SAG Infotech - Blog

Tax Filing: ITR-1 to ITR 7 Forms Released for AY 2026-27

Tue, 31 Mar 2026 11:48:00 +0000

On March 30, 2026, the Indian government introduced new Income Tax Return (ITR) forms, specifically ITR-1 through ITR-7, for the Assessment Year 2026–27.

These forms are available for various categories of taxpayers, including individuals, pensioners, and professionals. Taxpayers are encouraged to use the relevant forms to submit their returns by the deadline of July 31, 2026.

Chartered Accountant Ashish Niraj, a partner at A S N and Company, shared with ET Wealth Online an important update regarding the Income Tax Return (ITR) forms. One significant change in the ITR-1 form is the allowance for reporting income from up to two house properties.

In the past, taxpayers could only report income from a single property using ITR-1, which required those with multiple properties to file the more complex ITR-2 or ITR-3 forms. This update simplifies the filing process, making it easier for taxpayers to report their income from additional properties through the more straightforward ITR-1 form.

Who Is Eligible to File ITR-1?

Let’s look at some key types of income that cannot be reported in the Income Tax Return (ITR-1) form.

For example, income from business or professional activities.
Income from Short-Term Capital Gains
Income from long-term capital gains under Section 112A above ₹1.25 lakh.
Income from more than one residential property
Income falling under the head “Other Sources” in the following categories:
(i) Income from Lottery Winnings
(ii) Racehorse Ownership and Maintenance Activities
(iii) Income falling under special taxation provisions of Sections 115BBDA or 115BBE.
(iv) Income required to be apportioned as per Section 5A provisions.

Who Can File ITR-2?

ITR-2 can be filed by individuals or Hindu Undivided Families (HUFs) who

Who Are Not Eligible for ITR-1 (Sahaj)?
In situations where taxpayers do not earn income from business or professional activities, as well as from any associated profits and gains, it is important to understand the implications for their tax obligations.
interest
salary
Bonus
Any commission or remuneration, regardless of its designation, received or receivable from a partnership firm.
Have income of another person, such as a spouse or minor child, that is required to be clubbed with their income, if such income falls under any of the above categories.

Who Cannot File ITR-2?

Individuals and Hindu Undivided Families (HUFs) cannot use Form ITR-2 to file their income tax return if their total income includes profits and gains derived from a business or profession. Additionally, this form is not applicable to the income of certain specified categories.
Interest
salary
bonus
Any commission or payment, regardless of its name, received or receivable from a partnership firm.

Income-Tax Forms Set for Revision Under Draft Rules 2026

Wed, 18 Feb 2026 04:56:00 +0000

The draft Income-tax Rules for 2026 introduce several income-tax forms that were previously outlined under the Income-tax Rules of 1962. Although the majority of these forms maintain their original numbering and descriptions, the references to sections have been updated to correspond with the provisions of the Income-tax Act, 2025. Additionally, the draft includes several new forms aimed at addressing key areas, along with significant revisions to existing forms.

Understanding Tax Audit

Forms 3CA, 3CB, and 3CD are essential documents that function as the audit report and the statement of particulars that must be provided. These forms play a critical role in ensuring compliance with regulatory requirements.

Previously, these forms were mandated under Section 44AB of the Act.
According to the proposed regulations, it is essential to provide the same audit report as mandated by Section 63 of the Act.

TDS Returns Filing

Form 24Q plays a crucial role as the quarterly statement used for reporting tax deducted at source on employee salaries. This form is essential for employers to accurately disclose the amount of tax withheld from their employees' earnings.

The matter was previously documented under Section 200(3) of the Act.
According to the updated regulations, it is now mandatory to submit filings under Section 397(3) of the Act.

Form 26Q continues to serve as the quarterly statement for reporting tax deducted at source on payments other than salary, with the section reference now updated to Section 397(3)(b) of the Act.

Understanding Foreign Remittance

Form 15CA is an important declaration that individuals and entities must submit for any payments made to non-residents.

Form 15CB serves as an essential accountant's certificate for facilitating payments made to non-residents.
Certain forms continue to remain applicable under the proposed rules.

How Foreign Tax Credit Works

Form 67 is an important document used for reporting income earned from foreign countries or specified territories outside of India. It also serves as a means for taxpayers to claim the Foreign Tax Credit. This form helps individuals ensure compliance with tax regulations while optimising their tax benefits.

A new procedure has been introduced to communicate the resolution of disputes regarding foreign taxes for which credits have yet to be claimed.

Contributions

Form 10BD is an essential document that serves as the statement, or correction statement, required to be filed by the donee.

Form 10BE continues to serve as the certificate of donation.
The proposed rules align these forms with Section 354 of the Act.

Permanent Account Number (PAN)

Forms 49A and 49AA remain the designated applications for obtaining a Permanent Account Number (PAN) in India. There have been no alterations to their format or intended use, ensuring that individuals can continue to rely on these forms for their PAN allotment needs.

Tax Assessment of Fair Value

The proposed rules introduce new forms for both the application process to register as a valuer and for the reporting of asset valuations. These specific forms were not previously established, aiming to streamline and standardise the registration and reporting processes in the valuation field.

