Understanding Input Tax Credit (ITC) Under GST Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts July 14, 2025 GST Introduction Section 2(63) of the Central Goods and Services Tax Act, 2017, defines Input Tax Credit (ITC) as the “credit of input tax.” As a cornerstone of India’s GST framework, ITC empowers enterprises to deduct taxes remitted on acquisitions (inputs) from their output tax obligations. This crediting system guarantees taxation solely on the value addition at each phase of the supply network. By doing so, it eliminates the cascading effect of taxes and promotes better tax compliance across the system. However, recent amendments have introduced new conditions and restrictions that businesses need to be aware of to maximize their ITC claims. What is Input Tax Credit (ITC)? Input Tax Credit received on Procurement of Goods and Availment of services help the Registered business to offset their Tax Labilities on the supply of Good and Services. The key principle is that tax paid on inputs should be deductible from the tax collected on sales, thus lowering the overall tax liability. Eligibility Conditions for ITC In order to avail Input Tax Credit (ITC), a taxpayer needs to fulfill the following prerequisites: The individual or entity should be duly registered under the GST regime. The acquired goods or services must be intended for business-related activities. The supplier must have furnished the invoice details in their GSTR-1 return, and the same must be visible in the recipient’s GSTR-2B. The corresponding tax amount should have been remitted to the government by the supplier. The claimant must hold a valid tax invoice or debit note. Documents & Forms Required to Claim ITC A GST-registered taxpayer needs the subsequent records to utilize ITC: A Sales Documents like tax invoice or debit note issued by a GST-registered Suppliers. Bill of Entry (for imports) Documents (Tax Invoice) issued by Input Service Distributor (ISD) Supplier’s Documents like tax invoice required for reverse charge transactions. Payment records as a proof to supplier within 180 days Filing of GSTR-3B & GSTR-2B reconciliation Cases Where ITC Cannot Be Claimed A GST- registered Taxpayer or Assesses is not eligible to avail Input Tax Credit under the following Scenarios: ❌ Goods/services used for personal purposes. ❌ Non-business-related expenses. ❌ Motor vehicles (except for transport, training, or business resale). ❌ Expenses related to food and drinks, outdoor catering services, or club membership fees (unless they form part of a taxable outward supply) are not eligible for ITC. ❌ ITC is generally disallowed for works contract services, with an exception when these services are employed for further supplying taxable works contracts. ❌ ITC on composition scheme taxpayers. ❌ Input Tax Credit cannot be claimed on goods that are lost, pilfered, damaged, or disposed of as obsolete or written off. Input Tax Credit Set-Off Rules Order of GST Liability Settlement via ITC. The sequence for utilizing GST ITC to offset tax dues is as follows: IGST ITC → First applied against IGST liability, then against CGST & SGST in any ratio or proportion. CGST Input Tax Credit → Can be utilized first to offset CGST liability, and any remaining balance can be applied against IGST, but not SGST. SGST ITC → Can be used against SGST, then IGST (not CGST). Input Tax Credit cannot be applied towards the payment of interest, penalties, or late fee charges. Latest Amendments in ITC Rules The government has initiated several revisions to the GST’s ITC regulations to bolster clarity and adherence. Some of the key changes are: 1. Restriction on ITC Availment (Rule 36(4)) Previously, taxpayers could avail ITC based on provisional credit even if the supplier had not uploaded invoices. However, as per recent amendments, ITC can now be claimed only when the details are available in GSTR-2B. This amendments ensures that input tax credit is only availed against tax actually paid by the supplier. 2. Input Tax Credit Reversal for Non-Payment to Suppliers of goods or services (Rule 37) If the recipient or Receiver of Goods or services does not settle the payment to the supplier of goods or services within stipulated times of 180 days from the date of the invoice, the Input Tax Credit availed must be reversed. However, if the payment for the goods or services made later, ITC can be reclaimed by the Recipient or Receiver. 3. Input Tax Credit Related on Corporate Social Responsibility (CSR) Activities A recent ruling clarifies that ITC on expenses incurred for CSR activities is not eligible under GST. This means businesses cannot claim credit for tax paid on goods or services used for mandatory CSR compliance. 4. ITC Restrictions for Defaulting Suppliers If a supplier fails to remit the tax, their customers will not be eligible to claim Input Tax Credit on those invoices. This amendment reinforces the need for businesses to deal with compliant vendors and verify their GST filings regularly. 