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Checklist for income tax compliance for small businesses in India

Having a simple checklist for income tax compliance for small businesses in India helps owners avoid last minute panic and penalties. This post provides a practical checklist for income tax compliance for small businesses in India under the new regime, covering proprietorships, firms and small companies.

Who should use this checklist for income tax compliance for small businesses in India

This checklist for income tax compliance for small businesses in India is designed for:

  • Proprietors running shops, traders, online sellers and freelancers
  • Partnership firms and LLPs providing services or manufacturing
  • Small private limited companies with limited number of shareholders

It assumes that the business has basic accounting in place and is now focusing on income tax compliance under the new Income tax Act and Rules.

Monthly and quarterly tasks for small businesses

Use this checklist for income tax compliance for small businesses in India to stay on top of recurring tasks.

1. Maintain books of account

  • Record all sales, purchases, expenses and receipts
  • Reconcile cash, bank and digital payment gateways

2. Track TDS and TCS responsibilities

  • Identify payments that require TDS such as rent, contractor fees, professional fees and commission
  • Deduct TDS at time of payment or credit as per law
  • Deposit TDS within due dates and file TDS returns quarterly

3. Advance tax payments

  • Estimate yearly profit and tax liability
  • Pay advance tax instalments in June, September, December and March as applicable

4. Monitor turnover and thresholds

  • Watch tax audit threshold limits under new income tax act
  • Check presumptive taxation eligibility based on turnover

Year end checklist for income tax compliance

At the end of the financial year, the checklist for income tax compliance for small businesses in India includes these steps.

1. Finalise accounts and financial statements

2. Verify all invoices and supporting documents

3. Ensure depreciation schedule is updated as per Income tax Rules

4. Check if tax audit is applicable and appoint a chartered accountant if required

5. Obtain and review tax audit report in prescribed forms

6. Compute total income and applicable deductions

7. File income tax return within due date for your category of assessee

Documentation and record keeping for small businesses

Strong documentation is the backbone of the checklist for income tax compliance for small businesses in India.

  • Keep purchase bills, sales invoices and expense vouchers
  • Maintain agreements for rent, loans and services
  • Preserve bank statements and loan statements
  • Keep TDS certificates, challans and returns acknowledgments
  • Store tax audit reports and working papers safely for several years

How FastLegal uses this checklist with clients

FastLegal uses a variant of this checklist for income tax compliance for small businesses in India when onboarding new clients. The process generally includes:

1. Initial diagnostic review of existing books and returns

2. Identifying gaps in TDS, advance tax or documentation

3. Creating a simple monthly and quarterly calendar of tasks

4. Implementing cloud based accounting and document management where helpful

This structured approach reduces the chance of notices under new income tax law and improves peace of mind for owners.

Related: New income tax act for small businesses in India overview (link: /blog/new-income-tax-act-small-business-overview)

Related: Presumptive taxation for professionals and small traders in India (link: /blog/presumptive-taxation-small-traders-professionals)

Related: Income tax rules for employers and payroll compliance in India (link: /blog/income-tax-rules-employer-payroll-compliance)

For official rules, forms and utilities, always refer to the Income Tax Department site at www.incometaxindia.gov.in and the e filing portal utilities released by CBDT.

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Private limited company registration in India: step by step guide for startups

Primary keyword: private limited company registration in India

Private limited company registration in India is often the first serious legal step for early stage startups and growing small businesses. This guide explains how private limited company registration in India works, who it is for, and the exact steps you need to follow on the MCA portal so that you can avoid common delays and rejections.

Who should choose private limited company registration in India

Private limited company registration in India is usually preferred when:

  • Founders plan to raise angel or VC funding in the future.
  • Equity needs to be split among multiple co founders.
  • The business has high growth ambitions and may issue ESOPs to employees.
  • Limited liability protection is important for promoters.

If you want simpler compliance for a very small business, you may also compare options like sole proprietorship, partnership firm or LLP. However, investors and experienced advisors usually recommend private limited company registration in India for serious startups.

Related: Choosing between LLP and private limited company in India (link: /blog/llp-vs-private-limited-india)

Documents required for private limited company registration in India

Make sure you collect the right KYC and address proof before you start the process on the MCA website.

Key documents for each Indian director and shareholder:

1. PAN card.

2. Aadhaar card.

3. Current address proof (any one of electricity bill, bank statement, telephone bill, not older than 2 or 3 months).

4. Passport size photograph.

For foreign directors or shareholders, passport and overseas address proof are required, usually notarised and apostilled as per MCA rules.

For the registered office of the company:

  • Electricity bill or property tax receipt.
  • Rent agreement or lease deed if the property is rented.
  • No objection certificate from the owner allowing use as registered office.

Related: Documents checklist for company registration in India (link: /blog/company-registration-documents-checklist-india)

Digital signatures and director identification numbers

The online process for private limited company registration in India requires digital signatures and DIN for proposed directors.

Step 1: Apply for digital signature certificate

You must obtain a Class 3 digital signature certificate (DSC) for at least one proposed director. Registered certifying authorities issue DSCs after video KYC and document verification.

Once DSC is ready, install the token driver and sign in on the MCA portal at https://www.mca.gov.in.

Step 2: Director identification number (DIN)

If a director does not have a DIN, you can apply for DIN within the SPICe+ form while applying for incorporation. MCA usually allows up to 3 DINs to be allotted through a single incorporation application.

Name approval and SPICe+ forms on MCA portal

Private limited company registration in India is now mostly done through the SPICe+ integrated form on the MCA portal.

Choosing a company name

While selecting a name for your private limited company:

  • Avoid generic words like India, enterprise, business without any distinctive element.
  • Step away from existing or similar registered company names or trademarks.
  • Make sure the name matches your main business activity.

You can use the MCA name search tool and check the trademark search at https://ipindiaonline.gov.in to avoid conflicts.

Filling SPICe+ Part A and Part B

The SPICe+ form has two main parts.

Part A:

1. Type of company and class (private company limited by shares).

2. Main division of industrial activity (choose from NIC codes).

3. Proposed company name and justification.

Part B:

1. Details of registered office.

2. Capital structure and shareholding pattern.

3. Details of directors and subscribers.

4. Attachments like MOA, AOA, declarations and consent forms.

The same integrated process also enables:

  • PAN and TAN allotment.
  • GST registration option.
  • ESIC and EPFO registration.
  • Opening of bank account through partner banks.

Post incorporation compliance checklist

After private limited company registration in India is completed and you receive the certificate of incorporation, do not forget the early compliance steps.

Important post incorporation actions:

1. Apply for current account in the company name.

2. Deposit share capital amounts from subscribers into the company bank account.

3. Issue share certificates to all shareholders within the required time.

4. Hold the first board meeting and record minutes.

5. Appoint the first statutory auditor.

6. Apply for GST registration if turnover or business model requires it.

7. Register under Shops and Establishment Act and Professional Tax where applicable.

Cost and timelines for private limited company registration in India

Government fees for private limited company registration in India depend on authorised share capital and state. Professional fees for legal and compliance support are separate.

Typical timelines if all documents are correct:

  • DSC: 1 to 2 working days.
  • Name approval: 1 to 3 working days.
  • SPICe+ processing and incorporation: 3 to 7 working days.

Delays mainly happen because of name rejection, incomplete attachments or incorrect object clauses. Having a standard, lawyer reviewed draft can save time and effort.