The Income Tax Department has officially opened a consultative window, inviting stakeholders to provide strategic inputs and feedback on the Draft Rules and statutory forms under the Income Tax Act, 2025. With this landmark legislation scheduled for implementation on April 1, 2026, the consultation offers professionals a crucial opportunity to help shape the procedural framework of India’s modernised tax ecosystem.

Also Read: How Income Tax Software Companies Should Prepare for Act 2025

In an effort to enhance stakeholder engagement, the draft Income-tax Rules, 2026, along with the associated forms, have been made available on the official website of the Income Tax Department ahead of their official notification. This initiative aims to encourage broader participation in the consultation process.

A new utility is now available on the e-filing portal, allowing stakeholders to submit their feedback. This feature has been live and accessible to all users since February 4, 2026.

Major New Tax Rule Changes for Taxpayers from April 2026

Fri, 09 Jan 2026 10:17:00 +0000

India is preparing for a landmark shift in its fiscal landscape with the introduction of the Income Tax Act, 2025, set to take effect on April 1, 2026. This new legislation will replace the legacy Income Tax Act of 1961, which has governed the country’s taxation framework for over six decades. The reform aims to modernise tax administration, simplify compliance, and align India’s tax system with the demands of a contemporary economy.

Tax professionals strongly advise taxpayers to familiarise themselves with these legislative changes in advance. Early engagement with the new framework is essential to ensure a smooth transition and to minimise compliance-related confusion once the law officially takes effect.

The New Income Tax Law Explained

Over time, the current tax law has grown increasingly complex due to frequent amendments, clarifications, and exceptions. The new Act aims to streamline this by presenting the law in clear, simple language and modernising procedures to align with today’s financial practices.

While the core framework of income tax remains unchanged, the new law emphasises simpler compliance, reduced disputes, and greater integration of technology.

Key Regulatory Changes in the New Income Tax Law for Taxpayers

The Income Tax Act, 2025 introduces updated rules, processes, and formats designed to simplify filing and compliance. Its goal is to reduce ambiguity and help taxpayers better understand their obligations.

According to tax officials, the new legislation places strong emphasis on clarity and administrative simplicity. By streamlining complex provisions, the law aims to improve ease of doing business, especially for individual taxpayers and small enterprises, ensuring a more transparent and user-friendly compliance ecosystem.

Important Modifications That Every Taxpayer Should Know

Updated Procedures and Filing Forms: The Central Board of Direct Taxes (CBDT) is implementing updated procedures and forms under the new Income Tax Law. As a result, taxpayers may need to follow revised formats when filing income tax returns, responding to notices, or completing other tax-related tasks.

These updates are expected to be introduced gradually, with new procedures and forms announced through official notifications.

Prioritising Guidance Over Pure Enforcement: The Income Tax Department is placing a greater emphasis on promoting voluntary compliance among taxpayers. A significant initiative that supports this strategy is the NUDGE framework, which stands for Non-intrusive Usage of Data to Guide and Enable. This framework leverages data-driven insights to offer gentle guidance to taxpayers, moving away from strict enforcement measures and fostering a cooperative approach to tax compliance.

The objective is to prevent errors before they occur and minimise unnecessary litigation.

Greater use of technology: Under the new Act, technology will play a much larger role, with legal backing for digital systems in assessments, data matching, and official communication.

Taxpayers should anticipate modifications in the procedures for issuing notices, submitting responses, and verifying information. The shift towards greater automation is expected to minimise manual intervention, thereby expediting the decision-making process.

How Taxpayers Should Prepare

It is essential for taxpayers to stay informed by regularly checking for official updates from the Income Tax Department and the Central Board of Direct Taxes (CBDT). In the upcoming months, notifications regarding new forms, procedures, and timelines will be particularly important.

With greater digital verification, it is essential to keep financial records well organised. Bank statements, investment proofs, income details, and tax documents should be readily accessible.

When taxpayers face uncertainty regarding exemptions, deductions, or reporting requirements, it is advisable to seek guidance from tax advisors or refer to official guidance provided by the relevant department. This can help ensure compliance and clarity in tax matters.

The new Income Tax Act is designed to simplify the tax compliance process, making it less burdensome for taxpayers. As the effective date approaches on April 1, 2026, it will be important for taxpayers to stay informed and prepared to ensure a smooth transition to the new regulations.

How to Respond to IT Dept Nudge Intimations on ITR–AIS Mismatch

Tue, 16 Dec 2025 10:30:00 +0000

The Income Tax (IT) Department has deployed data-driven compliance tools and intensified its use of ‘nudge’ notifications. These automated alerts are sent to taxpayers when discrepancies are detected between the income reported in their Income Tax Return (ITR) and the information available in their Annual Information Statement (AIS).

Chartered Accountant Ajay Konale highlights an important scenario regarding tax compliance: a taxpayer received a notification concerning the acquisition of immovable property valued at approximately ₹2.28 crore for the Financial Year 2024-25.

This transaction was noted in the Annual Information Statement (AIS) and was found to be inconsistent with the income reported in the taxpayer's Income Tax Return (ITR). As a result, the taxpayer was advised to review the details of the transaction, address the discrepancies, and consider revising their ITR for Assessment Year 2025-26 if necessary.

