Tax Compliance for Startups and SMEs: A Practical Approach
Starting from day one, startups and small businesses have a lot of different tax obligations. Getting these right lets you focus on growth, not fines. First, register for all applicable taxes. This generally involves getting a PAN and a TAN, registering under the GST if turnover warrants it, and under the state laws (VAT or professional tax). Other activity-based registration may include Udyam for MSME benefits, a shops license, and PF/ESI for employees. According to one guide from a CA, “CAs advise you about registering your new business with the proper organizations based on its legal form – sole proprietor, partnership, or company. You might be bound to sign up for income tax, GST, and professional taxation.
Once registered, the key filings include:
Income Tax Returns: It is to be filed annually. Non-audit cases, whose annual turnover is ≤ ₹ 1 crore, or ₹ 10 lakh in receipts for professionals, must be filed by July 31, while businesses requiring audit must file it before September 30. Timely filing, even if NIL, avoids interest and penalties.
GST Returns: As above, file GSTR-1 (10th of next month) and GSTR-3B (20th) on a monthly basis. Small taxpayers falling under quarterly returns or composition should file GSTR-4/GSTR-9 (annual).
TDS/TCS Returns: If you deduct tax or collect tax at source, file quarterly statements ‘Forms 24Q/26Q/27Q’ by 31st of the month after quarter.
Company/LLP Filings: Private Ltd. companies and LLPs must make ROC annual filings for financial statements and annual return forms, essentially within 60-90 days after the AGM. Directorship filings, namely DIR-3 KYC by 30th September of every year, will also be required.
Other Compliance: Maintain payroll compliance, such as PF, ESI, professional tax, and labour laws. For startups with employees, deduct PF/ESI and deposit each month. Keep up with all labor and statutory filings on time to avoid penalties.
Here is a quick compliance checklist for a new business in India: filing of audited financial statements (AOC-4) and Annual Return (MGT-7) post-AGM; holding of AGM within 6-9 months of the end of FY; filing of ITR on due date; filing of GSTR-1/GSTR-3B on due date.
Common Compliance Pitfalls:
GST Registration: Do not delay; the moment your turnover crosses thresholds, get registered. A failure to do so in time can invite 10% tax penalties.
Missing TDS Dates: Ensure timely TDS deposits and return filings at the end of every quarter. Even small delays accrue interest.
Ignoring ROC Filings: Private Companies are required to file ROC forms annually, such as AOC-4 and MGT-7. Non-filing of these forms attracts penalties and disqualification of directors.
Poor record-keeping: Maintain clear books and invoices. Inaccurate books can derail audits and invite notices.
Late Filing of Income Tax: ITR filed late, i.e., after the due date, results in late fees of as much as ₹10,000 under Sec.234F.
Compliance is not mere paper work; rather, it builds credibility. As experts explain, “Securing PAN and GST registration, maintaining records and filing timely returns…are not negotiable for a business’s success”. A CA firm can simplify these tasks: for example, GVC’s Income Tax and GST compliance teams ensure you meet all deadlines and claim all eligible benefits.
Ready to get compliant? Reach out to GVC’s tax advisers for a startup/SME compliance review and let us handle your filings as you grow your business.