Related: Step by step guide to startup legal documentation in India (link: /blog/startup-legal-documents-india)

External references:

  • MCA portal for company incorporation: https://www.mca.gov.in
  • Trademark public search: https://ipindiaonline.gov.in
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नई आयकर अधिनियम की धारा 58: भारतीय छोटे व्यवसायों के लिए प्रिज़म्पटिव टैक्सेशन का आसान गाइड

नई आयकर अधिनियम में भी **प्रिज़म्पटिव टैक्सेशन** की सुविधा जारी है, लेकिन इसे अब एक ही जगह, **धारा 58** में व्यवस्थित किया गया है –

“**विशेष प्रावधान – कुछ निवासी करदाताओं के लिए व्यवसाय या पेशे के लाभ व हानि की प्रिज़म्पटिव आधार पर गणना**।”

जो छोटे व्यवसायी और प्रोफेशनल पूरा अकाउंटिंग सिस्टम नहीं संभालना चाहते, उनके लिए यह धारा बहुत उपयोगी है। सही तरीके से इस्तेमाल करने पर कंप्लायंस आसान हो जाता है और टैक्स प्लानिंग भी साफ रहती है।

> **डिस्क्लेमर:** यह लेख केवल सामान्य जानकारी के लिए है और लिखे जाने के समय उपलब्ध ड्राफ्ट / टेक्स्ट पर आधारित है। किसी भी निर्णय से पहले अपने CA से सलाह लें और अंतिम अधिसूचित कानून, नियम तथा आयकर विभाग की आधिकारिक वेबसाइट देखें।

1. धारा 58 के तहत प्रिज़म्पटिव टैक्सेशन क्या है?

आम तौर पर व्यवसाय या पेशे की आय निकलती है:

  • पूरी किताबें (books of account) रखकर,
  • हर खर्च और डिप्रिसिएशन ट्रैक करके,
  • और धारा 26 से 54 के सामान्य नियमों के अनुसार नेट प्रॉफिट निकालकर।

**धारा 58** चुनी हुई कैटेगरी के *रिहायशी* करदाताओं को विकल्प देती है कि वे:

  • एक तय **प्रतिशत या तय रकम** के आधार पर *माना हुआ* (deemed) प्रॉफिट लें,
  • और उस पर टैक्स दें, बिना हर खर्च अलग‑अलग क्लेम किये।

जब आप किसी योग्य व्यवसाय या पेशे के लिए धारा 58 चुनते हैं:

  • सेक्शन 58(2) के अनुसार निकला हुआ **प्रिज़म्पटिव प्रॉफिट ही टैक्सेबल प्रॉफिट माना जाता है**, और
  • जहाँ यह धारा लागू है वहाँ सामान्य गणना के नियम (धारा 26–54) उतने हिस्से तक नहीं लगते।

2. किन पर धारा 58 लागू हो सकती है?

धारा 58 का दायरा तीन मुख्य गतिविधियों को कवर करता है (सिर्फ **रेज़िडेंट** के लिए):

1. **छोटे व्यवसाय** (ट्रेडिंग, मैन्युफैक्चरिंग, सर्विस – पर ट्रांसपोर्ट बिज़नेस को छोड़कर),

2. **गुड्स कैरिज (ट्रक आदि) चलाने / किराए पर देने / लीज़ पर देने का व्यवसाय**,

3. **नियत प्रोफेशन (specified profession)** – जैसे वकील, डॉक्टर, इंजीनियर, CA, CS, टेक्निकल कंसल्टेंट आदि।

साथ ही दो महत्त्वपूर्ण टर्म हैं:

  • **Eligible assessee** – रेज़िडेंट *individual*, *HUF* या *फर्म (LLP नहीं)*, जो:
  • कुछ विशेष कटौतियाँ क्लेम नहीं करता,
  • स्पेसिफाइड प्रोफेशन नहीं चलाता (जब बिज़नेस प्रिज़म्पटिव लेना हो),
  • कमीशन/ब्रोकरेज पर आय नहीं कमाता,
  • एजेंसी बिज़नेस नहीं करता।
  • **Specified assessee** – रेज़िडेंट individual या फर्म (LLP नहीं) – खास तौर पर प्रोफेशनल स्कीम के लिए।

3. छोटे व्यवसायों के लिए प्रिज़म्पटिव स्कीम (टेबल – सीरियल नंबर 1)

यह पुराने क़ानून की **धारा 44AD** जैसी स्कीम का नया रूप है।

3.1 टर्नओवर लिमिट

**“कोई भी व्यवसाय”** (गुड्स कैरिज वाले बिज़नेस को छोड़कर) के लिए, यदि आप *eligible assessee* हैं और आपके व्यवसाय का टोटल टर्नओवर / ग्रॉस रिसीट्स:

  • **₹2 करोड़ से ज़्यादा नहीं**, या
  • **₹3 करोड़ से ज़्यादा नहीं**, *बशर्ते* कुल रिसीट्स में **कैश रिसीट्स 5% या कम** हों,

तो आप धारा 58 के तहत प्रिज़म्पटिव स्कीम चुन सकते हैं।

सीधा मतलब:

  • लगभग पूरा कारोबार अगर बैंक/डिजिटल के माध्यम से होता है (कैश ≤ 5%), तो लिमिट **₹3 करोड़** है।
  • अगर कैश ज्यादा है, तो लिमिट **₹2 करोड़** तक सीमित रहेगी।

> **महत्त्वपूर्ण:** यदि कोई पेमेंट **नॉन‑अकाउंट‑पेयी चेक या ड्राफ्ट** से आती है, उसे भी कानून ने **कैश** माना है।

3.2 लाभ की गणना कैसे होगी?

आपका माना हुआ (presumptive) प्रॉफिट, निम्न में से **जो ज़्यादा हो** वह माना जाएगा:

1. **6%** – उस टर्नओवर / रिसीट्स पर जो

  • बैंक / ऑनलाइन मोड के माध्यम से टैक्स वर्ष के दौरान
  • या रिटर्न फाइल करने की नियत तारीख तक प्राप्त हुए हों; **और**

2. **8%** – बाकी बचे टर्नओवर / रिसीट्स पर (जो ऊपर वाली कैटेगरी में नहीं आए);

**या**

3. वह **असली प्रॉफिट** जो आप खुद ज्यादा बताना चाहें।

यानी:

  • डिजिटल रिसीट्स → **6%** की दर,
  • अन्य (आमतौर पर कैश) रिसीट्स → **8%** की दर।

3.3 छोटा उदाहरण

मान लीजिए एक ट्रेडिंग फर्म की:

  • कुल टर्नओवर: **₹2.5 करोड़**,
  • बैंक/ऑनलाइन रिसीट्स: **₹2.4 करोड़**,
  • कैश रिसीट्स: **₹10 लाख**।

कैश प्रतिशत = ₹10 लाख / ₹2.5 करोड़ = **4%** → 5% से कम, तो उच्च सीमा **₹3 करोड़** लागू और धारा 58 उपलब्ध।

प्रिज़म्पटिव प्रॉफिट:

  • 6% of ₹2.4 करोड़ = **₹14.4 लाख**,
  • 8% of ₹10 लाख = **₹0.8 लाख**,

कुल माना हुआ लाभ = **₹15.2 लाख** → इसी पर टैक्स लगेगा (अन्य हेड की आय को जोड़कर, स्लैब रेट आदि के अनुसार)।

4. ट्रक / गुड्स कैरिज व्यवसाय (टेबल – सीरियल नंबर 2)

यह पुराने **44AE** जैसा प्रावधान है।

4.1 कौन eligible है?