5. Reversal of Input Tax Credit on Exempt and Non-Business Transactions If goods or services are used partly for exempt supplies or non-business purposes, in that case ITC availed earlier needs to be proportionately reversed as per Rule 42 and Rule 43 of the CGST Rules. Impact of These Amendments Improved Compliance: Businesses must verify that suppliers submit their GST returns promptly and settle the required taxes to prevent losing out on ITC. Stricter ITC Claims: The dependency on GSTR-2B for claiming ITC mandates real-time reconciliation of purchase invoices. Increased Working Capital Requirements: ITC reversal due to supplier default or delayed payments affects cash flow. Best Practices for Businesses To navigate these amendments, businesses should: Regularly reconcile purchase invoices with GSTR-2B. Guarantee prompt payments to vendors to prevent the clawback of ITC. Maintain proper records and documents like tax invoices and GST returns. Verify supplier’s compliance with GST law and regulations before transactions. Conclusion Understanding and complying with the latest ITC rules is essential for businesses to optimize tax benefits… Continue reading Understanding Input Tax Credit (ITC) Under GST
Author: Manthan Experts
Understanding Payroll Deductions: What Employers and Employees Need to Know
Understanding Payroll Deductions: What Employers and Employees Need to Know Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts July 14, 2025 Other What is Payroll? Payroll is the system employers use to compensate their employees for their services.It includes calculating wages, withholding taxes, and distributing paychecks or direct deposits. Payroll is not just about salary payments—it also involves tracking work hours, managing deductions, and ensuring compliance with tax laws and labor regulations. Key Components of Payroll Employee Compensation – This includes wages, salaries, bonuses, and commissions. Deductions & Withholdings – Taxes, benefits, retirement contributions, and other deductions. Payroll Taxes – Employers must withhold and pay taxes such as Social Security, Medicare, and unemployment taxes. Payroll Compliance – Ensuring that all payroll-related regulations and laws are followed to avoid penalties. Payroll Processing – This involves using payroll software or a payroll provider to automate salary calculations, tax withholdings, and payments. Payroll deductions are an essential part of an employee’s paycheck. They help cover taxes, benefits, and other mandatory contributions. Understanding these deductions is crucial for both employers and employees to ensure compliance and proper financial planning. What Are Payroll Deductions? Payroll deductions are the amounts subtracted from an employee’s gross earnings to cover taxes, benefits, and other obligations. These deductions reduce the employee’s take-home pay and are either mandatory (required by law) or voluntary (chosen by the employee). Types of Payroll Deductions Payroll deductions fall into two main categories: 1. Mandatory Payroll Deductions These are legally required deductions that employers must withhold from an employee’s paycheck, including: Income Tax Withholding – Federal, state, and local income taxes. Social Security and Medicare (FICA Taxes) – Contributions to government programs for retirement and healthcare. State and Local Taxes – Some states require additional deductions for unemployment insurance or disability programs. Wage Garnishments – Court-ordered deductions for child support, student loans, or debt repayment. 2. Voluntary Payroll Deductions These deductions are optional and based on the employee’s preferences, including: Health Insurance Contributions – Amounts deducted for medical, dental, and vision coverage. Retirement Plan Contributions – Contributions to a 401(k), pension, or other retirement accounts. Life and Disability Insurance – Optional insurance coverage offered by the employer. Union Dues – Payments for employees who are part of a labor union. Mandatory Payroll Deductions Mandatory payroll deductions are amounts that employers are legally required to withhold from an employee’s wages. These deductions ensure compliance with federal, state, and local tax laws, as well as court orders for specific obligations. Employers must calculate and remit these deductions to the appropriate authorities on behalf of their employees. 1. Income Tax Withholding Income tax is deducted from an employee’s paycheck and paid to the government. The amount withheld depends on various factors, including salary, tax brackets, and exemptions claimed by the employee. In the U.S., employees fill out Form W-4 to determine their withholding preferences. Federal Income Tax – Required by the IRS and based on the employee’s income and W-4 selections. State Income Tax – Not all states impose income tax, but those that do require additional deductions. Local Income Tax – Some cities and counties also impose local income taxes. 