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Importance Of Tax Compliance for Business

Individuals, entrepreneurs, and business enterprises need to abide by all the legislation surrounding the…

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Individuals, entrepreneurs, and business enterprises need to abide by all the legislation surrounding the amount of taxes to be paid by them. All of them must maintain a record of their income and revenues. For the sake of transparency, this data must be produced before the respective authorities within a stipulated period and taxes must be paid accordingly.

But, legislative measures surrounding rates of taxation, at the local, national and international levels, are ever-changing. Keeping a track of such measures is nothing less than Herculean labour because such changes occur quite swiftly. Things tend to become complicated especially for businesses that operate at the international level. Also, the need to maintain clarity and transparency about filing records of tax returns only complicates the matter.

Tax compliance, despite being a gruelling task, is of tremendous importance. Non-compliance to tax laws can result in dire consequences.

What Is Tax Compliance?

Several legislative and regulatory measures surrounding taxation and the rates of taxation are issued by the government and/or its officials and other authoritative bodies. From time to time, amendments and changes are made to these regulations. Such changes are made at the national and international levels.

All business ventures and even individuals must be aware of these rules and laws and even the amendments that are implemented from time to time. If they succeed in doing so, they can be regarded as “tax compliant”. In plain terms, tax compliance entails awareness and a thorough understanding of the legislation and amendments about the payment of taxes by individuals and/or by business enterprises.

The Implications Of Non-Compliant Behaviour About Taxation In The Context Of A Business

It has already been mentioned that non-compliance with taxation can have negative implications. This is true in the case of payment of taxes by individuals and even in the case of business enterprise(s).

The rules surrounding taxation in the case of a business differ from those that are applicable in the case of individuals. In other words, any business venture and its activities such as, accounting, tax filing and so on, are strictly governed by a set of laws that are not similar to those that are applicable in case of individual human beings.

In this connection, it must be noted that any business enterprise has to pay the following set of taxes apart from income tax:

  • Sales tax on the goods and/or services sold by them
  • Property taxes
  • Professional tax of employees and company
  • Other administrative taxes

If under any circumstance the owner of a business fails to abide by the regulations associated with all the taxes and their payments, their behaviour will be considered non-compliant. No excuses are entertained in case of unintentional non-compliant behaviour.

Non- compliance with tax laws can be unintentional sometimes. It may result from the business owner’s ignorance about the regulations and amendments surrounding the filing of tax returns or payment of taxes. It may even happen in case of erroneous filing of tax returns or miscalculations.

Even under such circumstances, the business owner will be penalized by the respective authorities. They might have to pay fines in case of their non-adherence to rules. Also, their reputation and image would be tarnished. Needless to say, such an occurrence might spell doom for a business venture, especially if the venture is a new one. Thus, tax compliance is very important in the case of somebody who owns and runs a business.

How To Ensure Tax Compliance And Prevent Unintentional Non-Compliant Behaviour?

It is not easy to comply with legislative measures surrounding taxation. These measures are subject to frequent changes. Besides, as we have already discussed, non-compliance can be unintentional. After all, to err is human. Therefore, all business owners must resort to professional tax accounting services. Professionals in this field would help business owners immensely. More and more business owners in India and all over the world are likely to reach out to such professionals shortly. Keeping that in mind people can consider getting themselves enrolled in tax courses. In India, one can easily avail of taxation training in Ahmedabad.

This is mainly because their services can prove to be beneficial in the following ways:

  • They can provide business owners with a clear picture of the rapidly changing tax laws.
  • They can ensure the minimization of errors in the filing of tax returns. This, in turn, would prevent unintentional non-compliant behaviour resulting from miscalculations.
  • They would ensure that their client can complete the payment of taxes within the specified period.

However, these professionals must be aware of the latest tax laws and should know about the prevailing rates of taxation as well. They must also know about the tax laws and tax rates at all levels— national or international. Usually, accountants and auditors who are proficient in this field, possess a clear-cut understanding and knowledge of such regulations.

They are also well-versed in other specialized areas such as inbound and outbound transactions and income taxation of trusts and estates, to name a few. It is by such knowledge and insight that they can ensure that their clients are tax-compliant.

Considering the prospects of this field, especially in a country like India, taking a taxation course in Ahmedabad might prove to be beneficial for potential job seekers with requisite qualifications.

Key Takeaways

A business must be tax-compliant. Tax-compliance will allow a business venture to thrive and prosper in the long run. If it exhibits non-compliance about the filing of tax returns and timely payment of taxes, it is bound to suffer. 