  • ऐसा रेज़िडेंट असेसी जो टैक्स वर्ष में **किसी भी समय 10 से अधिक गुड्स कैरिज** का मालिक *न* हो।
  • यहाँ मालिक (owner) में वे वाहन भी शामिल हैं जो **हायर‑परचेज या इंस्टॉलमेंट** पर हैं और जिनकी कुछ राशि अभी देनी बाकी है।

4.2 माना हुआ लाभ

प्रत्येक टैक्स वर्ष के लिए:

  • **Heavy goods vehicle** (जिसकी gross vehicle weight > 12,000 kg):
  • प्रति वाहन, प्रति माह या उसके हिस्से के लिए **₹1,000 प्रति टन** (gross या unladen weight)।
  • अन्य **goods carriage**:
  • प्रति वाहन, प्रति माह या उसके हिस्से के लिए **₹7,500**।

या फिर जो **असली प्रॉफिट आप खुद ज्यादा दिखाना चाहें**, वह।

4.3 फर्म होने की स्थिति

यदि असेसी **फर्म** है, तो:

  • पार्टनर्स को दी गई **salary और interest** को,
  • धारा 35(e) में दिए लिमिट्स के भीतर,
  • प्रिज़म्पटिव इन्कम में से अलग से घटाया जा सकता है।

5. स्पेसिफाइड प्रोफेशन के लिए प्रिज़म्पटिव स्कीम (टेबल – सीरियल नंबर 3)

यह पुराने **44ADA** का नया संस्करण है।

5.1 किन प्रोफेशन पर?

धारा 62(4) में बताये गए **specified profession** – जैसे:

  • लीगल, मेडिकल, इंजीनियरिंग, आर्किटेक्चर, अकाउंटेंसी, टेक्निकल कंसल्टेंसी, इंटीरियर डेकोरेशन और अन्य नोटिफाइड प्रोफेशन।

असेसी को **specified assessee** होना चाहिए – यानी रेज़िडेंट individual या फर्म (LLP नहीं)।

5.2 रिसीट्स लिमिट

टैक्स वर्ष में प्रोफेशन की **gross receipts**:

  • या तो **₹50 लाख** से अधिक नहीं,
  • या **₹75 लाख** से अधिक नहीं, **यदि कैश रिसीट्स 5% या कम** हों।

5.3 माना हुआ लाभ

प्रिज़म्पटिव लाभ = निम्न में से अधिक:

  • **ग्रॉस रिसीट्स का 50%**, या
  • आप जो **असली प्रॉफिट** ज्यादा दिखाना चाहें।

6. अगर असली प्रॉफिट प्रिज़म्पटिव से कम हो?

यदि आप मानते हैं कि:

  • आपका असली लाभ, टेबल के अनुसार निकलने वाले प्रिज़म्पटिव लाभ से **कम** है, **और**
  • आपकी कुल आय **बेसिक छूट सीमा से ज़्यादा** है,

तो धारा 58(3) के अनुसार आपको:

1. धारा 62 के अनुसार **किताबें (books of account) रखना**, और

2. धारा 63 के अनुसार **टैक्स ऑडिट कराना** व रिपोर्ट जमा करना होगा।

अर्थात, *कम मार्जिन दिखाना है → बुक्स + ऑडिट अनिवार्य*।

7. प्रिज़म्पटिव आय पर अलग से खर्च / डिप्रिसिएशन नहीं

धारा 58(4) कहती है कि:

> किसी भी अन्य धारा के तहत मिलने वाला **कोई भी नुकसान, भत्ता या कटौती** धारा 58(2) के तहत निकाली गई आय के खिलाफ **अलग से नहीं दी जाएगी**।

यानी:

  • प्रिज़म्पटिव बिज़नेस की आय पर आप अलग से डिप्रिसिएशन, अन्य बिज़नेस खर्च, या विशेष कटौतियाँ क्लेम नहीं कर सकते।

परंतु, अन्य हेड (जैसे कैपिटल लॉस) की सेट‑ऑफ़ सामान्य नियमों के अनुसार होगी।

8. स्कीम से बाहर आने पर 5 साल का लॉक‑इन (बिज़नेस केस)

धारा 58(7) के अनुसार यदि:

  • आपने किसी साल बिज़नेस के लिए प्रिज़म्पटिव स्कीम ली, **और**
  • अगले पाँच टैक्स वर्षों में से **किसी भी साल** आप सामान्य तरीके से प्रॉफिट दिखाते हैं,

तो आप उस साल के बाद **अगले पाँच साल तक** धारा 58 के इस बिज़नेस प्रिज़म्पटिव लाभ के लिए **eligible नहीं रहेंगे**।

साथ ही 58(8) कहती है कि जहाँ यह लॉक‑इन लागू है और कुल आय टैक्सेबल लिमिट से ऊपर है, वहाँ बुक्स और ऑडिट ज़रूरी होंगे।

9. कैश बनाम नॉन‑कैश रिसीट की बारीकी

टर्नओवर/रिसीट लिमिट और 5% कैश टेस्ट के लिए:

  • अगर कोई रकम **नॉन‑अकाउंट‑पेयी चेक या ड्राफ्ट** से मिली है, तो कानून उसे **कैश रिसीट** मानता है।

इससे दो चीज़ें प्रभावित होती हैं:

  • आपको ₹3 करोड़ / ₹75 लाख की *उच्च* लिमिट मिलेगी या नहीं,
  • और 6% / 8% वाले रेट्स में आपका ब्रेकअप कैसे होगा।

10. गुड्स कैरिज प्रिज़म्पटिव और बुक्स/ऑडिट में छूट

धारा 58(10) के अनुसार:

  • गुड्स कैरिज वाले प्रिज़म्पटिव बिज़नेस (सीरियल नंबर 2) पर **धारा 62 और 63 के बुक्स/ऑडिट प्रावधान लागू नहीं होते**, और
  • इन धारा के लिमिट्स की गणना करते समय इस ट्रांसपोर्ट बिज़नेस की ग्रॉस रिसीट्स / आय को **कुल में नहीं जोड़ा** जाता।

इससे छोटे ट्रांसपोर्टरों का कंप्लायंस काफी सरल हो जाता है।

11. छोटे व्यवसायों के लिए मुख्य पॉइंट्स

1. **सही स्कीम चुनें:**

  • ट्रेडिंग / मैन्युफैक्चरिंग / सर्विस → 6% / 8% वाली बिज़नेस प्रिज़म्पटिव।
  • ट्रांसपोर्ट → प्रति वाहन प्रिज़म्पटिव।
  • प्रोफेशन → रिसीट्स का 50% प्रिज़म्पटिव।

2. **कैश रिसीट 5% के अंदर रखें:**

  • इससे आपको ₹3 करोड़ / ₹75 लाख की ऊपरी लिमिट का फायदा मिल सकता है।

3. **एक बार निकलने से पहले सोचें:**

  • स्कीम छोड़ दी तो **5 साल तक वापस नहीं आ सकते** (बिज़नेस केस में)।

4. **सादगी बनाम डिडक्शन:**

  • प्रिज़म्पटिव में डिटेल्ड खर्च/डिप्रिसिएशन नहीं मिलता, पर कंप्लायंस बहुत आसान हो जाता है।

5. **CA के साथ प्लानिंग करें:**

  • आने वाले 2–3 साल के टर्नओवर, मार्जिन और कैश/डिजिटल मिक्स के आधार पर फैसला करें कि प्रिज़म्पटिव बेहतर है या नॉर्मल कंप्यूटेशन।

सही तरीके से उपयोग करने पर नई धारा 58, वास्तविक छोटे व्यवसायों और प्रोफेशनल्स के लिए टैक्स और कंप्लायंस दोनों को सरल बना सकती है।

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New Income Tax Act Section 58: presumptive taxation basics for Indian small businesses

The new Income Tax Act keeps the concept of **presumptive taxation** but organises it under **Section 58 – Special provision for computing profits and gains of business or profession on presumptive basis in case of certain residents**.

For small businesses and professionals, Section 58 is important because it offers a simpler way to compute taxable income, reduce paperwork and sometimes lower the risk of scrutiny—provided you understand the rules and limits.

This guide explains Section 58 in plain language for Indian founders, freelancers and small business owners.

> Disclaimer: This article is for general information only and is based on the draft/available text of Section 58 at the time of writing. Please consult your CA and the final notified law and rules before taking any decisions.

