Virtual Accounting

What does tax compliance for businesses in India require?

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Contents

Key takeaways

  • Tax compliance for businesses covers GST, TDS, Income Tax, payroll TDS, and ROC, with clean books, timely filings, and accurate payments at its core.
  • Turnover thresholds drive GST registration, e invoicing, and tax audit, always verify current limits on official portals.
  • A simple rhythm, monthly, quarterly, annual, with reconciliations and maker checker reviews, prevents penalties and cash flow stress.
  • Match ITC to GSTR 2B, map TDS sections at source, and reconcile AIS and 26AS to books before year end.
  • Strong documentation and digital workflows reduce audit effort and notice risk, preserve records for seven years or more.
  • CA led services like AI Accountant bring execution and visibility together with a live dashboard, reconciliations, filings, and alerts.

Introduction, tax compliance for businesses made simple

If you run a company, a startup, or work as a freelancer in India, tax compliance for businesses can feel heavy. There are many rules, many due dates, many forms. A small miss can cost money and time.

This guide makes it simple. We walk through what to do, when to do it, and how to do it right. You will see practical steps, a clear calendar, checklists, and common mistakes to avoid. You will also see how a CA led service like AI Accountant can keep you on track with a live dashboard, reconciliations, filings, and alerts.

What is tax compliance for businesses

Tax compliance for businesses means you follow all tax laws on time and with correct data. You register when needed, you keep clean books, you file returns as per the rule, you pay taxes on time, you keep records ready, you match statements, you reply to notices in time.

It covers direct taxes and indirect taxes. Direct taxes include Income Tax and TDS. Indirect tax is GST. The core pillars include PAN and TAN, GSTIN if needed, advance tax payments, and record keeping for audits.

Rules vary by entity type. A proprietor or freelancer may use presumptive tax, sections 44AD and 44ADA allow simple filing if your receipts are below set limits. A partnership or LLP files ITR 5. A company files ITR 6 and also has ROC work with the Ministry of Corporate Affairs.

Turnover also triggers rules. You may need GST registration when your receipts cross the basic limit, many businesses must register when turnover crosses twenty lakh rupees, and in some special category states the limit is ten lakh rupees. Big turnover can also trigger tax audit under Income Tax, often when turnover is above ten crore rupees or other tests are met.

If you sell goods or services across India, track place of supply, HSN or SAC codes, and e invoicing rules if you cross the e invoice threshold. Good master data and a clear chart of accounts make this easier.

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Why tax compliance for businesses matters

Tax compliance for businesses protects you from penalties, interest, and cash flow pain. Late Income Tax filing can lead to a fee under section 234F. Short payment or late payment of advance tax can attract interest under sections 234B and 234C. On the GST side, if you do not match your input tax credit with GSTR 2B, your ITC can get blocked, that ties up working capital.

Non deduction or late deposit of TDS can trigger interest, late fees, and even expense disallowance, which raises your tax bill. Chronic non compliance can also harm your brand, make audits harder, and slow investor due diligence. In short, poor controls cost real money.

Good compliance compounds benefits, better trust with banks and investors, better data for decisions, leaders focus on growth, and a stronger contribution to public infrastructure.

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The Indian tax compliance landscape, what to file, when, and who

GST compliance for businesses

If your turnover crosses the threshold, you must register for GST, the general limit is twenty lakh rupees, and in special category states the limit is ten lakh rupees. Small taxpayers can choose the composition scheme if they qualify. Exporters and SEZ units can use a Letter of Undertaking to zero rate exports without paying IGST upfront.

File GSTR 1 for outward supplies, monthly or quarterly under QRMP. File GSTR 3B monthly by the due date based on your state. If your turnover is above five crore rupees, you may need to file annual returns GSTR 9 and reconciliation GSTR 9C. E invoicing applies when you cross the notified turnover threshold, always check the latest GSTN updates for the current limit.

Manage input tax credit with care. Reconcile books with GSTR 2B every month, use this practical reconciliation guide. Apply reverse charge where required. Use correct HSN and SAC codes. Keep a clean invoice trail, including e invoice IRN where applicable.