In cases involving high-value transactions, such as the acquisition of immovable property, a notification is typically issued. The primary concern in these situations is that the recorded transaction value appears to be inconsistent with the income reported by the taxpayer in their tax return.

Chartered Accountant Ajay Konale explained that the ‘nudge’ notifications issued to taxpayers should not be confused with scrutiny notices or formal assessment orders. These notifications act as a non-intrusive, preventive compliance tool, giving taxpayers an early opportunity to correct genuine mistakes or clarify discrepancies in their filings.

He emphasised that responding promptly to these notifications is generally seen as an effort to rectify errors, whereas failing to address them may later be interpreted as a deliberate attempt to conceal or misreport information.

The Central Board of Direct Taxes (CBDT) has launched a focused initiative known as the ‘NUDGE’ campaign, aimed at addressing fraudulent claims related to deductions and exemptions. This campaign specifically targets suspicious donation claims filed under Sections 80G and 80GGC of the Income Tax Act.

Following comprehensive data analysis and the identification of unusual patterns, the CBDT has begun sending advisories via SMS and email to taxpayers flagged as high-risk cases. This outreach effort commenced on December 12, 2025, as part of the CBDT’s commitment to enhancing compliance and preventing tax evasion.

What do Taxpayers Need to Do?

Taxpayers who receive a nudge intimation are advised to log in to the Income Tax e-filing portal to review their Annual Information Statement (AIS) in detail. It is important to reconcile each entry in the AIS with the income and transactions reported in the Income Tax Return (ITR) to pinpoint any discrepancies or mismatches. This process will help ensure that all information is accurate and up-to-date.

Taxpayers are encouraged to carefully evaluate the accuracy of the data presented in their Annual Information Statement (AIS). If the AIS information is accurate but has been overlooked or inaccurately reported in the original tax return, taxpayers should take the necessary steps to file a revised return by December 31st of the applicable assessment year.

On the other hand, if the AIS data is found to be incorrect or only partially accurate, taxpayers should provide feedback directly within the AIS section. This feedback can consist of accepting, partially accepting, or disputing the information, and it should include clear explanations for any discrepancies noted.

When preparing for potential scrutiny regarding high-value transactions or deduction claims, it's essential for taxpayers to keep supporting documentation readily available. This documentation should include important proof, such as loan details, ownership records for properties, and evidence of legitimate donations. Additionally, it's crucial to ensure that your mobile number and email ID are correctly updated on the tax portal. This will help you receive all important communications from the tax authorities.

The Central Board of Direct Taxes (CBDT) has described the campaign as a beneficial initiative for taxpayers. This program aims to promote voluntary correction of errors in tax filings prior to the commencement of more stringent enforcement measures.

Mistakes Taxpayers Must Avoid During GST Online Verification on the Portal

Thu, 04 Dec 2025 11:18:00 +0000

Tax law is essential to India’s financial ecosystem, particularly for businesses that depend on accurate compliance to maintain proper records and avoid unnecessary notices. Errors in GST online verification can cause confusion, failed vendor validations, and filing delays. Taxpayers often rush the process and miss important details. Even minor issues, such as mismatched legal names or outdated registration information, can disrupt business operations.

This blog post highlights common mistakes to avoid and offers practical solutions to ensure smooth and reliable GST verification. The aim is to help traders, retailers, distributors, and service providers complete the verification process with confidence while remaining fully compliant with GST rules applicable in their respective states.

Checklist of GST Online Mistakes Taxpayers Must Avoid

In today’s digital environment, many businesses fail to perform basic checks while validating their suppliers, which often leads to issues during audits and monthly return filings. Some common errors are outlined below.

Entering supplier details regarding using outdated or incorrect legal names.
Not checking the status code on the portal before issuing invoices.
Entering incorrect state codes during purchase entries.
Not validating the GSTIN format before saving it in accounting software.

A Surat-based textile unit continued transactions with a partner whose GST registration had become inactive. The issue was discovered only during a departmental inquiry, causing unnecessary stress. A careful review of all details beforehand could have prevented this problem.

Why Overlooking Government Portal Status Can Severely Impact Compliance Signals

Failing to Verify the Latest Status

Real-time status updates on the GST portal are vital for staying compliant. Yet, many tax professionals zero in on the GSTIN and miss the activity flag. When verifying, taxpayers can easily overlook key details like:

Suppliers receive notices directly through the portal.
Remarks from the website moderator, such as suspended or flagged comments.
If there are dues to be paid for the records, the registration can be canceled.
A record of filed returns and any delays, as displayed on the dashboard.

A supplier based in Pune continued to receive repeated orders from a wholesale grocery dealer despite having their GST registration cancelled. The dealer placed these orders based on outdated information saved months earlier, without verifying the supplier’s current GST status. This situation highlights the risks of relying on old data, which can lead to non-compliant transactions and potential input tax credit issues. To prevent such problems, businesses should always check the GST portal for the latest registration status of suppliers before placing any major order.

Skipping Location and Activity Checks

GST verification is not limited to checking the validity of the GSTIN. Taxpayers should also ensure that the supplier’s declared nature of business aligns with the specific goods or services being procured. Engaging with a supplier whose GST registration does not cover the relevant goods or services may result in denial of input tax credit and potential compliance issues. Therefore, a thorough review of the supplier’s GST details on the portal is essential before finalizing significant transactions.

