Income Tax and GST


The Goods and Services Tax (GST) aims to combine various taxes into one. It will be imposed on goods or services at each stage, starting from production or import to the final retail sale. Essentially, all taxes on goods or services imposed by the central or state governments will merge into GST.

Income tax:

* Income tax is levied by the Government of India on individuals' earnings. The regulations for Income tax are outlined in the Income-tax Act, 1961.
* Income tax applies to various entities like individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), partnerships, LLPs, companies, local authorities, and any other legal entity not covered under these categories.
* From this definition, it's clear that, apart from individuals, any legal entity will also be subject to paying Income tax.

People Responsible for Registration:

For individuals and sole proprietors

Providers must register for GST if their turnover crosses the defined limit in a financial year. Once liable, they need to apply for GST registration within 30 days from the date they become liable.

People Not At risk to register:

  • Individuals engaged in providing goods/services that are either not liable for tax or are excluded from taxation under the Goods and Services Tax Act, along with agriculturists.
  • Reports needed for GST Registration – Ownership Organization

  • Copy of PAN Card
  • Copy of Aadhaar Card
  • Passport-sized Photograph
  • Copy of Rental Agreement and Electricity Bill - If the office is leased.

  • People Not liable to Enlist:

  • Individuals engaged in activities exempted or not liable for taxation under the Goods and Services Tax Act include agriculturists.
  • Required documents for GST Registration – applicable to Organization/Private Limited/LLP/Society/Trust/AOP:
  • Partners'/Directors' PAN Card Copy
  • Partners'/Directors' Aadhaar Card Copy
  • Passport-sized Photograph of Partners/Directors
  • Copy of Rental Agreement and Electricity Bill (If office is leased)
  • Partnership Deed/Company Incorporation Document/LLP Agreement
  • Society Registration Certificate/Trust Deed

Advantages of GST:

  • Straightforward Compliance
  • Uniform Taxation
  • Easy and straightforward to administer
  • Improved revenue efficiency
  • Transparent Taxation system
  • Objective-driven tax system
  • Single tax across the nation
  • Legal Recognition

  • Income tax:

    Income Tax Slab Tax rate - Individuals
    Up to `2,50,000 Nil
    2,50,001 to 5,00,000 5%
    5,00,001 to 10,00,000 12,500 + 20% of total income exceeding 5,00,000
    Above 10,00,000 1,12,500 + 30% of total income exceeding 10,00,000

    The Finance Act, 2020 has presented new discretionary tax system:

    • No Tax – Upto Rs 2.5 Lakhs
    • 5% Tax – Between 2.5 Lakhs to 5 Lakhs
    • 10 % Tax – Between 5 Lakhs to 7.5 Lakhs
    • 15 % Tax – Between 7.5 Lakhs to 10 Lakhs
    • 20 % Tax – Between 10 Lakhs to 12.5 Lakhs
    • 25 % Tax – Between 12.5 Lakhs to 15 Lakhs
    • 30% Tax – Over 15 Lakhs

    Taxpayers can choose between the options mentioned above. They can opt for a lower tax rate under the new system or continue paying taxes as per the existing tax slab rates. Those selecting the New Tax system need to forgo exemptions and allowances available in the old tax system.

    The underneath exceptions are Not Permitted:

    • Standard Deduction for salary
    • Education allowance for children
    • House Rent Allowance
    • Leave Travel Allowance

    It is fitting to pick the new tax system if you have less venture. Three classifications of “person”

    • Individuals - Under 60 years old
    • Senior Citizens - Between 60 and 80 years old
    • Very Senior Citizens - Over 80 years old

    ITR Forms:

    FORM ITR-1 – Used by individuals with income up to Rs. 50 lakh, earning from salary, one house property, or other sources like interest.

    FORM ITR-2 - For individuals and HUFs without business income, not eligible to file Sahaj.

    FORM ITR-3 – Any individual with income from business/profession.

    FORM ITR-4 - For individuals, HUFs, firms (other than LLPs) earning up to Rs. 50 lakh and having income from business/profession under the presumptive taxation scheme.

    FORM ITR-5 – Partnership firms, LLPs.

    FORM ITR-6 – Companies

    FORM ITR-7 - Charitable or non-profit organizations.

    Due date for filing a Personal tax Return:

    • For regular cases: July 31st of the assessment year is the deadline.
    • For cases under review: The deadline is September 30th of the assessment year.

    Income tax/Ownership:

    Filing income tax returns personally is similar to individual tax filing. Individuals under 60 with income exceeding Rs. 2, 50,000 need to file personal tax returns. This process also applies to LLPs and companies, which is somewhat surprising.

    Annual tax-Limited liability Partnership/Partnership companies/private limited company

    Limited Liability Partnerships (LLPs) and partnership companies are often seen as similar to partnership firms. LLPs and partnership companies generally pay a 30% tax rate on their total income. If the income exceeds one crore, an additional surcharge of 12% is applicable. On the other hand, public limited companies are taxed at a rate of 25% on their total income.

    Penalty on Annual tax:

    At the end of the financial year, all financial reports must be submitted. Starting from April 1st, a new financial year begins for ongoing business activities. The Indian government sets the deadline for filing all company's ITR reports as July 31st. A penalty of Rs.5000 per day is imposed for filing the ITR before December 31st. If the filing extends beyond December 31st, the penalty amount increases to Rs.10, 000.