TDS and TCS compliance for businesses

Deduct TDS on payments covered by the law. Common sections include 194C for contracts, 194J for professional fees, and 194H for commission. For purchase of goods above fifty lakh rupees, apply TDS under section 194Q or TCS under section 206C sub section 1H as applicable. Deposit TDS by the seventh of the next month. File quarterly TDS returns, see this breakdown of forms and timelines. Use Form 24Q for payroll TDS. Use Form 26Q for other domestic payments. Use Form 27Q for non residents. Issue TDS certificates like Form 16 and Form 16A to deductees. Late deposit or filing can lead to interest and late fees, non deduction can cause expense disallowance.

Income Tax compliance for businesses

Pick the right ITR form. Proprietors with business income use ITR 3, partnerships and LLPs use ITR 5, companies use ITR 6. The due date for non audited taxpayers is July thirty first, for audited taxpayers, it is October thirty first. Late filing can lead to a fee up to five thousand rupees under section 234F.

Pay advance tax in four parts, fifteen percent by June fifteen, forty five percent by September fifteen, seventy five percent by December fifteen, one hundred percent by March fifteen. Shortfalls attract monthly interest. A tax audit is needed if turnover crosses ten crore rupees, or lower in cases with large cash receipts. Small businesses may use presumptive taxation under 44AD with deemed profit at six to eight percent. Always reconcile your books with AIS and Form 26AS each year.

Payroll TDS compliance for businesses

Deduct TDS from salaries each month, deposit by the seventh of the next month. File quarterly 24Q returns. Issue Form 16 by May thirty first. Keep payroll proofs and workings safe.

ROC and MCA compliance for small companies

Small companies must file AOC 4 for financial statements and MGT 7 for annual return, see this ROC and secretarial overview. Typical due dates are October thirty and November thirty. File DIR 3 KYC by April thirty. Hold an AGM within six months after the end of the financial year. File event based forms for changes in directors, capital, or registered office.

Sector nuances in tax compliance for businesses

  • SaaS exporters often zero rate supplies by filing LUT, keep proof of foreign inward remittance.
  • D2C brands handle marketplace TCS, shipping GST, high returns, reconcile payment gateways and COD carefully.
  • Freelancers must register for GST when they cross twenty lakh rupees, many use section 44ADA with fifty percent deemed profit for receipts below the current professional threshold.

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Step by step compliance roadmap for new businesses

  1. Set your legal base
    Choose the right entity. Obtain PAN and TAN. Register for GST if eligible based on turnover or nature of supplies. If you export, plan for LUT early.
  2. Set up banking and books
    Open a current account. Set up a chart of accounts in your accounting tool. Map GST buckets, TDS sections, and revenue and expense categories. Create cost centers if needed.
  3. Set up invoicing with e invoicing
    Design invoices with correct HSN or SAC. Enable e invoicing if you cross the threshold. Keep series control. Store IRNs and e way bills with invoices.
  4. Onboard vendors and customers
    Collect GSTIN, PAN, and bank details. Validate under section 206AB for higher TDS if the vendor is a non filer. Save contracts and SOWs. Set payment terms.
  5. Map TDS sections and banking links
    Create a TDS matrix by vendor and by service. Set default rates. Link bank and payment gateways to your books for automatic reconciliations. Automate import of statements.
  6. Run monthly routines
    Reconcile GSTR 2B with purchase register. Post RCM entries if any. Deduct and deposit TDS by the seventh. Estimate advance tax each quarter. Close books with a maker checker review.
  7. Close the year cleanly
    Scrutinize ledgers. Post provisions for expenses, bonuses, and taxes. Match Form 26AS and AIS with your books. Prepare schedules for auditors. Lock the year after review.

If this feels like a lot, a CA led managed service like AI Accountant can run the engine while your team uses a live dashboard for status and documents.

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Monthly, quarterly, annual compliance calendar for tax compliance for businesses

Monthly

  1. Close the books for the month, post accruals, reconcile bank accounts and payment gateways.
  2. Reconcile ITC with GSTR 2B, hold invoices that do not match.
  3. File GSTR 3B by the due date for your state grouping.
  4. Deduct and deposit TDS by the seventh of next month.
  5. Process payroll and compute payroll TDS, prepare draft 24Q data.

