The SMEs operating in India experienced a declined rate to their clerical jobs with the note ban (demonetization) announcement last year November 8th 2016, to support the decline in operations these entities expected to get some good rebates from government in taxation and some effective policies for their smooth operations with a long term vision. While the last year budget gifted cancellation of wealth tax more concern is laided on income tax receipts of SMEs as major direct tax sources by government.
Announcing Budget 2017, Finance Minister revised declining tax collections and bought up major reductions in slabs of MSMEs registered as companies and having incomes below 50 cr to 25% and also made changes to individual taxation and working system of banking structures. FM in one of his public talks addressed major compliances of SMEs and diverted to make some effective measures for them in future also. He said “Keeping in record of digital incentives, government will now effort to ease up tax collection from individuals and SMEs.”
Non complying to tax structures is like setting growth barriers in business “as defined by Khandelwal R Sethi & Company, Chartered Accountants implied getting behind in tax space may lend coming business ventures like SMEs to legal problems. For SMEs changes to income reports happens with a increase in profits and ignoring tax compliances may end up their year paying tax penalties through these profits . So, to start with an effective plan SMEs need to re look their tax compliances first.
How to deal with Income Tax?
Starting with TDS, shifting the collection burden to source of income, government has initiated recovery of income tax right from their emerging source, in which parties transacting would be themselves preparing records of TDS receipts and will submit it to government till due date being 7th of every next month. In TDS, department has specified that deduction by firms would be according to defined rates under Income Tax act and the deducting party would be named as “deductor”.
SME’s working as a deductor if any how fails to collect the required amount or submit it to government, they would become liable to pay an interest of 1-1.5% on the delayed period which can further be added with some additional late penalty of Rs 200 per day. Simplifying TDS provisions government has specified usage of a TAN number for interacting to their filed returns and also made it mandatory while issuing a TDS certificate to the parties within 15 days of filing returns.
Hence SMEs to protect their profits with unnecessary tax penalties need to file their TDS on time.
Complying with Advance tax:
For every person whose expected income tax range above Rs 10,000 is bounded to pay his tax prior to period of actual liability in the form of advance tax.
Just like individual applicability advance tax rules as defined in section 208 are also applicable to SMEs which states ,if by any default these organizations do not submit their advance tax timely then a Non-payment interest would be attracted to their outstanding amount according to section 234, implying that businesses working in compliances of tax structure need to file their approx 45% of their standing tax liability before the actual assessment year commences.
So, for every company to rest stable in tax obligations need to plan its tax accordingly and file it before a strict penalty arises.