Income Tax: Registrations & Compliance by Company and LLP

Income tax is a direct tax collected by the Central Government and is levied on all income other than agricultural income on a person liable to pay such tax. Company / LLP is a separate person different from its owners and income of business is taxed at the hand of the Company / LLP.

A. Income Tax Registrations

1. Permanent Account Number (PAN)

Permanent Account Number (PAN) issued by the Income Tax Department to a tax payer. All the Companies are required to obtain PAN for Income Tax references. PAN is required as reference in many other instances as well.

2. Tax Deduction and Collection Account Number (TAN)

Certain category of payments requires Tax Deduction at Source (TDS) and the tax so deducted must be remitted to the Government of India. To enable TDS remittance, TAN is required. This can be obtained after approval and issue of PAN.

B. Income Tax Compliance

1. Tax Deduction / Collection at Source (TDS/TCS) and filing of Returns

A Company / LLP while making specific payments has to deduct tax at source. TDS is applicable to payments such as Salary, Interest, Dividend, Rent, Fee for professional and technical services, Commission and brokerage etc. The collection tax will be made at the source where income arises or accrues.

The Incomes Tax Act mandates the payer to deduct specific percentage from the payment and pay the balance to recipient. The payer has to file quarterly returns to Income tax department with details of payee, date of deduction and date of remittance to department etc. The due dates for filing TDS returns are as follows:f

After payment of TDS to the Government, the Company / LLP has to issue TDS Certificates periodically to the person from whom the amount is deducted. Delay in filing the returns and issue of TDS Certificates attracts penalty.

2. Advance Tax Payments

Income Tax laws mandate payment of Income Tax in Advance in case of assesses total tax liability for a financial year exceeds Rs.10000 or more after deducting the tax deducted at source from the gross tax payable on the current income. Schedule of Advance Tax Payment for Companies are as follows:

If the advance tax payment is not made in time, interest will be applicable for the delay in payment.

3. Filing of Income Tax Returns

As per Income Tax Act, company or LLP has to close its financial year as on 31st March every year and has to file the returns with Income Tax Department. In case of Company / LLP whose annual turnover is more than Rs.100 Lakhs, the accounts have to be audited as required under Income Tax Act as well. A company / LLP have to file its Income tax Returns on or before the due dates as follows:

4. Dividend Distribution Tax (DDT).

A company can distribute profit to shareholders as dividend after paying dividend distribution tax (DDT). The dividend, if distribute after payment of DDT will not be taxed again at the hands of shareholders.