The invoice does not align with the business activity declared on the GST portal.
The invoice shows a location different from the principal place of business.
It has been observed that large distributors frequently fail to register their additional places of business.
The Harmonized System of Nomenclature (HSN) or Services Accounting Codes (SAC) mentioned do not match the goods or services being billed.

A Chennai electronics dealership faced an Input Tax Credit (ITC) blocking issue because their supplier's registered field of activity bore no relation to the electronic items being sold. A brief, simple review of the supplier's registered business activities would have prevented this critical mismatch.

PAN Records Not Matching Correctly

Many taxpayers rely on GSTINs obtained through verbal communication or old purchase bills without proper validation. As a result, they fail to conduct thorough checks during verification, leading to several important details being overlooked, such as:

Always Check if the GSTIN Prefix Corresponds to the Entity's PAN
A common data entry error is the misspelling of the supplier's legal name when recording transactions or details.
A common cause of filing mismatches occurs when an entity’s trade name is mistakenly used instead of its legally registered name in records.
The Misrepresentation of Temporary IDs and Registrations as Valid GSTINs

Reconciliation issues often stem from small but critical errors, such as spelling mistakes. For example, a furniture retailer in Nagpur faced return mismatches and the risk of notices because a single spelling error in a supplier’s legal name was repeated across multiple entries. Correcting that one error promptly resolved the entire issue.

Final Confirmation on the Circumstances for Not Using the GST Portal

Due to the verification complexities, many taxpayers rely entirely on screenshots provided by vendors or accountants, significantly increasing the potential for human error and data inaccuracy.

Data may be outdated.
GST Portal Updates are Not Consistent in Older Screenshots
Incorrect assumptions may be made because of partial visibility.
The historical compliance notes are hidden within screenshots.

A chemical distributor in Vadodara was misled by a screenshot showing a supplier’s GST status as “Active.” However, the official GST portal had already marked the supplier as “Suspended” due to non-filing. This incident highlights the importance of relying on direct, real-time portal verification for accurate compliance data.

The Risk of Failing to Carefully Check Address Details

Small address-level errors often go unnoticed, but they can turn into major issues during assessments or cross-verification. Some common address-related mistakes include:

Mismatch Between Registered State and Utilized State Code
Entering Branch Office Details Where Main Office Information is Required
Missing Unit Numbers in Documentation for Multi-Warehouse Setups
Overlooking Additional Places of Business in Compliance Documentation

A courier partner in Hyderabad once used warehouse details instead of the primary registered address, which caused a mismatch during e-way bill generation. A simple review of the address fields could have resolved the issue immediately.

The Final Verdict

Across India, taxpayers frequently underestimate how severely small errors during GST online verification, such as a wrong digit, an outdated status, or a missed portal alert, can impact compliance. To prevent costly Input Tax Credit (ITC) mismatches and audit issues, maintain accurate records and build trust by always verifying every detail directly on the official GST portal, rather than making assumptions.

How to Check ITR Refund Status Online on the Portal

Fri, 28 Nov 2025 08:33:00 +0000

Each year, a taxpayer must file their income tax return for the relevant financial year by a prescribed deadline. If taxpayers have paid more tax than they actually owe, they are entitled to receive a refund from the Central Board of Direct Taxes (CBDT), known as an ITR refund.

Typically, the Income Tax Department issues these refunds before the end of the financial year. However, for the financial year 2024–25, there may be a delay in processing these refunds.

As per the latest information from the tax department, the refund process may be completed by the end of December. If the refund is delayed by the Income Tax Department, they are liable to pay interest on the amount owed to the taxpayer.

What Interest Will You Receive If Your Income Tax Refund Is Delayed?

As per Income Tax Section 244A, a taxpayer can claim up to 6% interest on the refund if there is a delay by the tax department.
As per Income Tax Section 437(1), an interest rate of 0.5% per month is mandatorily payable on the total refund amount.
However, certain conditions determine whether you are eligible to receive this interest. For example, interest is not payable if the ITR has been filed incorrectly or contains inaccurate information. Additionally, taxpayers who make errors in their ITR forms will not be eligible to receive interest.
If a refund is due, the interest payout is calculated from the relevant date as prescribed under the Income Tax Act.

Define an Income Tax Refund?

The Income Tax Department provides refunds to taxpayers who have paid more tax than they actually owe. These payments may be made under different categories, such as Tax Deducted at Source (TDS), Tax Collected at Source (TCS), Advance Tax, or Self-Assessment Tax.

When you file your income tax return, the department verifies all applicable deductions and exemptions to determine your tax liability. Any excess amount paid by the taxpayer before filing the return becomes eligible for a refund. There is a standard process for claiming a refund, which involves verifying your details online. Once all the information is correct and verified by the Central Board of Direct Taxes (CBDT), it usually takes about 4 to 5 weeks for the refund amount to be credited to your bank account.