Quarterly

  1. If under QRMP, file GSTR 1 by the thirteenth.
  2. File TDS returns 24Q, 26Q, and 27Q by due dates for July, October, January, and April.
  3. Pay advance tax as per the June, September, and December milestones.
  4. Review 26AS and AIS for mismatches.

Annual

  1. File GSTR 9 and GSTR 9C if applicable by December thirty first.
  2. File Income Tax return by July thirty first, or October thirty first if under audit.
  3. Complete tax audit if applicable.
  4. For small companies, file AOC 4 by October thirty and MGT 7 by November thirty, hold your AGM within the legal window.

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Records and documentation to maintain for tax compliance for businesses

Strong records are your first line of defense and your best tool in audits.

Keep these items safe and easy to find

  1. Sales invoices, e invoices with IRN, e way bills.
  2. Purchase invoices, credit notes, and debit notes.
  3. GSTR 2B and your ITC workings month by month.
  4. TDS challans, return acknowledgments, and Form 16 and 16A.
  5. Bank statements and reconciliations for each account and each gateway.
  6. Contracts, SOWs, LUT copies, and FIRC or bank advice for exports.
  7. Ledger backup and audit trail exported from your software.

Retention period

  1. Under GST, keep documents for seventy two months from the due date of the annual return for that year.
  2. Under Income Tax, keep records for seven years or more if there is a notice or litigation.

Use digital tools to store documents with access controls and logs. A central repository with folder structure by year and by tax saves time during audits.

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Common mistakes in tax compliance for businesses and how to avoid them

  1. GST mismatches between GSTR 1, GSTR 3B, and GSTR 2B
    Fix by reconciling monthly. Flag and follow up on supplier uploads that are missing. Use exception reports to track ITC gaps.
  2. TDS mistakes on sections and rates
    Fix by setting a TDS matrix by vendor and by expense head. Train the team. Deposit on time. Review quarterly forms before filing.
  3. Advance tax underestimation
    Fix by updating rolling forecasts each quarter. Use last quarter performance to true up.
  4. AIS and 26AS not matching books
    Fix by reviewing once a quarter. Clear mismatches before year end to avoid surprises.
  5. Weak documentation and spreadsheet sprawl
    Fix by using digital workflows, approval trails, and document repositories. Avoid manual copy paste. Use maker checker.

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Controls, tooling, and dashboards that improve tax compliance for businesses

Core controls to implement

  1. Auto reconciliations for bank, gateways, and GST 2B to books.
  2. Lock dates after filing to prevent back dated edits.
  3. Maker checker reviews on journals, GST returns, and TDS returns.
  4. Exception reports for ITC gaps, negative ledgers, and unusual trends.
  5. Alert calendars for GSTR 3B, GSTR 1, TDS deposits, and advance tax.
  6. AI driven anomaly checks on vendors, rates, and duplicate invoices.
  7. Centralized document storage with access control and full audit trail.

Recommended tools for tax compliance and bookkeeping

  1. AI Accountant https://aiaccountant.com, CA led virtual accounting with a live dashboard for GST, TDS, Income Tax, ROC, reconciliations, documents, and alerts.
  2. QuickBooks Online https://quickbooks.intuit.com
  3. TallyPrime https://tallysolutions.com
  4. Zoho Books https://www.zoho.com/books
  5. Xero https://www.xero.com
  6. Clear GST suite https://clear.in/gst

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Mini case scenarios for tax compliance for businesses

Freelancer crossing the GST threshold

A design freelancer in Bengaluru crosses twenty lakh rupees in the middle of the year. They must register for GST from the date they cross the limit. They shift to GST compliant invoices with SAC codes. If receipts are below the limit set for professionals under 44ADA, they may opt for presumptive Income Tax with fifty percent deemed profit. They must deposit GST as per returns and keep e invoices if they cross the e invoice limit later.

D2C brand with COD and returns

A D2C skin care brand sells via its website and marketplaces. It handles cash on delivery, returns, and discounts. Each month, the team reconciles payment gateways and cash collections with orders and bank credits. They track marketplace TCS and claim it in Income Tax. They adjust GST on sales returns. They use a SKU wise HSN master to apply correct rates and claim ITC on inputs.

