Filing of returns monthly & yearly

Financial compliance is an important aspect of running a business, and one important component is the timely filing of returns. This includes informing the appropriate authorities about financial activities, income, expenses, and tax obligations. Filing monthly and yearly returns ensures transparency, accurate reporting, and compliance with legal requirements. 

Individuals and businesses in India are required to file returns on a monthly and yearly basis, depending on their income and other criteria. 

1) Monthly Returns: Individuals and entities who fall under the purview of the Goods and Services Tax (GST) are required to file monthly returns. This applies to businesses registered under GST, including regular taxpayers, composition scheme taxpayers, and those engaged in specific activities such as e-commerce operators.

2) Yearly Returns: Every individual, including salaried individuals and self-employed professionals, is required to file a yearly return, known as the Income Tax Return (ITR), if their income exceeds the basic exemption limit specified by the Income Tax Act. Businesses and entities such as companies, partnership firms, and LLPs are also obligated to file annual returns, including their income and financial details.

The Importance of Filing Tax Returns

Filing returns is a legal requirement that assists businesses in meeting their financial obligations and maintaining transparency. It ensures that companies report their financial transactions, income, expenses, and tax liabilities accurately. Filing returns also enables tax authorities to assess and verify a company’s financial health while also ensuring compliance with tax regulations.

Benefits of Monthly Return Filing:

  1. a) Timely Tax Assessment: Filing monthly returns enables tax authorities to assess tax liabilities promptly. This facilitates accurate tax calculations, reduces the risk of errors or discrepancies, and helps businesses avoid penalties associated with delayed or incorrect reporting.
  2. b) Improved Cash Flow Management: By filing returns monthly, businesses can estimate and manage their tax obligations more effectively. It allows for better cash flow management throughout the year, preventing unexpected tax burdens and facilitating more accurate financial planning.
  3. c) Enhanced Compliance and Transparency: Monthly return filing demonstrates a commitment to compliance and transparency. It establishes trust with tax authorities, showcases responsible financial practices, and minimizes the likelihood of audits or scrutiny.

Process of Filing Monthly Returns:

  1. a) Maintain Accurate Records: Businesses should maintain comprehensive and up-to-date financial records, including income, expenses, deductions, and relevant supporting documents.
  2. b) Calculate Monthly Tax Liabilities: Based on financial records, businesses calculate their monthly tax liabilities in accordance with applicable tax laws, rates, and regulations.
  3. c) Prepare Monthly Returns: Using the prescribed forms or electronic filing systems provided by the tax authorities, businesses prepare and submit their monthly returns, ensuring accurate financial information and tax calculations.
  4. d) Timely Submission: Monthly returns must be submitted within the specified due dates to comply with regulations and avoid penalties or interest charges for late filing.

Under the Goods and Services Tax (GST) regime in India, the deadlines for filing monthly returns vary based on the type of return. The main monthly return is GSTR-3B, which summarizes the tax liability for a particular month. The due date for filing GSTR-3B is typically the 20th of the following month. For example, the return for the month of July must be filed by August 20th. However, certain states or categories of taxpayers may have different due dates. It’s important to refer to the official GST portal or notifications issued by the GST authorities to determine the specific due dates.

Benefits of Yearly Return Filing

  1. a) Comprehensive Financial Overview: Filing yearly returns allows businesses to review their financial activities for the entire fiscal year. It provides a comprehensive overview of income, expenses, profits, losses, and financial trends.
  2. b) Claiming Deductions and Credits: Yearly return filing enables businesses to claim eligible deductions, credits, and incentives provided under tax laws. This helps reduce overall tax liabilities and optimize tax planning strategies.
  3. c) Statutory Compliance: Filing yearly returns ensures compliance with annual reporting requirements mandated by tax authorities. It helps businesses fulfill their legal obligations, maintain good standing, and avoid penalties or legal consequences.

Process of Filing Yearly Returns:

  1. a) Gather Financial Information: Businesses gather all relevant financial information, including income statements, balance sheets, profit and loss statements, and supporting documents such as receipts and invoices.
  2. b) Prepare Tax Returns: Using the appropriate tax return forms or electronic filing systems, businesses complete and file their annual tax returns. This involves providing detailed financial information, calculations, and any necessary supporting documentation.
  3. c) Review and Verify: Businesses carefully review their tax returns to ensure accuracy, completeness, and compliance with tax regulations. It is essential to double-check calculations, deductions, and any other relevant information before submission.
  4. d) Submit by Deadline: Yearly returns must be filed within the specified due date, typically after the end of the fiscal year. Timely submission ensures compliance and avoids penalties for late filing.

The deadline for filing the annual return, known as the Income Tax Return (ITR), for individuals and entities filing income tax returns in India is generally July 31st of the assessment year. The assessment year is the year that follows the fiscal year in which the return is filed. The ITR for fiscal year 2022-2023 (April 1, 2022 to March 31, 2023), for example, would be due by July 31, 2023. However, the government may extend the deadline in specific cases or for specific taxpayer groups. 

Filing returns on a monthly and yearly basis is an essential aspect of business financial compliance. It ensures accurate reporting, timely tax assessments, improved cash flow management, regulatory compliance, and transparency. Businesses can fulfil their financial responsibilities, maintain good standing with tax authorities, and avoid penalties or legal consequences by following the step-by-step process of maintaining accurate records, calculating tax liabilities, and submitting returns within specified deadlines. Regular and accurate return filing contributes to responsible financial management, fosters trust with authorities, and lays the groundwork for long-term business success.

G Akshay Associates