Easy Steps to Check Your Tax Refund Status Online

Step 1: Visit the e-Filing portal.
Step 2: Enter your user ID and password provided by the department.
Please Note: After entering your details, a pop-up message may appear stating that your PAN is inactive if you are an individual user and your PAN is not linked to your Aadhaar.
Step 3: After logging in, navigate to the e-File tab, select "Income Tax Returns," and click on "View Filed Returns."
Step 4: You can now check the refund status for the selected Assessment Year (AY). Click on "View Details" to track your filed Income Tax Returns (ITR). Important statuses related to your ITR filing will be displayed:

Status 1: Refund has been issued

Status 2: Refund has been partially adjusted

Status 3: Refund has failed

Note: If your PAN is inactive or not linked to your Aadhaar, your refund may fail, and a warning message will be displayed.

A fair statement by the Chairman of the Central Board of Direct Taxes, Mr Ravi Agrawal, shared with PTI, stated that the Income Tax Department is currently reviewing certain cases where taxpayers may have incorrectly claimed deductions. This process is causing delays in issuing tax refunds. However, he also mentioned that taxpayers who are owed legitimate refunds can expect to receive them by the end of December.

Tax Rules for Buying IT & GST Software from Overseas Vendors

Thu, 20 Nov 2025 06:54:00 +0000

In the current digital economy, businesses and individuals in India increasingly purchase software and digital tools from foreign vendors that lack a Permanent Establishment (PE) in the country. These purchases often encompass cloud services, SaaS subscriptions, and standard software licenses, typically facilitated through credit cards, PayPal, or various online payment gateways. While the transaction process is generally smooth, it comes with significant tax implications.

Beginning in November 2025, under India's Goods and Services Tax (GST) framework and the Income Tax Act, such imports will incur specific obligations. Notably, buyers will need to account for GST under the reverse charge mechanism, as well as potential withholding tax (TDS) on payments made to foreign suppliers.

This article aims to clarify these requirements, assess whether they result in additional costs for buyers, and provide practical examples to illustrate the implications. A firm understanding of these regulations is essential for taxpayers to avoid unforeseen compliance challenges.

Understanding Cross-Border Digital Service Transactions

When an Indian resident, whether an individual or a business, acquires software from a foreign supplier that lacks a Permanent Establishment (PE) in India, this transaction is classified as an import of services under Section 2(11) of the Integrated Goods and Services Tax (IGST) Act, 2017. Since the place of supply is determined to be India, the import is subject to taxation. Furthermore, software that is delivered online or accessed digitally is recognised as an OIDAR (Online Information and Database Access or Retrieval) service, particularly when it is automated and reliant on internet connectivity.

Payment channels like credit cards (Visa/MasterCard) and PayPal act as intermediaries in transactions and do not alter the tax implications involved. The core supply takes place between the purchaser in India and the foreign vendor. Since the foreign supplier lacks a Permanent Establishment (PE) and is not registered under the Goods and Services Tax (GST) in India, the responsibility for tax payment is transferred to the Indian recipient through the Reverse Charge Mechanism (RCM).

GST Liability: Reverse Charge Mechanism and Applicable Rates

GST plays a crucial role in transactions involving services, particularly under the Reverse Charge Mechanism (RCM) as stipulated in Notification No. 13/2017–Central Tax (Rate). According to this mechanism, the recipient of the service in India is responsible for self-assessing and paying the Integrated Goods and Services Tax (IGST) based on the transaction value, treating the supply as one received from a non-taxable entity.

For most Gen GST Software-related services, the standard GST rate is set at 18%. This rate aligns with the revisions made after the GST rationalisation in September 2025, which simplified service tax rates into two categories: 5% (without Input Tax Credit) and 18% (with Input Tax Credit). While basic productivity tools typically fall under the 5% tax category, customised or enterprise-grade software is generally subject to the standard 18% GST rate.

Importers are required to report their tax liabilities through the GSTR-3B form and can claim Input Tax Credit (ITC) when the imported software is utilised for taxable business activities. It's important to note that ITC cannot be claimed for personal use, which means the GST amount associated with such use becomes a direct expense for the individual. Exemptions from this rule are rare and are typically restricted to specific educational or government-related imports. The updates introduced in 2025 highlight the importance of obtaining Input Service Distributor (ISD) registration for businesses that distribute services across different branches. However, for direct purchases, the Reverse Charge Mechanism (RCM) process remains straightforward and unchanged.

Income Tax and TDS on Cross-Border Payments (Withholding Tax)

The income tax implications of software licensing payments hinge on the characterisation of those payments. When a software license involves the transfer of copyright or technical know-how, it is categorised as a 'royalty' under Section 9(1)(vi) of the Income Tax Act, 1961, and is subject to taxation in India. Notably, the Supreme Court's 2024 ruling in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT clarified that payments made for standard, off-the-shelf software do not qualify as royalty, which significantly lessens tax liabilities for such transactions. In instances where payments pertain to Software as a Service (SaaS) or cloud-based access, they are typically classified as service fees rather than royalties.

Under Section 195 of the Indian tax law, buyers are required to deduct Tax Deducted at Source (TDS) at a rate of 10% (plus applicable surcharge and 4% cess, bringing the total to approximately 11.7%) if payments are classified as royalty or fees for technical services (FTS). There is no minimum threshold for this deduction; however, TDS is applicable only when the income is considered to accrue or arise within India.