1. What is presumptive taxation under Section 58?

Normally, business and professional income is calculated by:

  • maintaining full books of account,
  • tracking all expenses and depreciation, and
  • computing net profit as per sections 26 to 54 (normal computation rules).

Section 58 allows **certain residents** to instead pay tax on a **presumed profit** calculated as a fixed percentage or fixed amount, without claiming individual expenses.

When you opt for Section 58 for an eligible business or profession:

  • your **presumptive profit is deemed to be your taxable profit**, and
  • the usual computation provisions (sections 26–54) **do not apply** to that business to the extent they conflict with Section 58.

2. Who can use Section 58 presumptive scheme?

Section 58 covers three categories of activities (for **residents only**):

1. **Eligible small businesses** (other than goods carriage business).

2. **Business of plying, hiring or leasing goods carriages**.

3. **Specified professions** (like legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration and other notified professions).

The section also defines two key terms:

  • **Eligible assessee** – resident individual / HUF / firm (not LLP) who:
  • does not claim certain specified deductions,
  • does not carry on a specified profession (for business presumptive),
  • does not earn commission or brokerage income, and
  • does not run an agency business.
  • **Specified assessee** – resident individual or firm (not LLP) eligible for presumptive **profession**.

3. Presumptive scheme for small businesses (Section 58 Table, Sl. No. 1)

This is the successor of the old **Section 44AD** concept.

3.1 Turnover limits

You can use the presumptive scheme for **”any business”** (other than goods carriage business) if you are an **eligible assessee** and your **total turnover/gross receipts** in the tax year:

  • **do not exceed ₹2 crore**, or
  • **do not exceed ₹3 crore**, where **cash receipts are up to 5%** of total turnover/gross receipts.

In simple terms:

  • If almost all your receipts are via banking channels / digital (cash ≤ 5%), the turnover limit is **₹3 crore**.
  • If you have more cash receipts, the lower limit of **₹2 crore** applies.

3.2 How profit is computed

Your presumptive profit is the higher of:

1. **6%** of turnover/receipts that are **received through banking/online modes** during the year or before the due date for filing the return; **plus**

2. **8%** of the remaining turnover/receipts (i.e. not covered in point 1);

**OR**

3. The **profit you actually claim to have earned**, if that is higher.

So effectively:

  • Digital receipts → presumptive rate **6%**.
  • Other receipts (typically cash) → presumptive rate **8%**.

3.3 Practical example

Assume a small trading business with:

  • Total turnover: **₹2.5 crore**.
  • Receipts through bank/online: **₹2.4 crore**.
  • Cash receipts: **₹10 lakh**.

Cash receipts are **4%** of turnover (₹10 lakh / ₹2.5 crore), so the higher **₹3 crore** limit applies and Section 58 presumptive is available.

Presumptive profit would be:

  • 6% of ₹2.4 crore = **₹14.4 lakh**; plus
  • 8% of ₹10 lakh = **₹0.8 lakh**.

Total presumptive profit = **₹15.2 lakh**.

You pay tax on ₹15.2 lakh (subject to other income, slab rate, etc.) without separately claiming expenses.

4. Goods carriage business (Section 58 Table, Sl. No. 2)

This is the successor of old **Section 44AE**.

4.1 Who can use it?

  • Any **resident assessee** (individual or firm, etc.) who **owns not more than 10 goods carriages at any time** during the tax year.
  • Ownership includes vehicles taken on **hire purchase or instalments** where payment is still due.

4.2 How profit is computed

Presumptive income is the aggregate of:

  • For each **heavy goods vehicle** (gross vehicle weight > 12,000 kg):
  • **₹1,000 per ton** of gross vehicle weight or unladen weight, **per month or part of a month** of ownership in the year.
  • For each **other goods carriage**:
  • **₹7,500 per month** or part of a month of ownership.

**OR** the **actual higher profit** claimed by the assessee.

4.3 Firms – deduction for partner salary and interest

Where the assessee is a **firm**, Section 58 allows deduction of:

  • **salary and interest to partners** from the presumptive income,
  • subject to conditions and limits of the partnership deduction rule (corresponding to section 35(e) in the new Act).

5. Presumptive scheme for specified professions (Section 58 Table, Sl. No. 3)

This corresponds broadly to old **Section 44ADA**.

5.1 Who is covered?

  • **Specified professions** as defined in Section 62(4) – typically legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and other notified professions.
  • **Specified assessee** – resident individual or firm (not LLP).

5.2 Gross receipts limits

You can use Section 58 presumptive for specified professions if your **gross receipts** in the tax year:

  • **do not exceed ₹50 lakh**, or
  • **do not exceed ₹75 lakh**, where **cash receipts are up to 5%** of gross receipts.

5.3 How profit is computed

Presumptive profit = the higher of:

  • **50% of gross receipts**, or
  • **actual profit claimed**.

If a professional wants to declare profit **less than 50%**, and total income exceeds the basic exemption limit, they must keep books and get them audited (see next section).

6. What if actual profit is lower than presumptive?

Section 58(3) says that any assessee in the table who:

  • claims that **actual profit is lower than presumptive**, **and**
  • has **total income exceeding the basic exemption limit**, must:

1. **Maintain books of account** as per Section 62; and

2. **Get accounts audited** and obtain/file audit report as per Section 63.

In other words, if you want to declare a lower margin than the presumptive percentage, and your income is taxable, you have to follow **full books + audit**.

7. No extra deductions against presumptive income

Under Section 58(4):

> Any loss, allowance or deduction allowable elsewhere in the Act **cannot be claimed separately** against presumptive income computed under Section 58(2).

So you **cannot**:

  • claim depreciation separately,
  • set off additional business losses or allowances **against the presumptive income of that business**.

However, rules on set-off of losses from other heads (for example, capital loss) still depend on the general provisions of the Act.

8. Lock-in and consequences of opting out (for business presumptive)

Section 58(7) introduces a **five‑year lock-in** rule similar to the old law for business presumptive.

  • If an **eligible assessee** declares profit under presumptive business scheme (Sl. No. 1) for a tax year, but **declares profit under normal computation for any of the next five tax years**, then:
  • they **cannot claim presumptive benefit again** for **five tax years** after the year in which they opted out.

Further, Section 58(8) says that where this lock‑in applies and total income exceeds the basic exemption limit, the assessee **must maintain books and get them audited**.

9. Cash vs non‑cash receipts – important clarification

For business (Sl. No. 1) and profession (Sl. No. 3) turnover limits and 5% cash test:

  • any receipt by **cheque or bank draft that is *not account payee*** is treated as **cash receipt**.

This is important because using non‑account‑payee cheques can:

  • increase your “cash receipts” percentage,
  • potentially push you **over the 5% limit**, and
  • reduce your eligibility for the higher turnover caps (₹3 crore / ₹75 lakh).

10. Books and audit relaxation for goods carriage presumptive

For the goods carriage business (Sl. No. 2), Section 58(10) provides that:

  • the general **books and audit provisions (Sections 62 and 63)** do **not apply** to that presumptive business, and
  • while checking monetary limits under Sections 62 and 63, **gross receipts/income from this presumptive transport business are excluded**.

This is meant to keep compliance simpler for small transporters using the fixed-amount presumptive scheme.

11. Key takeaways for founders and small businesses

1. **Choose the right scheme:**

  • Trading, manufacturing, services → consider presumptive business scheme (6%/8%) if within turnover & cash limits.
  • Goods vehicles → consider fixed per‑vehicle presumptive.
  • Professionals → consider 50% presumptive if within receipts & cash limits.

2. **Mind the 5% cash ceiling:**

  • To access higher limits (₹3 crore / ₹75 lakh), keep cash receipts **within 5%** of turnover/receipts.

