CA Umesh Sharma
Arjuna (Fictional Character): Krishna, Today is “Ananat chaturdashi”. Devotees will end this joyful Ganesh festival by dissolving Idol of Ganesh in water (i.e, Visarjan). This Festival was celebrated everywhere with enlivenment more particularly in Maharashtra State. Today, Ganesha will say good bye to us after the Ten days of worship. It means people should dissolve bad habits and inculcate the knowledge and Homage. In the same manner please explain, which things should Taxpayer dissolve and live happily in the next year.
Krishna (Fictional Character): Arjuna, Ganesha is the Lord of wisdom. He provides intellect to all. Humans should preserve what they have gained in these 10 days, otherwise they will forget the good learning’s after the Visarjan. Taxpayers should also comply with the tax laws and inculcate good practices and refrain from the malpractices. If the taxpayer adopts good practices then he will be happy in next financial year. This means taxpayer should always make Tax planning intellectually. Otherwise planning for less tax liability in one year will create additional burden for next year.
Arjuna: Krishna, Which are the things that Taxpayer should avoid or dissolve (i.e, Visarjan),?
Krishna: Arjuna, as September month is going on, taxpayers are busy in preparing Income tax Return, Tax Audit, Company Audit, etc. for the F.Y 2013-14. Taxpayer should consider the following things and avoid mistakes which affect the financial position of subsequent years and save themselves from becoming victim of the complicated law:
1. Every year many devotees worship Lord Ganesha for 10 days and thereafter forget for the whole year. Same thing happens with many taxpayers who only talk about compliance of law at the time of audit and fail to implement afterwards. Instead of doing this, they should update the accounts on day to day basis. Most of the businessmen make mistake and delay in preparing balance sheet due to carelessness and negligence. Because of that the businessman, record keeper, Accountant and the Auditor face many problems. Therefore, wise and discreet taxpayer should preplan for 31st march and should prepare the projected and comparative Balance sheet and Profit and loss Account which will be beneficial. It will also help in taking correct financial decisions. Mistakes made in previous year in accounts should be avoided in the next year. I.e, one should dissolve mistake in same year, should not carry on it.
2. Stock Valuation: Taxpayer should make correct stock valuation and disclose in the books of accounts. If stock valuation is modified to increase or decrease the profit, it will affect subsequent years also. I.e, tax payer should dissolve attitude of manipulation in stock valuations it also effects banks cash credit margins.
3. Depreciation: Businessman should apply the applicable rate of depreciation for the respective business assets because if mistake is made in one year, it shall have effect in the subsequent years.
4. Reconciliation of the Cash and Bank balances, Receivables, Payables etc. is important otherwise wrong balances will be carried forward to next year. Should account credit or debit notes in the correct year, should not carry on it in next year or wise mis match issues may arise with parties. To dissolve mismatch will be headache for taxpayer and also in VAT laws setoff issues may arise.
5. Income and expenditure incurred during the year should be shown in the same year and claim the deduction otherwise it cannot be claimed in next year. Dissolve revenue recognition issues in time and issues of exempt income and expenditure otherwise section 14A of Income Tax may spoil the game.
6. Taxpayer should pay the taxes and file the return on time. Under Income tax Act,u/s 43B if the taxpayer pays various taxes on time or before due date of filing of Income tax return, then only deduction can be claimed. E.g If Sales tax is payable on 31st march then the payment for the same should be made before due date of filing of Income tax return i.e. 30th September in of tax audit cases. Dissolve issues of disallowance of statutory dues by paying it in time.
7. If the Taxpayer has incurred losses then Income tax return for that year should be filed on time otherwise setoff of losses cannot be claimed in next year. I.e, non-filing of loss returns in time may dissolve losses in the same year itself.
8. Hence there are various provisions of Income Tax, Sales Tax, Excise, Service Tax, PF, Company law etc, which should be followed by the Taxpayer. Further dissolve issues in other taxes, as same are to be reported in tax audit report this time.
Arjuna: As per Income Tax Act, for how many years taxpayer can dissolve books of accounts?
Krishna: Under Income Tax taxpayer should preserve the Books of Accounts, documents of expenditure, etc. for six years and under MVAT Act for eight years.
Arjuna: Krishna, Today the slogan of “Ganpati Bappa Morya, agle baras tu zalidi Aa” ( i.e. Dear Lord, please come soon next year ) is proclaimed in everywhere. Accordingly which provisions in Tax Laws should the taxpayers expect from him, to come soon in next year?
Krishna: Arjuna, good coincidence. Ganesha is worshipped everywhere with joy for ten days but Ganesha should be prayed whole year, as it leads to worship of Knowledge. Taxpayer should constantly gain and update his knowledge. Let’s expect following changes may come in next financial year 1) Income Tax Act 1961 should be replaced with the Direct Tax Code and taxpayer should be released from the burden of tax compliance to large extend. 2) VAT, Service Tax, Excise, etc indirect tax should be substituted with Goods and Service Tax, so that taxpayer is not required to follow various tax laws. 3) Government may make amend complicated provisions of New Companies Act e.g. loans and deposits, etc. 4) It is expected that provisions of retrospective taxation will reduce. So that taxpayer will say joyously say; GANPATI BAPPA, TAKE AWAY OLD COMPLICATED LAWS AND COME WITH NEW SIMPLE LAWS NEXT YEAR…….!!!