For digital purchases that do not qualify as royalty or FTS, TDS may not be necessary. Instead, these types of transactions might be subject to a 2% Equalisation Levy (EL) on e-commerce supplies, which was introduced in 2020 and is payable by the foreign seller rather than the Indian purchaser. Additionally, the previous 6% EL on online advertisements was phased out as of April 2025, which has eased the compliance burden for digital transactions.

When individuals or small buyers make payments via credit cards or PayPal, it is often impractical for them to deduct Tax Deducted at Source (TDS) because banks and payment gateways typically do not withhold this tax. In situations where annual remittances exceed ₹5 lakh, buyers need to report the transaction using Form 15CA/15CB, which needs to be accompanied by a certificate from a Chartered Accountant (CA). It’s important to comply with these regulations, as failure to do so may result in penalties equating to the amount of tax that was not paid.

Payment Gateways: Do They Impact GST or Tax Compliance?

Payments made through credit cards or PayPal are considered direct remittances to non-resident sellers, attracting the same GST under RCM and any applicable TDS. While PayPal may apply its own withholding terms, Indian tax regulations ultimately govern the treatment. The absence of a PE simplifies matters for the foreign seller but shifts the compliance burden entirely to the Indian buyer. As of 2025, even with fintech advances like UPI-linked international cards, this position remains unchanged. RBI’s Liberalised Remittance Scheme (LRS) continues to cap individual foreign exchange spending at USD 250,000 per year, inclusive of taxes.

Important Article: How Modern GST Software Keeps Your Financial Data Safe

The Nuance of Additional Cost for the Indian Buyer

Yes, these taxes do increase the overall cost, though businesses can offset the burden through the Input Tax Credit. Without ITC eligibility, however, the entire amount becomes an added expense—potentially raising the cost by up to 18% in GST alone.

Example 1: Business Purchase Scenario A Delhi-based startup purchases a $1,000 (approximately ₹84,000) annual SaaS subscription from a U.S. provider using a credit card. Transaction value: ₹84,000.

GST: 18% IGST amounts to ₹15,120, which the startup must pay under the RCM (Reverse Charge Mechanism). This amount is generally claimable as Input Tax Credit (ITC), resulting in a net zero impact if the software is used for business purposes.
TDS: Not applicable as the payment is not treated as royalty. Equalisation Levy (EL): 2% (₹1,680), payable by the US vendor. Total upfront outlay for the buyer: ₹84,000 + ₹15,120 = ₹99,120, with the IGST recoverable through ITC. Net cost remains ₹84,000 if ITC is available; without ITC (e.g., for exempt supplies), the full ₹15,120 becomes an added expense.

Example 2: Individual Freelancer Scenario A Mumbai-based freelancer purchases a $500 (approximately ₹42,000) Adobe subscription through PayPal for personal editing use.

GST: 18% = ₹7,560 (RCM; no ITC as personal use).
TDS: None (small value, non-royalty). Total: ₹42,000 + ₹7,560 = ₹49,560. Here, 18% is pure additional cost, inflating the budget by nearly one-fifth.

Case Study 3: High-Value B2B Software Transaction for an Enterprise A Bengaluru-based IT company purchases custom ERP software worth ₹10 lakh from a German vendor with no PE in India. If the payment qualifies as royalty, TDS at 10% applies, resulting in a deduction of ₹1,00,000. GST of ₹1,80,000 is payable under RCM, but the firm can claim full ITC. The effective outflow is ₹10 lakh plus GST (later offset through ITC) and TDS (borne upfront by the buyer but creditable to the seller). Additionally, post-2025 presumptive tax schemes for foreign companies may reduce their effective corporate tax burden to around 35%, offering indirect relief through DTAA provisions.

Across all scenarios, the buyer initially bears the GST and any applicable TDS, recovering them only when eligible. Even with the 2025 Budget’s simplified Equalisation Levy refund mechanisms, the immediate cash-flow impact remains significant.

Revised Tax Audit Report: Deadlines and Important Precautions

Thu, 06 Nov 2025 04:47:00 +0000

A tax audit is an examination conducted to ensure that a taxpayer’s financial records accurately reflect their income, expenses, and deductions in accordance with the provisions of the Income Tax Act, 1961. This audit is mandated under Section 44AB and must be carried out by a Chartered Accountant (CA). The results of the audit are documented in either Form 3CA or Form 3CB, depending on the circumstances, with comprehensive details provided in Form 3CD as specified under Rule 6G of the Income Tax Rules, 1962.

However, in some cases, after submitting the audit report, a taxpayer may identify an omission or make a payment that impacts certain deductions. This raises an important question — can the tax audit report be revised?

The Applicable Legal Rule

Previously, there was no specific provision allowing the revision of an audit report once it had been submitted. However, this changed with the introduction of the Income-tax (Eighth Amendment) Rules, 2021, which inserted Rule 6G(3). The sub-rule allows the revision of a tax audit report under the following circumstances:

"There is payment by such person after furnishing of the report under sub-rule (1) or (2) which necessitates a recalculation of disallowance under section 40 or section 43B." This provision allows a taxpayer to obtain a revised audit report from the same Chartered Accountant (CA), duly signed and verified, and submit it before the end of the relevant assessment year if any subsequent payment affects disallowances under Sections 40 or 43B.