3. **Think before opting out:**

  • Once you move away from presumptive for business, you may be **locked out for five years**.

4. **No extra deductions:**

  • Under presumptive, you trade off detailed expense deductions for **simplicity and certainty**.

5. **Work with your CA:**

  • Before choosing presumptive vs regular taxation under the new Act, run the numbers for at least **2–3 years ahead** (turnover growth, margins, cash vs digital mix, audit thresholds).

Handled properly, Section 58 can reduce compliance burden for genuine small businesses and professionals, while giving the tax department a simple and predictable profit baseline.

Related: New Income Tax Act TDS provisions: practical guide for Indian businesses (Section 393) (link: /blog/new-income-tax-act-tds-provisions-practical-guide-indian-businesses-section-393)

Related: New Income Tax Act for small businesses in India – structure, key provisions and compliance (link: /blog/new-income-tax-act-small-businesses-india-overview)

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New Income Tax Act TDS provisions: practical guide for Indian businesses (Section 393)

The new Income Tax Act has reorganised the TDS chapter and introduced a consolidated table under **Section 393 – Tax to be deducted at source**. For founders, CFOs and finance teams, this section is now the primary reference point for when and how much TDS to deduct on common business payments.

This guide explains the key **TDS provisions on payments to residents** under Section 393(1), with focus on rates, threshold limits and practical compliance points for Indian businesses.

> Disclaimer: This post is a simplified overview based on the draft/proposed text of Section 393 as available at the time of writing. Always cross-check with the final law, rules and official notifications on https://www.incometax.gov.in before taking decisions.

1. Overview of Section 393 – when TDS is required

Section 393(1) says that when a payer makes certain types of payments (listed in a detailed table) **to a resident**, they must deduct income tax at source if:

  • the **nature of payment** appears in the Section 393 table, and
  • the **amount exceeds the specified threshold**, and
  • no specific exemption or carve-out applies.

TDS must be deducted:

  • on the **entire amount** once the threshold is crossed (or only on the excess, in specific cases like purchase of goods – see below), and
  • at the **time of credit** to the payee’s account or **payment**, whichever is earlier.

2. Commission and brokerage

2.1 Insurance commission

  • **Nature of income**: remuneration or reward (commission or otherwise) for soliciting or procuring insurance business, including renewal/continuance.
  • **Payer**: *Any person* making the payment.
  • **Rate**: **rates in force** (to be notified / as per Finance Act).
  • **Threshold**: **₹20,000** per payee.

If total insurance commission paid to an agent during the tax year exceeds ₹20,000, TDS applies on the **entire amount**.

2.2 Other commission and brokerage

  • **Nature**: commission or brokerage other than insurance commission.
  • **Payer**: **specified person** (essentially businesses and certain individuals/HUFs crossing monetary limits – similar to old provisions).
  • **Rate**: **2%**.
  • **Threshold**: **₹20,000** per payee.

**Practical point:** Track cumulative commission per agent/broker so you don’t miss TDS once the aggregate crosses ₹20,000.

3. Rent payments

Section 393 consolidates TDS on rent with slightly different treatment for “specified persons”.

3.1 Rent paid by non-specified persons

  • **Nature**: any income by way of rent.
  • **Payer**: person **other than specified person** (typically larger businesses / entities already under TDS net).
  • **Rate**: **2%**.
  • **Threshold**: **₹50,000 per month or part of a month**.

**Note:** For this clause, TDS is deducted at the time of credit/payment for the **last month of the tax year or last month of tenancy**.

3.2 Rent paid by specified persons

  • **Nature**: any income by way of rent.
  • **Payer**: **specified person** (certain individuals/HUFs etc. crossing limits).
  • **Rate**:
  • **2%** for use of machinery, plant or equipment.
  • **10%** for use of land, building (including factory building), land appurtenant to building, furniture or fittings.
  • **Threshold**: **₹50,000 per month** across both categories.

**Practical point:** If total monthly rent (office, shop, warehouse, etc.) exceeds ₹50,000, you need to deduct TDS even as an individual or HUF carrying on business once you fall in the “specified person” definition.

4. TDS on transfer of immovable property (other than agricultural land)

Section 393 retains a 1% TDS style mechanism for property transfers, but organises it more clearly.

4.1 General property purchases

  • **Nature**: consideration for transfer of immovable property (other than agricultural land).
  • **Payer**: any person **other than** those required to deduct under the special compulsory-acquisition clause.
  • **Rate**: **1%** of the **higher of**:
  • consideration stated in the agreement, or
  • **stamp duty value**.
  • **Threshold**: **₹50 lakh** or more.

Threshold is computed by aggregating all amounts paid/payable by all transferees to all transferors for that property.

4.2 Certain agreement consideration (section 67(14))

  • **Nature**: consideration (other than in kind) under specific agreements referred to in section 67(14).
  • **Payer**: any person.
  • **Rate**: **10%**.
  • **Threshold**: **no threshold** – TDS from first rupee.

4.3 Compulsory acquisition compensation

  • **Nature**: compensation/enhanced compensation or consideration on compulsory acquisition (other than agricultural land).
  • **Payer**: any person.
  • **Rate**: **10%**.
  • **Threshold**: **₹5,00,000**.

5. Capital market-related income

Key rows in the Section 393 table cover TDS on income from units, business trusts, investment funds and securitisation trusts:

  • **Mutual fund units / specified undertaking / specified company units**: TDS at **10%** above **₹10,000**.
  • **Distributed income of business trusts** (certain types defined in Schedule V): **10%**, no threshold.
  • **Income from units of investment funds (section 224)**: **10%**, no threshold.
  • **Income from securitisation trusts (section 221)**: **10%**, no threshold.

For most retail investors, TDS is visible in statements from mutual funds/AMCs or intermediaries.

6. Interest income

Section 393 distinguishes interest on securities and other interest, and also provides higher thresholds for senior citizens.

6.1 Interest on securities

  • **Payer**: any person.
  • **Rate**: **rates in force**.
  • **Threshold**: **₹10,000**.

6.2 Bank/co-operative bank/post office interest

  • **Nature**: interest other than interest on securities, paid by:
  • a banking company,
  • a co-operative society engaged in banking, or
  • a post office (for specified government-notified schemes).
  • **Rate**: **rates in force**.
  • **Threshold**:
  • **₹1,00,000** for senior citizens.
  • **₹50,000** for others.

6.3 Other interest payers (specified persons)

  • **Payer**: specified person (other than the above).
  • **Rate**: **rates in force**.
  • **Threshold**: **₹10,000**.

There are also **special rules for branches** that do not have core banking solutions, and for adjusting excess/short deductions across the year.

7. Contractors, professional and technical services, and related payments

Section 393 brings together the familiar TDS provisions on payments to contractors and professionals.

7.1 Payments by “designated persons” to contractors

  • **Nature**: any sum for carrying out any work (including supply of labour).
  • **Payer**: **designated person** (similar to old definition for 194C).
  • **Rate**:
  • **1%** if contractor is an individual or HUF.
  • **2%** in other cases.
  • **Thresholds**:
  • **₹30,000** per contract; and
  • **₹1,00,000** aggregate during the year.

Where the contract is covered by section 402(47)(e), tax is deducted on invoice value **excluding materials** if shown separately, else on full value.

7.2 TDS by individuals/HUFs on large payments

  • **Nature**: work contracts, professional fees, or commission/brokerage (non-insurance).
  • **Payer**: **individual or HUF** not otherwise covered under 6( i ) or 6( iii ) or 1( ii ).
  • **Rate**: **2%**.
  • **Threshold**: **₹50 lakh** aggregate.

This is effectively a **high-value safeguard**: once an individual/HUF’s payments for work/professional services/commission cross ₹50 lakh, TDS kicks in.