SaaS exporter with zero rated supplies

A SaaS company sells subscriptions to clients outside India. It files LUT at the start of the year. It issues zero rated invoices without IGST. It keeps proof of foreign inward remittance for each invoice. It reports these supplies in GSTR 1 under exports. No GST is paid if conditions are met, income is classified correctly for Income Tax, and transfer pricing is handled if there are cross border group entities.

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How AI Accountant helps with tax compliance for businesses

AI Accountant’s Virtual Accounting is a CA led managed service with a proprietary dashboard. It brings execution and visibility together, so tax compliance for businesses becomes steady and stress free.

What the CA team covers

  1. Accounting and bookkeeping, monthly books for sales, purchases, and expenses, ledger clean up, year end closing and schedules, fixed asset and inventory registers, receivable and payable management, bank and payment gateway reconciliations, cash flow prep and MIS, support during statutory audit coordination.
  2. GST compliance and advisory, registration, monthly or quarterly GSTR 1 and 3B filings, annual GSTR 9 and 9C preparation, e invoicing setup, GST health checks and reconciliations, advisory on place of supply, RCM, HSN, and tax rates.
  3. TDS and Income Tax, TDS advisory and compliance, monthly challan payments and quarterly filings of 24Q, 26Q, and 27Q, Income Tax return filing for individuals, partnerships, and companies, advance tax computations and payments, tax audit preparation support without certification, international tax advisory, expat tax, salary structuring, Form 15CA preparation.
  4. Payroll TDS, monthly payroll TDS calculations and guidance on salary structure to help employees save tax.
  5. ROC and secretarial for small companies, AOC 4, MGT 7, DIR 3 KYC, MSME filings to MCA, director appointment or resignation filings, increase in authorised share capital, share allotments, board meetings and minutes, AGM support, statutory registers, board reports, and annual report preparation.

What the dashboard adds

  1. Live financial overview of revenue, expenses, profit or loss, and balances.
  2. Cash flow trends, burn rate, and runway.
  3. AI generated insights and alerts.
  4. Recent transactions and bank statement analysis.
  5. Document repository for invoices, challans, and returns.
  6. Compliance calendar with filing status for GST, TDS, Income Tax, and ROC.
  7. Centralized communication with the CA team and clear SLAs.

What is not included

Attestation and certification work, audit certification stays with your statutory auditor.

How onboarding and cadence work

Set up is quick. We map your chart of accounts, GST and TDS matrices, and connect your banks and gateways. You get a monthly cadence with book close, reconciliations, filings, and a standard response time of one to two days. You see all of it in the dashboard, so there is no email or chat sprawl.

Learn more at AI Accountant

Quick reference checklist for tax compliance for businesses

Pre month end

  1. Collect vendor statements and missing invoices.
  2. Post TDS accruals on services.
  3. Confirm sales cut off and dispatch proof.

Month end

  1. Close books and run reconciliations for bank, gateways, and GST 2B to books.
  2. File GSTR 3B in time.
  3. Deposit TDS by the seventh.
  4. Process payroll and prepare 24Q data.

Quarterly

  1. File GSTR 1 if under QRMP by the thirteenth.
  2. File TDS returns 24Q, 26Q, and 27Q by the due dates.
  3. Pay advance tax as per the schedule.
  4. Review 26AS and AIS with books.

Annual

  1. File ITR by the due date, complete tax audit if needed.
  2. File GSTR 9 and 9C if applicable.
  3. For small companies, file AOC 4 and MGT 7 and hold AGM.
  4. Archive all documents with indexes for audits.

Closing notes

Structured tax compliance for businesses is not just about avoiding fines, it is about clean data, better calls, and peace of mind. If you want a CA team to run the engine while you get real time visibility in one place, consider AI Accountant’s Virtual Accounting. Book a demo or download the calendar and checklist to start strong.

This is general guidance. Always check the latest notifications on the GST portal, Income Tax portal, and MCA website for updates, and take professional advice for your case.

FAQ

When should my business obtain GST registration, and when does e invoicing become mandatory

You must register when aggregate turnover crosses twenty lakh rupees, or ten lakh in special category states, or earlier if you make inter state taxable supplies that require registration. E invoicing applies once you cross the notified turnover threshold for any prior year as per GSTN, verify the current limit before implementation. A CA managed service like AI Accountant keeps a live watch on thresholds and alerts you before you cross them.

