Complete Guide to Accounting, Tax Return, and Tax Filing in India

Introduction

Managing finances and fulfilling tax obligations are crucial for individuals, businesses, and NGOs. Proper accounting, tax return preparation, and tax filing help in maintaining financial health and avoiding legal issues.

In this blog, we will cover:
✅ Accounting Basics – Understanding bookkeeping, financial statements, and compliance.
✅ Tax Return – Types of tax returns and their importance.
✅ Tax Filing – Step-by-step process for filing income tax, GST, and TDS returns.

This guide will help you manage your finances efficiently and stay compliant with Indian tax laws.

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1. Accounting: The Foundation of Financial Management

What is Accounting?

Accounting is the process of recording, classifying, summarizing, and analyzing financial transactions to ensure transparency and compliance.

Types of Accounting

✔ Financial Accounting – Prepares financial statements for external stakeholders.
✔ Management Accounting – Helps businesses make strategic decisions.
✔ Tax Accounting – Ensures compliance with tax laws and filings.
✔ Cost Accounting – Analyzes production costs for pricing and efficiency.

Key Accounting Concepts

📌 Double-Entry System – Every transaction has a debit and a credit entry.
📌 Accrual vs. Cash Accounting – Accrual recognizes revenue when earned, while cash accounting recognizes revenue when received.
📌 Accounting Standards (IND-AS & IFRS) – Guidelines for financial reporting.

Basic Accounting Process

1️⃣ Recording Transactions – Using journals and ledgers.
2️⃣ Preparing Financial Statements – Balance sheet, profit & loss account, and cash flow statement.
3️⃣ Tax Compliance – Calculating taxable income and filing tax returns.

📌 Example: A business must record sales, purchases, salaries, and expenses accurately to file correct tax returns.

2. Tax Return: Understanding Different Types

What is a Tax Return?

A tax return is a document filed with the government that reports income, expenses, deductions, and tax liabilities.

Types of Tax Returns in India

(A) Income Tax Return (ITR)

Individuals and businesses must file Income Tax Returns (ITR) annually with the Income Tax Department.

Types of ITR Forms

✔ ITR-1 (Sahaj) – For salaried individuals with income up to ₹50 lakh.
✔ ITR-2 – For individuals with capital gains or foreign income.
✔ ITR-3 – For professionals and business owners.
✔ ITR-4 (Sugam) – For presumptive taxation under Section 44AD & 44ADA.
✔ ITR-5 – For LLPs, partnership firms, and NGOs.
✔ ITR-6 – For companies (except those claiming tax exemption).
✔ ITR-7 – For trusts and NGOs registered under 80G & 12AB.

📌 Example: A salaried employee with an annual income of ₹10 lakh must file ITR-1 or ITR-2, depending on income sources.

(B) GST Return

Businesses registered under GST (Goods and Services Tax) must file periodic returns.

Common GST Returns

✔ GSTR-1 – Monthly/quarterly return for outward supplies.
✔ GSTR-3B – Monthly summary return for tax payment.
✔ GSTR-4 – Annual return for composition scheme taxpayers.
✔ GSTR-9 – Annual GST return for businesses.

📌 Example: A shopkeeper earning more than ₹40 lakh annually must file GSTR-1 & GSTR-3B regularly.

(C) TDS Return

TDS (Tax Deducted at Source) returns must be filed by businesses that deduct tax while making payments.

✔ Form 24Q – TDS on salaries.
✔ Form 26Q – TDS on non-salary payments.
✔ Form 27Q – TDS on payments to NRIs.
✔ Form 27EQ – TCS (Tax Collected at Source).

📌 Example: A company paying a consultant ₹50,000 must deduct 10% TDS and file a TDS return using Form 26Q.

3. Tax Filing: Step-by-Step Guide

(A) Income Tax Filing Process

1️⃣ Collect Financial Data – Salary slips, bank statements, investment proofs, and business income details.
2️⃣ Choose the Right ITR Form – Select the correct form based on income sources.
3️⃣ Compute Taxable Income – Calculate gross income, deductions (80C, 80D, etc.), and taxable amount.
4️⃣ Pay Advance Tax (If Required) – If total tax liability exceeds ₹10,000, advance tax must be paid.
5️⃣ File ITR Online – Log in to the Income Tax e-Filing portal, fill in details, and submit the return.
6️⃣ Verify ITR (E-Verification) – Verify via Aadhaar OTP, net banking, or by sending a signed ITR-V.
7️⃣ Check ITR Status – Track return processing and refund status online.

📌 Example: A businessman with ₹12 lakh annual income and ₹1.5 lakh investment under Section 80C will pay tax on ₹10.5 lakh after deductions.

(B) GST Filing Process

1️⃣ Maintain Sales & Purchase Records – Keep track of invoices and tax collected.
2️⃣ Upload Invoices on GST Portal – Required for GSTR-1 filing.
3️⃣ Compute Tax Liability – Claim Input Tax Credit (ITC) on purchases.
4️⃣ File GSTR-3B Monthly – Pay GST and file returns before 20th of every month.
5️⃣ Annual Return Filing (GSTR-9) – Submit by 31st December for each financial year.

📌 Example: A trader buying goods for ₹1,00,000 (with 18% GST) and selling them for ₹1,50,000 (with 18% GST) must pay net GST after ITC adjustment.

(C) TDS Filing Process

1️⃣ Deduct TDS Before Payment – Deduct applicable tax before paying salary, rent, or professional fees.
2️⃣ Deposit TDS with Government – Use Challan ITNS-281 before 7th of the next month.
3️⃣ File Quarterly TDS Returns – Submit Form 24Q (salaries) or 26Q (non-salaries) online.
4️⃣ Issue TDS Certificates (Form 16/16A) – Provide tax deduction certificates to employees and vendors.

📌 Example: A company paying ₹5,00,000 annual salary to an employee must deduct TDS based on applicable tax slabs and file Form 24Q quarterly.

Common Mistakes to Avoid in Tax Filing

🚫 Incorrect ITR Form Selection – Always choose the correct form based on income type.
🚫 Not Reporting All Income Sources – Include salary, rent, interest, and freelance income.
🚫 Late Filing of Returns – Filing after the due date leads to penalties under Section 234F.
🚫 Failure to E-Verify ITR – Unverified returns are considered incomplete.
🚫 Ignoring TDS Deductions – Mismatches in Form 26AS can cause refund delays.

Conclusion

Proper accounting, tax return preparation, and tax filing ensure financial stability and legal compliance.

✔ Accounting helps businesses track income, expenses, and profitability.
✔ Filing tax returns is mandatory for individuals, businesses, and NGOs.
✔ Timely tax payments and compliance prevent penalties and legal issues.

At NGO RC Tax Consultancy, we assist in accounting, ITR, GST, and TDS filing. Need expert tax solutions? Contact us today! 🚀