7.3 Professional/technical services, director fees, royalty etc.

  • **Nature**: fees for professional or technical services, director remuneration (where not covered elsewhere), royalty, and specified sums under section 26(2)(h).
  • **Payer**: **specified person**.
  • **Rate**:
  • **2%** for technical services (non-professional), certain film royalties and call centre business.
  • **10%** for all other cases.
  • **Thresholds**:
  • **₹50,000** for most items.
  • **No threshold** for director remuneration/fees/commission.

8. Other key TDS cases businesses must track

8.1 Life insurance payouts

  • TDS at **2%** on the **income component** (not gross receipt) where total exceeds **₹1,00,000**, subject to exemptions.

8.2 Purchase of goods above ₹50 lakh

  • **Nature**: purchase of any goods.
  • **Payer**: any person being a **buyer**.
  • **Rate**: **0.1%**.
  • **Threshold**: TDS applies only on the **amount exceeding ₹50 lakh**.

TDS under this row **does not apply** if the transaction is already subject to TDS/TCS under another provision.

8.3 Benefits or perquisites arising from business/profession

  • **Rate**: **10%**.
  • **Threshold**: **₹20,000**.
  • Applies even where benefit is in kind or partly in cash; provider must ensure TDS is paid before releasing the benefit.

8.4 E-commerce transactions

  • **Rate**: **0.1%** on gross amount of sale of goods or provision of services via the platform.
  • **Payer**: e-commerce operator.
  • **Threshold**: **no threshold**.
  • This TDS has precedence over other TDS provisions for such transactions, with specific exceptions.

8.5 Transfer of virtual digital assets (VDA)

  • **Rate**: **1%**.
  • **Threshold**: **no threshold** under the table (but practical monetary limits may be notified separately).

Where consideration is wholly/partly in kind or VDA-for-VDA, the person responsible must ensure TDS is paid before releasing the consideration.

9. Practical compliance checklist for businesses under Section 393

1. **Update your vendor master and payment workflows** to map each payment type to the correct row in the Section 393 table.

2. **Track thresholds per payee and per category** (commission, rent, contractors, professional fees, etc.).

3. **Configure accounting/ERP software** to auto-apply correct TDS rates and flags based on Section 393.

4. **Reconcile TDS monthly and quarterly** with books and Form 26Q, and fix any short/excess deductions quickly.

5. **Train finance and operations teams** on new terminology (e.g. “specified person”, “designated person”, VDA, e-commerce operator).

Section 393 is central to the new Income Tax Act’s TDS mechanism. Once you map your regular payments to the table and set up systems around it, ongoing compliance becomes largely process-driven rather than case-by-case.

Related: New Income Tax Act for small businesses in India – structure, key provisions and compliance (link: /blog/new-income-tax-act-small-businesses-india-overview)

Related: TDS for small businesses in India – practical guide for owners and professionals (link: /blog/tds-small-businesses-india-guide)

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Income tax rules for NRIs in India under the new income tax law: residential status, income scope and compliance

Income tax rules for NRIs in India under the new income tax law are a mix of special provisions and general rules of the Income tax Act. This article explains how income tax rules for NRIs in India operate under the new income tax law, including residential status, taxable income, TDS, return filing and practical compliance steps.

Who is an NRI under income tax rules for NRIs in India

The term NRI is not defined directly but is understood with reference to residential status. Under income tax rules for NRIs in India, an individual is treated as non resident if he or she does not satisfy any of the basic conditions for residence in India in the relevant financial year.

In simple terms, you are an NRI if:

  • You are an Indian citizen or foreign citizen of Indian origin living outside India; and
  • Your presence in India is below the prescribed number of days under residential status rules.

Income tax rules for NRIs in India therefore always start with residential status determination.

Related: Residential status under new income tax law in India (link: /blog/residential-status-new-law)

Scope of income under income tax rules for NRIs in India

Once status as NRI is established, income tax rules for NRIs in India provide that only the following incomes are taxable in India:

1. Income received or deemed to be received in India.

2. Income accruing or arising or deemed to accrue or arise in India.

Typical taxable incomes for NRIs include:

  • Interest on NRE and NRO deposits depending on specific exemptions.
  • Rental income from house property situated in India.
  • Capital gains on transfer of shares, securities or property situated in India.
  • Salary for services rendered in India.

External reference: Check the sections on deemed accrual and sources of income in the bare Act on www.incometax.gov.in.

TDS and special rates under income tax rules for NRIs in India

Income tax rules for NRIs in India prescribe special TDS provisions such as:

  • Higher TDS rates on certain interest income, dividends, and capital gains.
  • TDS on sale of immovable property by NRIs, where the buyer is required to deduct tax before payment.
  • TDS on royalty, fees for technical services, and other specified payments to non residents.

In many cases, NRIs can claim benefit of Double Taxation Avoidance Agreements (DTAA) to reduce TDS or claim refunds later. However, DTAA relief usually requires furnishing of tax residency certificate from the foreign country and following procedural rules.

Related: DTAA relief and Form 10F requirements for NRIs (link: /blog/dtaa-relief-form-10f)

Return filing requirements under income tax rules for NRIs in India

Under the new income tax law, income tax rules for NRIs in India generally require filing of return if:

  • Total income before giving effect to Chapter VI A deductions exceeds the basic exemption limit; or
  • Specified conditions like high value deposits, foreign travel expenses or electricity consumption are triggered.

Key points for NRIs:

1. Choose correct ITR form for NRIs.

2. Report only incomes taxable in India but disclose foreign assets where required.

3. Verify TDS credits in Form 26AS and AIS.

4. File return electronically and verify it within the prescribed time.

External reference: Use the NRI specific help pages and FAQs on www.incometax.gov.in for latest ITR and disclosure requirements.

Practical checklist for NRIs managing Indian income

Income tax rules for NRIs in India can be managed smoothly by following this checklist:

1. Banking arrangements

  • Maintain separate NRE and NRO accounts.
  • Route Indian income through NRO account where required.

2. Documentation

  • Maintain copies of property sale deeds, rent agreements, and investment statements.
  • Keep DTAA documentation and tax residency certificate ready if claiming treaty benefits.

3. TDS and lower deduction certificates

  • Consider applying for lower or nil TDS certificate if TDS at standard rate is higher than actual tax liability.

4. Return filing

  • Engage a tax advisor in India if you are outside India for most of the year.
  • Ensure that email and mobile on portal are accessible for OTPs.

Related: Step by step guide to filing NRI income tax return online (link: /blog/nri-itr-filing-step-guide)

Common mistakes under income tax rules for NRIs in India

NRIs often make the following mistakes:

  • Treating themselves as NRI without doing a proper day count for residential status.
  • Assuming that income taxed abroad is never taxable in India.
  • Not reporting Indian bank interest or capital gains.
  • Ignoring TDS certificates and not filing returns when refund is due.

To avoid these, NRIs should track day count carefully, maintain a summary of Indian income and TDS, and review income tax rules for NRIs in India annually with a professional.

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New income tax act for small businesses in India: structure, key provisions and compliance

New income tax act for small businesses in India aims to simplify compliance while ensuring proper reporting of profits and turnover. This article explains how the new income tax act for small businesses in India is structured, which chapters are most relevant for proprietors, partnership firms and small companies, and what compliance steps they must follow.

Overview of new income tax act for small businesses in India

The new income tax act for small businesses in India is organised into chapters dealing with:

  • Definitions and scope of total income
  • Heads of income including profits and gains of business or profession
  • Computation of total income and set off and carry forward of losses
  • Deduction of tax at source and collection of tax at source
  • Advance tax, assessment, appeals and penalties

Small businesses should focus on specific provisions on presumptive taxation, audit thresholds, TDS responsibilities, and simplified return filing.

