduct business with that revenue.
  3. Other international companies that have made a permanent presence in India.
  4. Corporations that have obtained the status of being an Indian resident solely to pay taxes.

Presumptive Basis of Taxation Scheme

The assesses ‘Total Income’ is used to calculate income tax. With so many claims, disallowances, deductions, exclusions, and other provisions, the Income Tax Code is always seen as a complicated statute. There’s no denying that calculating the exact ‘total income’ on which the tax due is based necessitates lots of new calculations to the Net Profit as represented in an enterprise’s Profit and Loss statement. One must be aware of which expenses cannot be ‘claimed,’ which expenses will be denied, what types of income are free from taxation, and how one might reduce their tax burden by investing a certain amount of money in specific assets.

The Government of India has carried out a scheme for a certain type of entrepreneurs with modest turnover and volume of business in order to avoid these complex calculations and ease the lives of relatively smaller business owners. The system mandates that total income is calculated as a defined percentage of the turnover of certain businesses. Under the Income Tax, this is known as calculating business profits and gains on a ‘Presumptive basis.’ The ‘total income’ for that year is assumed to be a percentage of the business’s turnover for that year. Let’s look at what this presumptive basis of taxation scheme is and how it applies to small enterprises in different situations.

Section 44AD for Small business owners

Only if the assesses total revenue is less than Rs. 2 crore would income be considered to be 8% of the assesses total sales under Section 44AD. If the assesses total sales exceeds Rs. 2 crore, income will be determined using the standard provisions of the Income Tax Act (i.e. Revenue – Expense – Depreciation), and the assesse would be compelled to have his accounts audited under section 44AB.

Furthermore, an assesse who uses section 44AD will not be able to claim any expenses or depreciation. Any deduction granted under Sections 30 to 38 shall be regarded to have been fully applied for the purposes of computing income computed under this section, and no additional deduction shall be allowed under these sections.

Features of section 44AD

  1. You must have a turnover of less than Rs 2 crores.
  2. Your net income should be at least 8% of your total revenue (the minimum net income should be considered 6 percent in case of digital receipts).
  3. You are not required to keep accounting records.
  4. If an assessee chooses presumptive taxation, he or she must pay 100 percent advance tax by the 15th of March of that fiscal year. Prior to FY 2016-17, you do not have to pay advance tax.
  5. You are exempt from having your accounting records audited.
  6. You can file your tax return in ITR-4 instead of ITR-3, which is a much shorter and easier form.

Businesses eligible for section 44AD

This presumptive tax benefit will not be accessible to qualifying assessees operating in any of the following businesses:

– A person who is engaged in a profession as defined by section 44AA. – A alternative arrangement under section 44ADA is available for certain experts.

– A person who earns money through commissions or brokerage.

– Any agency operation

– Any enterprise engaged in the transportation, hiring, or leasing of goods carriages as defined in section 44AE.

Presumptive Profit – All qualified assessees who are involved in an eligible business and have a turnover or gross receipts of less than INR 2 crores in the preceding year can report 8% of their turnover or gross receipts, or a larger amount, as their net profit from the business. In respect of turnover/gross receipts obtained by account payee cheques/bank draughts or any other electronic form of payment, the assessee may declare just 6% of the turnover/gross receipt as its net profit.

Salary and interest paid to partners – In the case of a partnership firm, salary and interest paid to partners are not eligible to be deducted from the net profit computed in accordance with this section at 8% or 6%, as the case may be. It is presumed that the pay and interest to partners have been deducted/allowed when computing the net profit on a presumptive basis.

Decided to opt out – If an assessee declares profit under this section and then chooses not to use this presumptive basis of declaring income in any of the next five years, he will not be able to use this section again for a period of five years from the year in which he chose not to use this presumptive basis of declaring income under this section. In this case, the assessee will be compelled to keep the required books of accounts and have them audited under section 44AB of the Act.

Section 44 ADA for Small business professionals

As indicated in section 44AD, the presumed foundation of income for small professionals is substantially similar to that of small business owners. Legal, medical, engineering, architectural, interior decoration, accountancy, technical consultancy, and other professions as defined by the Board in the official gazette are among the professionals defined under section 44AA. Only professionals with gross receipts of less than INR 50 lakhs are eligible to have their income calculated on a presumptive basis.

Features of Section 44ADA

  1. If the assessee’s gross turnover is less than Rs 1 crore, the tax payable under Section 44AD is determined at 8% of the individual’s gross revenue for the financial year. According to Budget 2020, this ceiling has been raised to Rs 2 crore.
  2. With the exception of those listed in Section 44AE, the provisions of this section apply to any business or profession.
  3. The income estimated under this section will be taxed according to the slab rates set out in the Income Tax Act.
  4. Assessees who claim deductions under this section will be barred from claiming any further expenses or depreciation, with the exception of interest and payments to partners.

Eligibility for Section 44ADA

The Indian assesses listed below are eligible:

  1. Individuals Hindu families who are not split (HUFs)
  2. Firms that form partnerships (note that limited liability partnerships are not eligible)
  3. Professionals listed under Section 44AA of the Income Tax Act, 1961, whose total gross income are less than Rs 50 lakh in a year are qualified beneficiaries of section 44ADA.

Professionals eligible for section 44ADA

  1. Interior designers
  2. Technical assistance
  3. Engineering \Accounting
  4. Legal \Medical \Architecture

Other specialists, as listed below:

Producers, editors, actors, directors, music directors, art directors, dance directors, cameramen, singers, lyricists, storey writers, screenplay or dialogue writers, and costume designers are all examples of movie artists.

A person who represents another person for a fee before a tribunal or any authority established by law is referred to as an authorized representative. It does not include an employee of the person thus represented or a person engaged in the accounting profession.

Any additional experts who have been notified

In most circumstances, a businessperson cannot be expected to understand all of these complications and prepare their taxable income and return of income without the assistance of an expert Tax consultant. Phoenix Tax- Tax consultant in Chennai are always ready to help you pay your taxes with ease on time.