When is Income Tax Audit Report Revision Permitted?

The law permits revision only under specific and bona fide circumstances:

Payments Made After the Audit Date - When a taxpayer makes payments of statutory dues such as GST, TDS, PF, or interest after filing the original report, which impact deductions under Sections 40 or 43B.
Correcting Genuine Errors - In cases involving clerical errors, incorrect clause references, or misclassified data entries.
Revised financial statements – When a company or partnership reopens or restates its financial accounts.
Impact of Retrospective Law Changes or Judicial Rulings - Impacting the disallowances reported earlier.
Addressing Technical or Utility Issues - Where the e-filing system or audit utility required re-uploading corrected data.

The ICAI’s Guidance Note on Tax Audit under Section 44AB clarifies that audit report revisions should not be done routinely. Any revision must be properly justified, well-documented, and clearly cross-referenced to the original report.

Who Can Revise the Income Tax Audit Report?

Only the original auditor who submitted the initial report is authorised to issue the revised version. The revised report must include a new date, signature, and a fresh UDIN (Unique Document Identification Number).

If the original auditor has resigned, retired, or ceased to practice, the succeeding auditor cannot 'revise' the previous report. Instead, they must issue a new audit report following a fresh appointment and independent audit procedures.

The Applicable Time Limit

The revised audit report must be submitted before the conclusion of the relevant assessment year. Beyond this period, further revisions are generally not permitted unless specifically allowed by the Assessing Officer.

Key Cautions for Audit Report Revision

A revised tax audit report does not automatically update the Income Tax Return (ITR). The taxpayer must file a separate revised ITR, referencing the details of the updated audit report.
Frequent or unjustified revisions may lead to professional scrutiny or disciplinary action under the Chartered Accountants Act, 1949.
The revised report fully supersedes the previous one and is treated as the valid audit report on record.
The reason for the revision must be clearly stated in the new report and properly cross-referenced to the original report.
If the revision alters any qualification or observation, it should be thoroughly reviewed and clearly justified in the revised report.

Illustrative Example

For example, if a business files its audit report and later makes a payment for an employee bonus or other statutory dues that were previously disallowed under Section 43B, the Chartered Accountant may issue a revised report. This updated report reflects the correct figures and ensures compliance while avoiding potential penalties.

However, if the revision is only to correct minor wording or unrelated data, it may not qualify as a valid reason for revision and should generally be avoided.

Final Thoughts

Revision of a tax audit report is legally permitted but subject to specific conditions. As per Rule 6G(3), it is allowed only when a subsequent payment impacts disallowances under Sections 40 or 43B. Apart from these cases, only genuine and properly documented reasons are considered valid for revision.

Importance of GSTR 1 Retrun Filing for Regular GST Taxpayers

Tue, 02 Sep 2025 07:40:00 +0000

If you own a business in India, you're likely familiar with the Goods and Services Tax, commonly known as GST. One important requirement under this system is submitting your GST returns on time. One of the main forms you’ll need to file is called GSTR 1, which is crucial for following GST rules. In this article, we’ll simplify what the GSTR-1 form is and explain the deadlines for regular taxpayers.

The due dates for filing GSTR-1 forms depend on how much money your business makes. If your business has sales of up to Rs 5 crore, you can file your returns every three months using a special scheme called QRMP. These returns are due by the 13th of the month following each quarter. For businesses with annual earnings exceeding Rs 1.5 crore, you will need to submit your GSTR 1 forms by the 11th of the month after each month. Timely submission helps ensure that you comply with tax rules and avoid any penalties.

Understanding the Importance of Filing GST Returns

If you run a registered business, it's important to file GST returns. These are documents that tell the tax authorities about your business's income and expenses. Basically, if your business is registered for Goods and Services Tax (GST), you need to keep track of what you earn and spend, and share that information with the tax office.

One key form you'll need to fill out is called GSTR 1. In this form, you provide details about the goods and services you sell. This information helps the tax authorities figure out how much tax you owe. The returns include details about what you've sold, what you've purchased, and the GST you've collected and paid.

Filing these returns regularly is necessary, and how often you do so depends on your business situation, either every month, every three months, or once a year. There are different types of GST return forms, but you'll only need to complete the ones that apply to your business.

What Does GSTR-1 Mean?

GSTR-1 is a form that businesses registered for GST need to fill out and submit every month or quarter, based on how much money they make in a year. This form is important because it requires businesses to provide detailed information about all the goods and services they sell. The reason GSTR-1 matters so much is that it helps buyers claim back some of the tax they paid, but only if the seller submits this form accurately and on time.

Even if a business didn’t sell anything in a particular month, they still have to submit a form called a NIL GSTR-1 to show there were no sales. On the other hand, if a business has decided to join a simpler tax scheme known as the composition scheme, it shouldn't file GSTR-1. Instead, they need to make their payments using a different form called CMP-08.

