Paying Your Taxes
Be it an entrepreneur or an employee everyone comes under the sphere of taxation
Be it an entrepreneur or an employee everyone comes under the sphere of taxation. Trying to escape tax obligations is a futile exercise as it can land you in the legal net. Therefore it becomes imperative to acquaint oneself with the complete knowledge of various tax authorities for better compliance and to be on the right side of law.
Your Tax Authorities
A) Income Tax (IT) Authority: This is one authority to which everyone has to report whenever one starts earning his/her living whether as a salaried employee or an employer/entrepreneur. To get enrolled with the IT department one needs to get a PAN (Permanent Account Number) card. A PAN card is a laminated card having a ten-digit alphanumeric number. It is mandatory to quote PAN while filing the income tax returns and during a correspondence with any income tax authority. It is also compulsory for all documents pertaining to financial transactions to be notified from time-to-time by the Central Board of Direct Taxes. Dinesh Konchady, Consultant at Inode Technologies says, “A PAN card is vital for any financial transaction today. Non-quoting or wrong quoting is a punishable offence.”
When to Use: You can use your PAN card when opening your bank account, obtaining credit card, doing a sale/purchase of property or vehicle, and for bank deposits exceeding Rs 50,000, and travel expenses exceeding Rs 25,000.
Note: A PAN card is not required for those whose income is below taxable limit and for those who are agriculturists.
B) Service Tax Authority: Service tax is essential for entrepreneurs who are in a service-oriented business and fall under this authority. According to Konchady, “At present there are 96 categories including 15 new services, which come under the service tax net.” It is mandatory for an owner whose business has a turnover exceeding Rs 10 lakh and so should register within 30 days from starting the business. There is no specific penalty for failure on registration but as per the convention a fine of Rs 1000 can be levied.
C) VAT Authority: Value added tax or Goods & Services tax (GST) is a consumption tax levied on value added. In contrast to sales tax, VAT is much simpler. As per definition, VAT is not applicable on export items and if you are charged then it is refundable. A dealer who purchases, sells, supplies or distributes goods as part of his business for valuable consideration has to register with the VAT authority. You have to submit an application to your nearest commercial tax office and then you will be issued a VAT certificate.
When to Register:
When you do business within the state and your turnover exceeds Rs 10 lakh or when your business is outside the state and the turnover exceeds Rs 5 lakh. If you happen to pay VAT on your purchases, registration would allow you to set off the purchase tax against collection.