2. Social Security and Medicare Taxes (FICA Taxes) Under the Federal Insurance Contributions Act (FICA), both employees and employers are required to make contributions toward Social Security and Medicare. These programs provide financial assistance to retirees, disabled individuals, and low-income citizens. Social Security Tax – 6.2% of an employee’s wages (up to an annual wage cap), matched by the employer. Medicare Tax – 1.45% of wages, also matched by the employer. Additional Medicare Tax – Employees earning above a certain threshold ($200,000 for single filers) pay an extra 0.9%, though employers do not match this portion. 3. State and Local Payroll Taxes Some states and municipalities impose additional payroll taxes, including: State Unemployment Insurance (SUI) – Employers primarily pay this, but some states require small contributions from employees. State Disability Insurance (SDI) – Required in some states (e.g., California, New Jersey) to fund disability benefits for workers. 4. Wage Garnishments and Court-Ordered Deductions If an employee has outstanding debts or legal obligations, employers may be required to withhold a portion of their wages and send them to the appropriate recipient. Examples include: Child Support Payments – Enforced by the government to ensure financial support for dependents. Alimony (Spousal Support) – Court-ordered payments to an ex-spouse. Debt Garnishments – If an employee has unpaid loans, taxes, or credit card debt, a court may require wage garnishment. Employer Responsibilities for Mandatory Deductions Employers must: ✅ Correctly calculate deductions based on employee earnings and tax laws. ✅ Remit deducted amounts to the correct government agencies on time. ✅ Provide employees with clear pay stubs outlining deductions. ✅ Keep accurate payroll records for audits and compliance checks Voluntary Payroll Deductions Voluntary payroll deductions are amounts that employees choose to have deducted from their paychecks for personal benefits. Unlike mandatory deductions, these are optional and typically provide employees with financial security, insurance coverage, or retirement savings. Employees must authorize these deductions in writing before employers can withhold them from their wages. Types of Voluntary Payroll Deductions 1. Health and Insurance Benefits Many employers offer group health benefits that employees can opt into, often at a lower cost than individual plans. These deductions may include: Health Insurance Premiums – Contributions for medical, dental, and vision insurance coverage. Life Insurance Premiums – Payments for employer-sponsored life insurance plans. Disability Insurance – Short-term or long-term disability coverage to provide income protection in case of illness or injury. Health Savings Account (HSA) Contributions – Employees can contribute pre-tax dollars to an HSA for medical expenses, provided they have a high-deductible health plan. Flexible Spending Account (FSA) Contributions – Allows employees to set aside pre-tax income for medical expenses and dependent care. 2. Retirement Plan Contributions Employees can choose to contribute to employer-sponsored retirement savings plans to build financial security for the future. These deductions typically come with tax advantages. 401(k) or 403(b) Plans –… Continue reading Understanding Payroll Deductions: What Employers and Employees Need to Know
What Are GST Returns? Types of GST Return Forms, Filing Dates
What Are GST Returns? Types of GST Return Forms, Filing Dates Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts July 14, 2025 GST Introduction GST Returns are forms that businesses registered under the Goods and Services Tax (GST) system must file periodically to report their sales, purchases, output GST, input tax credit (ITC), and other tax-related information. These data helps the governments to track and manage the collection of taxes also the shows the Contributions in the GDP the Country as well as state. A comprehensive summary of the different GST return formats, their required submission timeframes, and the corresponding compliance duties for businesses. Types of GST Returns Within India’s Goods and Services Tax (GST) framework, enrolled firms and taxpayers must submit various categories of GST filings depending on their business type, turnover, and registration type. Below are mentions the types of return which required to be submit or file by the registered persons. GSTR-1 – Details of Outward Supplies Who Files: Registered taxable supplier Filing Interval: Monthly submissions required (with quarterly filing options available for taxpayers who qualify under the Quarterly Return Monthly Payment scheme). Purpose: To declare specifics of all external provisions (sales) of merchandise and services. Encompasses information such as individual sales invoices, debit memos, and credit memos. Scheduled Dates: Deadline for Monthly Submitters: The eleventh day of the subsequent month. For those submitting under the Quarterly Return Monthly Payment system: Due by the 13th of the month following the quarter’s conclusion. GSTR-2A – Auto-Generated Purchase Return Who Files: No manual filing required (auto-generated) Frequency: Monthly Purpose: This is a view-only record displaying particulars of incoming acquisitions (purchases) automatically populated from the vendor’s GSTR-1. Used for input tax credit (ITC) reconciliation. GSTR-2B – Static ITC Statement Who Files: No manual filing required (auto-generated) Periodicity: Monthly (Accessible from the fourteenth of each month). Purpose: Provides a consolidated view of eligible and ineligible Input Tax Credit (ITC). Helps businesses claim ITC accurately. GSTR-3B – A consolidated return summarizing external and internal provisions. Who Files: Registered taxpayer Frequency: Required on a monthly basis (with quarterly options available for businesses registered under the QRMP program). Purpose: An overview of sales, purchase tax credit claimed, and the tax liability. Payment of tax liability. Due Dates: For Monthly Filers: 20th of the Subsequent or Next Month. For QRMPS Filers: 22 or 24 of the Subsequent or Next Month of Quarter End. GSTR-4 – Tax return submission required for businesses operating within the Composition Scheme framework. Who Must File: Taxpayers enrolled in the Composition Scheme. Frequency: Annually Purpose: An overview detailing aggregate business revenue and composition scheme tax liability. Limited reporting requirements compared to regular taxpayers. Due Date: April 30th of the subsequent fiscal year. GSTR-5 – Submitted by Non – Residents. Who Files: Non-resident taxpayers Frequency: Monthly Purpose: Reports sales and purchases made in India by non-resident taxpayers. Payment of tax liability. Due Date: 20th of the following month GSTR-5A – Return for OIDAR Services Who Files: Online Information and Database Access or Retrieval (OIDAR) service providers outside India who provide services in india. Frequency: Monthly Purpose: Particulars of services rendered to unregistered individuals within India. Payment of tax liability. Due Date: 20th of the following month GSTR-6 – Filing for Purchase Tax Credit Distribution Units (ISD). Who Files: Input Service Distributors Frequency: Monthly Purpose: Allocation of purchase tax credit (ITC) across operational units. Reports details of ITC received and distributed to their associates Due Date: 13th of the following month GSTR-7 – Return for TDS Deductors Who Files: Tax Deductors (like government departments) Frequency: Monthly Purpose: Reports details of Tax Deducted at Source (TDS) under GST. TDS certificate is auto-generated after filing. Due Date: 10th of the following month GSTR-8 – Return for E-Commerce Operators Who Files: E-Commerce Operators Frequency: Monthly Purpose: Reports details of supplies made through the E – Commerce platform. Tax collected at source (TCS) under GST on monthly basis. Due Date: 10th of the following month GSTR-9 – Annual Return Who Files: Regular taxpayers Frequency: Annually Purpose: A holistic summary of all GST filings submitted during the fiscal year. Includes data on sales, acquisitions, purchase tax credit (ITC), and tax liabilities. Due Date: 31st December of the subsequent or Next financial year. GSTR-9A – Yearly return for taxpayers under the Composition Scheme. Who Files: Composition Scheme taxpayers (Optional) Frequency: Annually Purpose: Overview of all returns submitted under the Composition Scheme throughout the financial year. Due Date: 31st December of the subsequent financial year. GSTR-9C – Reconciliation Statement Who Files: Taxpayers whose total turnover exceeds ₹5 crore. Frequency: Annually Purpose: Reconciliation of GSTR-9 with audited financial statements of relevant financial year. Certification by a Chartered Accountant (CA) is required. Due Date: 31st December of the subsequent financial year. GSTR-10 – Annual Return Who Must File: Entities whose GST registration status has been terminated or voluntarily relinquished. Frequency: Once Purpose: Reports details of closing stock and final tax liability. Due Date: Must be completed within a three-month timeframe following the cancellation notification or official order. GSTR-11 – Return for UIN Holders Who Must File: Individuals or entities holding a Unique Identification Number (UIN). Frequency: Monthly Purpose: Requests a refund for taxes paid on incoming supplies. Due Date: 28th of the following month Common GST Filing Timelines Overview Key Notes: ✅ ₹50 per day penalty is levied for late filing (₹20 for NIL returns). ✅ Delayed tax payments incur an interest charge of 18% per annum. ✅ Taxpayers enrolled in the Quarterly Return Monthly Payment (QRMP) plan are required to submit GSTR-1 and GSTR-3B on a quarterly basis yet remit taxes every month. Conclusion: Submitting GST returns correctly and promptly is essential to ensure compliance and prevent penalties. Businesses must stay on top of return filing deadlines and ensure all details are correctly reported to prevent tax issues. If you require assistance on filing any specific GST return, Manthan Experts can be your trusted advisor. Contact them at info@manthanexperts.com.to discuss your specific needs and explore how their expertise can benefit your business. Table of Contents Introduction Types of GST Returns GSTR-1 – Details of Outward Supplies GSTR-2A –… Continue reading What Are GST Returns? Types of GST Return Forms, Filing Dates
Who is Required to File Income Tax Returns (ITR) in India?