This is because non-compliance will only ruin its reputation. But the process entails a lot of difficulties and sometimes unintentional non-compliance may happen. Since there is no mercy even under such circumstances, it is always better for a business owner to avail of the services provided by accountants who are specialists in this field. The demand for the services of such professionals is steadily rising because tax-compliance is only becoming complicated with time, not only on a global scale but also in India. So, without further delay, all eligible individuals should seize the day and avail of the best tax course in Ahmedabad.

 

All About Deferred Tax – What You Need To Know

Contrary to its name, deferred tax is actually an accounting concept. It is governed…

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deferred tax simplfied - what you need to know

Contrary to its name, deferred tax is actually an accounting concept. It is governed by Accounting Standard 22, which is studied as part of course curriculum of most accounting classes.

In reality, deferred tax is not any form of tax expense paid/payable to the government. It represents accounting for difference between tax expense as per books and as per tax return filed by a taxpayer entity.

Differences in tax expense as per books and as per tax return could occur on account of various reasons, for example the rate at which depreciation on certain asset is accounted for in books may be higher/lower than what is permitted as per income tax law. Another example could be donations made by the company – while they are recorded as expense in profit and loss account, they are not an allowable deduction while computing taxable income.

All such differences are to be classified as either timing difference or permanent difference. Timing differences are those which will get reversed in the future. However, permanent differences are those which, as the name suggests, are permanent in nature and will not be reversed in the future. In the above example, while the book depreciation rate may be different than tax depreciation rate, the cost of asset would eventually be depreciated in entirety in both books and tax records. It is merely that the period over which it is depreciated will differ. Hence, it would qualify as timing difference. On the other hand, donation is never allowed as an expense and therefore qualifies as a permanent difference.

Deferred tax is recognised only on timing differences. Depending upon the nature of timing difference, either a deferred tax asset is created or a deferred tax liability is recognized in a financial year. Every year, the position is revisited and the deferred tax asset or deferred tax liability may be reversed depending upon the calculations made.

When there is a disallowance / addition to Profit before tax in tax return, deferred tax asset is created. When additional deduction / allowance is claimed from Profit before tax in tax return, deferred tax liability is created. Instead of mugging it up, whether an asset is to be created or liability, can be understood in logical terms as under:

  • When a disallowance / addition is made in tax return vis-a-vis the expense booked in books, it implies that taxable income is higher in current year, i.e. tax paid is higher now, thus lower tax would need to be paid in future, hence recognize an asset now.

  • Conversely, when higher deduction is claimed in tax return vis-a-vis the expense booked in books, it implies that taxable income is lower in current year, tax paid is lower now, thus higher tax would need to be paid in future, hence recognize a liability now.

Accounting Standard 22 provides for various other aspects related to deferred tax recognition as well, such as:

  • deferred tax is to be recognized at enacted or substantively enacted rate as on balance sheet date
  • deferred tax asset is recognized when there is ‘virtual certainty’ that the asset can be reversed in the future
  • deferred tax getting reversed within the tax holiday period should not be recognized

This might sound like too complicated and confusing, but if one were to think logically, the concept of deferred tax is pretty simple. Accounting classes at Super 20 Training Institute can help you learn complex accounting concepts such as these with ease.

12th / 10th Commerce Students – Learn Practical Skills

Students… here we are. Examinations of 10th and 12th are over. Now what to…

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Students… here we are. Examinations of 10th and 12th are over. Now what to do?

We suggest to all students to take a break. Enjoy the vacation. Do not be worried about your future.

Well, many students want to do ‘Tally Course’, ‘English Speaking’, ‘Computer Course’ etc. It is good that students / parents are concerned about their career. But where to go for such courses? Which is the best course for students?

There are many flavour of the day coaching classes around your locality sending you leaflets for these courses and doing some or the other marketing activity to woo students / parents.

We, at Super 20 Training Institute have always focused on what works in the industry and practical world.  We have been training graduates, undergraduates, businessmen in various practical areas like Tally, Accounting, Taxation, Banking, Finance, Management, Communication Skills, Personality Development, MS Office.

Many parents have advised us to do something for their 10th / 12th Commerce Students. That has lead us to start our Junior Executive of Commerce Course. This course is run by Super 20 Training Institute. All faculties are Chartered Accountants. ‘Learning is Fun’ here.

‘No books… Only practical’ is the mantra. Students in their free time can learn certain skills useful in their career.

Course Contents: Tally, Accounting, Taxation, Banking, Finance, Management, Communication Skills, Personality Development, MS Office

Duration: 2 months

Fees: Rs. 5000/-

After the course, expert Chartered Accountants will provide career counselling to all the students.

It will be a life changing experience. We believe that this course caters to all the concerns the parents have about their children’s career.

You may visit our website www.S20.in for more information.

You also call us on +91 – 70696 46028.