Overview of GSTR 1 Filing Form Deadlines for FY

The due date for filing GSTR 1 forms is defined by how much money your business earns. If your business makes up to Rs. 5 crore, you have the option to file your returns every three months under a special program known as QRMP. If you choose this route, you need to submit your returns by the 13th of the month after each quarter ends. For businesses that earn more than Rs. 5 crore, or if you decide not to use the QRMP program, you have to file your GSTR-1 form every month. In this case, the deadline is the 11th of the month after the one you're filing for.

In summary:

Businesses that make more than Rs. 5 crore need to file their tax returns every month, and they must do this by the 11th day of each month.
Businesses that earn up to Rs. 5 crore can choose to file their returns every three months instead. They need to submit these returns by the 13th day of the month following each quarter.

Who Needs to File GSTR-1?

Everyone who is registered for Goods and Services Tax (GST) must file GSTR-1, regardless of whether they had any sales or transactions during that time. If a business has no transactions to report (often called a "nil" return), they can even submit their GSTR-1 through a simple SMS since July 2020.

However, there are some specific groups of registered individuals or businesses that do not need to file GSTR-1.

These include:

Businesses known as Input Service Distributors.
Those who are registered under the Composition Scheme, which is a simpler tax option for small businesses.
Online service providers who need to pay tax directly under certain regulations.
Non-resident businesses that sell goods or services in India.
Taxpayers who collect Tax Collected at Source (TCS)
Taxpayers who deduct Tax Deducted at Source (TDS)

The Role of Payroll Software in Labour Law Compliance

Fri, 25 Jul 2025 11:35:00 +0000

Companies in the present era would be required to get updated on the rules of employee rights and pay. Such rules could get revised with time, and errors, delays, and even expensive fines may occur if businesses use the older methods. Therefore, for such complexities, payroll software has arrived. It manages the employee payments and makes businesses follow the current rules, which ensures that they stay compliant and function easily.

Comprehending Labour Law Compliance

The relationship between the employers and workers is managed under the Labour laws. Significant topics like pay, working hours, overtime pay, bonuses, employee state insurance (ESI), retirement funds, health insurance, taxes, minimum wages, benefits when leaving a job, and maternity leave are being covered under the law. The employers may encounter legal problems, fines, and harm their reputation if they do not comply with such laws.

It is not easy to monitor the amendments in laws for business, particularly those functioning in multiple states or with large workforces. Further applying them accurately and keeping accurate records is also not easy. Labour law compliance mandates timely filings, proper documentation, and transparent salary structures, and can be handled effectively via payroll software.

Payroll Software functions in Labour Law Compliance

Automated Statutory Deductions: To compute and deduct statutory components like PF, ESI, TDS, and professional tax based on the latest government rules, payroll software has been developed. Businesses do not require monitoring every statutory amendment manually, as the software furnishes them automated updates that ensure compliance.

Accurate Payslip Generation: It is important that compliant payslips show earnings, deductions, and employer contributions clearly. All components must be presented accurately, by the payroll software must meet the legal requirements established by the labour departments.

Real-Time Tax Updates: In response to amendments in tax laws or contribution limits, the new generation of payroll software is updated over time. It ensures appropriate calculations and reporting and it lessens the risk of errors from the outdated information.

Easier Integration with Government Portals:Various payroll systems authorise direct integration with government filing systems such as EPFO, ESIC, and income tax departments. The same supports automating returns, uploading required forms, and generating challans, thereby saving time and lessening human error.

Centralised Record-Keeping: Labour laws mandate companies to keep the payroll records for audits and inspections. The software of payroll furnsihes a secure, centralised database that stores employee salary data, compliance history, and statutory reports, making it simpler to retrieve and present during labour audits.

Multi-State Compliance: For businesses that are present in different Indian states, regional laws like state-wise professional tax, shops and establishments rules, or minimum wages must be adhered to. Payroll software like SAG Infotech’s Gen Payroll ensures compliance with state-specific rules as it comes with multi-state configuration support.

Advantages of Using Payroll Software for Labour Law Compliance

Reduced Errors: The payroll software streamlines the calculations and makes the operations error-free.
Time Efficiency: Automated workflows for salary processing, deductions, and filings save HR teams significant time.
Audit Readiness: Built-in reporting tools support businesses in generating statutory compliance reports that are ready for inspection.
Employee Transparency: Employees are enabled to access digital payslips and tax details, building trust and reducing problems.
Risk Mitigation: Automated compliance updates lower the risk of legal actions and financial losses due to non-compliance.

Choosing the correct Payroll Software

Businesses must choose the software accurately, as not all payroll software offers equal features. Below are the points that businesses should consider:

Regular statutory updates
Support for Indian labour laws and tax regimes
Easy integration with accounting and HR systems
Secure data handling and backups
Scalability for growing teams

Gen Payroll by SAG Infotech is made to manage the Indian payroll and labour law compliance. It comprises features for ESI, PF, TDS, leave and attendance, bonus calculation, and direct form generation for government portals, which makes it a comprehensive tool for businesses.

Closure: Labour law compliance protects the rights of employees, avoids penalties, and develops a trustworthy organisational culture. The investment of businesses in intelligent payroll systems is effectively set for staying compliant, avoiding risks, and streamlining operations in this rising legal framework. A payroll is now a requirement for modern businesses that require compliance, accuracy, and efficiency in their HR and payroll processes.