Related: Presumptive taxation for small businesses in India under new law (link: /blog/presumptive-taxation-small-business)

Key chapters for small business owners

Under the new income tax act for small businesses in India, the following chapters are practically critical:

1. Chapter on business income

  • Explains what constitutes business profits
  • Covers allowable and disallowable expenses
  • Provides rules for depreciation and capital allowances

2. Chapter on deductions and incentives

  • Contains deductions for specified businesses, start ups and priority sectors
  • Lists conditions for claiming additional depreciation or investment linked deductions where applicable

3. Chapter on TDS and TCS obligations

  • Imposes responsibility on small businesses to deduct TDS on payments such as contractor bills, professional fees, rent and commission when thresholds are crossed
  • Provides for TCS on certain specified transactions

4. Chapter on assessment and penalty

  • Explains scrutiny assessment, best judgment assessment and faceless processes where notified
  • Lists penalties for non filing, under reporting, misreporting and late payment of tax

External reference: See the bare Act and relevant sections on www.incometax.gov.in for exact wording of the new law.

Practical tax options under new income tax act for small businesses in India

Small businesses in India can consider the following options while planning their taxes:

1. Presumptive taxation schemes

  • For eligible businesses and professionals, the new income tax act for small businesses in India may allow presumptive schemes where income is computed as a percentage of turnover or gross receipts.
  • This reduces the need to maintain detailed books, subject to turnover limits.

2. Normal taxation with audit

  • Businesses exceeding turnover thresholds must maintain books of accounts and get them audited by a chartered accountant.
  • Audit reports must be filed in prescribed forms on the income tax portal.

3. Choosing legal form of business

  • Proprietorship offers simplicity but no separate legal entity.
  • Partnership firms and LLPs provide shared ownership structures.
  • Small private limited companies may benefit from lower corporate tax rates under certain schemes.

Related: Choosing the right business structure in India for tax and compliance (link: /blog/choose-business-structure-india)

Compliance checklist under new income tax act for small businesses in India

Use this checklist to stay compliant:

1. Registration and master data

  • Obtain PAN for the business entity.
  • Link PAN with Aadhaar where required.
  • Update email and mobile on the income tax portal.

2. Book keeping and invoicing

  • Maintain proper books of account either manually or using software.
  • Issue GST compliant invoices where applicable.
  • Track cash transactions carefully to avoid disallowances.

3. TDS and TCS obligations

  • Identify payments that attract TDS under the new income tax act for small businesses in India.
  • Deduct TDS at correct rate, deposit on time and file TDS returns.
  • Collect TCS on specified sales if covered.

4. Advance tax

  • Estimate annual tax liability and pay advance tax in installments when liability exceeds the threshold.

5. Income tax return filing

  • Choose correct ITR form depending on business nature and legal form.
  • File return within due date along with audit report if applicable.

External reference: Use the e filing portal at www.incometax.gov.in and the income tax utility or online forms for small business ITR filing.

Risk areas and best practices for small businesses

Common risk areas under new income tax act for small businesses in India include:

  • Large cash expenses without proper documentation.
  • Mismatch between GST turnover and income tax turnover.
  • Failure to deduct TDS and report the same in quarterly returns.
  • Non reconciliation of bank accounts and creditor balances.

Best practices include:

  • Using accounting software with integrated GST and TDS modules.
  • Monthly review of profit and loss and balance sheet.
  • Periodic consultation with a tax professional to review compliance.

Related: Small business tax audit preparation checklist (link: /blog/small-business-tax-audit-checklist)

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TDS on salary in India under new income tax law: employer and employee guide

TDS on salary in India under new income tax law is one of the most common compliance obligations for employers and a key concern for salaried employees. This guide explains how TDS on salary in India under new income tax law works, what employers must do each month, and what employees should check in their salary slips and Form 16.

Basics of TDS on salary in India under new income tax law

TDS on salary in India under new income tax law is deducted under the salary provisions of the Income tax Act and corresponding Income tax Rules. Employers are responsible for:

1. Estimating annual taxable salary of each employee.

2. Considering declaration of investments and deductions, if allowed.

3. Applying applicable slab rates under the chosen regime.

4. Deducting TDS on salary in India under new income tax law every month.

5. Depositing TDS within due dates and filing TDS returns.

Related: Choosing between old and new tax regime for salaried taxpayers (link: /blog/old-vs-new-tax-regime-salaried)

Steps for employers to compute TDS on salary in India under new income tax law

Employers can follow this structured process at the start of each financial year:

1. Collect employee details

  • PAN and Aadhaar
  • Residential status and category (resident, senior citizen, etc.)
  • Regime choice where option is allowed

2. Estimate gross salary income

  • Basic salary
  • DA, HRA, special allowance
  • Bonus and incentives
  • Perquisites such as rent free accommodation, car, ESOP etc.

3. Apply exemptions and deductions as per new income tax law

  • HRA exemption, leave travel concession, etc., if permitted
  • Standard deduction, deduction for professional tax, and other available items

4. Determine taxable salary and annual tax liability

  • Apply income tax slab rates under new regime, if it is the default or chosen regime
  • Add surcharge and health and education cess if applicable

5. Compute monthly TDS on salary in India under new income tax law

  • Divide annual tax liability by remaining months of the financial year
  • Make adjustments when salary or declarations change mid year

External reference: Income Tax Department TDS on salary FAQs and calculators (available on www.incometax.gov.in)

Monthly and quarterly compliance for TDS on salary in India

Employers must comply with the following key timelines:

1. Monthly deposit of TDS

  • Use the appropriate challan on the e-payment portal of the Income Tax Department or authorised banks.
  • Ensure correct quoting of TAN, assessment year, and type of payment.

2. Quarterly TDS statements

  • File Form 24Q for TDS on salary in India under new income tax law.
  • Verify PAN details and salary figures before filing.

3. Form 16 issuance

  • Generate and issue Form 16 to employees by the prescribed due date.
  • Use the TRACES portal for downloading and authenticating Form 16.

Related: Practical checklist for employers for TDS compliance (link: /blog/tds-compliance-checklist-employers)

What employees should check for TDS on salary in India under new income tax law

Employees should not assume that TDS is always correct. Use this checklist:

1. Verify basic details

  • Name, PAN, and address on salary slips and Form 16.
  • Employer TAN and correct assessment year.

2. Match salary figures

  • Compare gross salary in Form 16 with CTC and offer letter.
  • Check for inclusion of bonus, perquisites, and reimbursements.

3. Confirm regime and deductions

  • Ensure that the chosen tax regime is reflected correctly.
  • Review deductions for provident fund, insurance, housing loan interest, and other eligible deductions if permitted under the regime.

4. Compare TDS with online AIS and Form 26AS

  • Log in to www.incometax.gov.in and verify that TDS on salary in India under new income tax law is properly reflected.

Common mistakes in TDS on salary in India and how to avoid them

Typical issues seen in practice include:

  • Incorrect regime selection due to lack of communication between employer and employee.
  • Non consideration of proof of investments submitted later in the year.
  • Deducting TDS only in last few months, leading to cash flow stress.
  • Errors in PAN or TAN causing TDS credit mismatch.

To avoid these, employers should:

  • Collect declarations at the start of the year and ask for proof midway through the year.
  • Educate employees about TDS on salary in India under new income tax law.
  • Run trial computations and share provisional tax workings with employees.

Related: Handling TDS mismatches and rectification steps (link: /blog/tds-mismatch-rectification)

Practical example of TDS on salary in India under new income tax law

Assume an employee has the following estimated annual salary under the new regime:

  • Gross salary: Rs 12,00,000
  • Standard deduction: Rs 75,000
  • Taxable salary: Rs 11,25,000

Compute tax according to the new slab rates for individuals. Suppose the total tax including cess is Rs 1,12,500. If the employee joins in April, monthly TDS on salary in India under new income tax law would be approximately Rs 9,375 per month, subject to later adjustments.