How do I determine the correct TDS section and rate for a vendor payment without slowing down payables

Map the nature of service to the law, for example section 194C for contracts, section 194J for professional or technical services, section 194H for commission. Build a vendor wise matrix in your accounting tool, default the rate at master level, and enforce a maker checker on exceptions. AI Accountant configures this matrix and validates it monthly during close.

What typically triggers a tax audit for a business, and how should I prepare

Turnover above ten crore rupees is a common trigger, there are others related to cash receipt ratios, presumptive scheme usage, and specific sections. Preparation means reconciled ledgers, fixed asset and inventory registers, GST and TDS reconciliations, and schedules for key balances. A Virtual Accounting team can compile audit schedules and coordinate with your statutory auditor.

How should I reconcile Form 26AS and AIS with my books to avoid credits being missed

Do a quarterly match of TDS credits, advance tax, self assessment tax, and high value transactions. Investigate counter party PAN errors and missing TDS certificates before year end. AI Accountant runs a standardized 26AS and AIS to GL reconciliation and raises vendor follow ups early.

What are the real costs of late or incorrect filings across GST, TDS, and Income Tax

GST late fees accrue per day per return as per current rules, interest applies on net tax payable. TDS attracts one percent to one and a half percent per month interest for short deduction or late deposit, plus late filing fees. Income Tax late filing can draw a fee up to five thousand rupees under section 234F and interest for short advance tax. Indirect costs include blocked ITC, expense disallowance, and investor diligence friction.

Can a freelancer or consultant use presumptive taxation under section 44ADA and still claim actual expenses

Under section 44ADA, income is deemed at fifty percent of gross receipts up to the notified threshold for professionals, once opted, you cannot claim further expense deductions in addition to the deemed percentage. Maintain proof of receipts and basic books for sanity checks and cash flow control.

How do I operationalize QRMP for GST while keeping input credit accurate each month

Even under QRMP, reconcile GSTR 2B monthly, hold mismatched invoices, and post RCM entries timely. Use IFF for outward supplies if customers demand monthly reflection. A service like AI Accountant posts monthly reconciliations and ensures quarterly filings remain smooth.

What is the best way to handle TDS under section 194Q versus TCS under section 206C sub section 1H on large goods purchases and sales

Determine who has the first right to apply, usually the buyer under 194Q takes precedence over seller TCS under 206C sub section 1H when conditions for both are met. Maintain ledgers that track thresholds by counter party during the financial year. AI Accountant configures threshold trackers and prevents double levy.

How do I implement e invoicing without disrupting my current invoicing workflow

Start with master data hygiene, correct GSTINs, HSN or SAC, unit and tax rates. Pilot e invoicing on a subset, validate IRN and QR code flows, and integrate your ERP or accounting tool to the IRP via a reliable connector. Maintain series controls and archiving. AI Accountant supervises setup, testing, and go live, and monitors daily rejects.

What governance should I expect from a CA managed Virtual Accounting partner during month close

A standard cadence should include a close checklist, reconciliations for banks and gateways, GSTR 2B to purchase register match, TDS accrual and challan review, variance analysis on P and L, exception logs, and a sign off pack. AI Accountant provides this as a dated close packet with supporting reports.

How are statutory notices handled, and who responds if a GST or TDS notice arrives

Agree upfront on scope, a Virtual Accounting partner typically drafts responses, compiles reconciliations, and files replies on your behalf with your authorization. Complex assessments and appeals may be out of scope and handled by your tax counsel. AI Accountant maintains a notice register, assigns ownership, and tracks closure.

What happens if I switch to a Virtual Accounting service mid year, will prior period clean up be included

Mid year onboarding usually includes a diagnostic of opening balances, GST and TDS positions, and pending reconciliations. A one time clean up scope and timeline is agreed, followed by steady state monthly operations. AI Accountant runs a structured migration, maps your chart of accounts, and locks cleaned periods to prevent regressions.

Written By

Harshit Jain

A Chartered Accountant with 5+ years of experience across indirect taxation and project finance. Harshit has led GST and income tax compliance for clients in hospitality, fast fashion, FMCG, cement, and related sectors, including managing analyst teams and end to end filings.

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