External reference: Use the official income tax calculator on www.incometax.gov.in for exact slab wise computation and latest rates.

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Residential status under new income tax law in India: complete guide for FY 2026-27

Residential status under new income tax law in India is the starting point for calculating a person’s global and Indian taxable income. This guide explains how residential status under new income tax law is determined for individuals, why it matters, and how you can practically apply the rules for FY 2026-27.

Why residential status under new income tax law is important

Residential status under new income tax law decides whether your global income is taxable in India or only income received in India or from Indian sources. The same person can be:

1. Resident and ordinarily resident (ROR)

2. Resident but not ordinarily resident (RNOR)

3. Non-resident (NR)

Tax rates may be similar, but the scope of total income varies depending on residential status under new income tax law.

Related: Understanding taxable income under the new income tax regime (link: /blog/new-tax-regime-taxable-income)

Basic conditions for residential status under new income tax law

Under the new Income tax Act, an individual is treated as resident in India in a financial year if any one of the following basic conditions is satisfied:

1. The individual is in India for 182 days or more during the relevant financial year; or

2. The individual is in India for 60 days or more during the relevant financial year and 365 days or more during the 4 immediately preceding financial years.

The new income tax law may provide special relaxations or modifications for:

  • Indian citizens leaving India for employment abroad
  • Crew members of Indian ships
  • Visiting Indian citizens and Persons of Indian Origin (PIOs)

You should always read these special provisions together with the basic conditions for residential status.

External reference: Income Tax Department residential status page (search on www.incometax.gov.in)

Additional conditions for ROR and RNOR classification

Once basic conditions are checked, a resident individual is further classified as ROR or RNOR based on additional conditions. Typically, the law tests:

1. Whether the individual was resident in India for at least 2 out of 10 previous years immediately preceding the relevant year.

2. Whether the individual was in India for 730 days or more in the 7 previous years immediately preceding the relevant year.

If both conditions are satisfied, the individual is resident and ordinarily resident. If only some conditions are satisfied, the individual may qualify as RNOR under residential status under new income tax law.

Scope of income for each residential status under new income tax law

Once residential status is determined, the scope of income is applied as follows:

1. Resident and ordinarily resident (ROR)

  • Global income is taxable in India.
  • Income received or deemed to be received in India is taxable.
  • Income accruing or arising outside India is also taxable.

2. Resident but not ordinarily resident (RNOR)

  • Income received or deemed to be received in India is taxable.
  • Income accruing or arising in India is taxable.
  • Foreign income is taxable only if it is from a business controlled in or a profession set up in India.

3. Non-resident (NR)

  • Only income received or deemed to be received in India or accruing or arising in India is taxable.

Residential status under new income tax law therefore directly affects how foreign salary, foreign interest, or foreign business income is treated.

Related: Taxation of foreign income for RNOR and NR taxpayers (link: /blog/foreign-income-rnor-nr)

Practical checklist to determine residential status under new income tax law

Use this simple checklist at the beginning of each financial year while planning taxes:

1. Collect travel details

  • Passport entries for arrivals and departures
  • Tickets and boarding passes, where available

2. Compute total days in India

  • Count physical presence in India for the relevant year
  • Count presence for last 4 years and last 7 years for additional conditions

3. Apply basic conditions

  • Check if 182 days condition is satisfied
  • If not, check the 60 days plus 365 days condition

4. Apply special provisions

  • If you are a seafarer, NRI, or employee leaving India, read the specific rules in the new Income tax Act and CBDT circulars

5. Determine final residential status under new income tax law

  • Mark ROR, RNOR, or NR clearly in your working papers

6. Align tax planning

  • Identify which foreign incomes are taxable
  • Review DTAA benefits where applicable

Compliance and documentation tips for residential status

  • Maintain a yearly residential status working sheet with day count.
  • Keep self declaration and employer communication aligned with your determined status.
  • For NR and RNOR taxpayers, inform banks and financial institutions to apply correct TDS.
  • Keep evidence to support your residential status under new income tax law in case of scrutiny or assessment.

External reference: Check relevant circulars and FAQs on www.incometax.gov.in or CBDT notification pages for updated day count relaxations and tie breaker rules for dual residence.

Related: NRI tax planning under new income tax law in India (link: /blog/nri-tax-planning-new-law)

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GST registration for service businesses in India: step by step guide

GST registration for service businesses in India is often the first major tax registration new consultants, agencies and freelancers face. Whether you run a digital marketing agency, IT services firm, design studio or consulting practice, understanding when and how to obtain GST registration for service businesses in India is critical.

This guide explains thresholds for compulsory registration, voluntary registration, the online application process on the GST portal and common mistakes to avoid.

When is GST registration mandatory for service businesses in India

GST registration for service businesses in India becomes mandatory when your aggregate turnover crosses the notified threshold limit in a financial year.

Key points:

1. Aggregate turnover includes taxable supplies, exempt supplies and export of services on an all India basis.

2. Thresholds and special category state rules can change, so always check the latest information on the official GST portal at https://www.gst.gov.in.

3. Certain categories such as inter state supply of services or operation through e commerce platforms may trigger mandatory registration even below thresholds, subject to current law.

Voluntary GST registration for service businesses in India

Many early stage agencies and consultants opt for voluntary GST registration for service businesses in India even before crossing the turnover threshold.

Reasons include:

  • Clients, especially larger companies, insist on GST invoices.
  • Ability to claim input tax credit on eligible expenses.
  • Building credibility as a compliant business.

However, voluntary registration also brings monthly or quarterly return filing and compliance responsibilities, so weigh the decision carefully.

Documents required for GST registration for service businesses in India

Typical documents include:

1. PAN of the business or proprietor

2. Aadhaar of the proprietor or authorized signatory

3. Proof of principal place of business (electricity bill, rent agreement, NOC)

4. Bank account details and cancelled cheque

5. Company or LLP incorporation documents if applicable

Keep scanned copies ready in the formats mentioned on the GST portal.

Step by step process on the GST portal

To complete GST registration for service businesses in India:

1. Visit the official GST portal at https://www.gst.gov.in.

2. Click on Services: Registration: New Registration.

3. Fill in basic details such as legal name, PAN, email and mobile number.

4. Verify OTPs and generate a Temporary Reference Number (TRN).

5. Log in with TRN and fill the full application form.

6. Upload required documents and photographs.

7. Submit with digital signature or EVC as applicable.

The tax officer may approve the application directly or raise a query for additional information.

After you obtain GST registration for service businesses in India

Once your GST registration is approved and you receive your GSTIN:

1. Start issuing GST compliant invoices with your GSTIN and correct HSN or SAC codes.

2. Set up your accounting to track output tax and input tax credit.

3. File periodic GST returns such as GSTR 1 and GSTR 3B by due dates.

4. Reconcile your books with data on the portal.

Remember that even with zero turnover in a month, registered service businesses may have to file nil returns, unless you have opted for a specific scheme that changes this requirement.

Common mistakes service businesses make with GST

Some frequent errors around GST registration for service businesses in India and subsequent compliance include:

  • Delaying registration even after crossing thresholds
  • Incorrect classification of services and SAC codes
  • Not collecting necessary client information (GSTIN, place of supply)
  • Missing return filing deadlines and late fees

Setting up processes early can prevent these issues and make GST compliance a routine part of your business operations.

GST registration for service businesses in India, when done at the right time and managed properly, supports growth by enabling smoother dealings with corporate clients and eligibility for input tax credit.

Related: GST compliance checklist for small service businesses in India (link: /blog/gst-compliance-checklist-service-businesses-india)

Related: Place of supply rules for services under GST in India (link: /blog/place-of-supply-services-gst-india)

Related: How to handle input tax credit for common expenses in service businesses in India (link: /blog/input-tax-credit-service-businesses-india)