Who is Required to File Income Tax Returns (ITR) in India? Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: Manthan Experts August 21, 2025 Blog, Income Tax Consultancy, ITR e-Filing Who is Required to File Income Tax Returns (ITR) in India? Filing an Income Tax Return (ITR) is mandatory for various individuals and entities in India, even if they don’t owe any tax. Here’s a summary of who needs to file: 1. Companies: All companies must file ITR regardless of their profit or loss. 2. Partnership Firms: All partnership firms must file ITR regardless of their profit or loss. 3. Individuals (Resident of India): Individuals exceeding the basic exemption limit: Old Tax Regime: New Tax Regime: ₹3 Lakhs for all individuals. 4. Individuals claiming a tax refund: If TDS deductions exceed assessee’s tax liability, assessee must file ITR to claim a refund. 5. Individuals carrying forward losses: To carry forward losses incurred in a particular year, assessee must file ITR. 6. Individuals with foreign assets: Residents of India with assets or financial interests in foreign entities are required to file ITR. 7. Individuals with foreign accounts: Residents of India who are signing authorities in foreign accounts must file ITR. 8. Individuals receiving income from certain trusts/institutions: Individuals receiving income from trusts, religious institutions, educational institutions, etc., must file ITR. 9. Foreign companies seeking treaty benefits: Foreign companies seeking tax treaty benefits on transactions in India must file ITR. 10. Individuals exceeding certain financial thresholds: Individuals who have deposited more than ₹1 Crore in current accounts, ₹50 Lakhs in savings accounts, spent more than ₹2 Lakhs on foreign travel, paid electricity bills exceeding ₹1 Lakh, or had TDS/TCS exceeding ₹25,000 in the previous year. 11. Individuals engaged in business or profession exceeding certain thresholds: Individuals engaged in business with a turnover exceeding ₹60 Lakhs or in a profession with gross receipts exceeding ₹10 Lakhs. 12. Individuals with Capital Gains: If assessee have earned capital gains through the sale of assets like property, shares, etc., then assessee must file his/her returns to report these gains. 13. Taxpayers with Deductions Under Section 80: If assessee have claimed deductions for investments or expenses under sections like 80C (PPF, NSC, life insurance), 80D (health insurance), etc., then assessee must file ITR. 14. HUF (Hindu Undivided Family): A Hindu Undivided Family needs to file ITR if their total income exceeds the exemption limit. 15. Non-Resident Indians (NRIs): If assessee are an NRI and have income in India, assessee must file ITR to comply with Indian tax laws. Consequences of Not Filing ITR Penalties: Failure to file ITR within the prescribed deadline can result in penalties. Non-Tax Audit Cases: Under Section 234F, if assessee fail to file his/her ITR within the due date, a late fee of Rs 5,000 will be applicable. So, In context of the above if the annual income of assesse is below Rs. 5,00,000 then the Late Fee would be Rs. 1,000. Tax Audit Cases: ₹1,50,000 or 0.5% of Total sales, whichever is lower. If assessee missed the due date or even not filed Income Tax return upto 31 December u/s 139(4), then there is No chance of filing the Tax Return. In case assessee miss the deadline prescribed u/s 139(4), then they may file return u/s 139(8A) i.e. ITR U(Updated return) in certain specified cases. Now Let us Discuss ITR-U (Updated Return) ITR-U is a mechanism introduced under Section 139(8A) of the Income Tax Act, 1961, that allows taxpayers to update their previously filed Income Tax Returns (ITR). This is crucial because it provides an opportunity to correct errors, omissions, or discrepancies in the original return. Eligibility for Filing ITR-U Within Two Years: ITR-U can be filed within two years from the end of the relevant assessment year. For example, for the Assessment Year 2024-25 (relating to the financial year 2023-24), the deadline for filing ITR-U would be March 31, 2026. NOTE:- In the Union Budget 2025-26, Finance Minister Nirmala Sitharaman introduced key amendments to the Updated Income Tax Return (ITR-U) provisions to enhance voluntary compliance. The deadline for filing an updated return has been extended from 24 months to 48 months from the end of the relevant assessment year, allowing taxpayers more time to rectify errors, disclose unreported income, and comply with tax regulations. This revision aims to improve transparency and reduce litigation by providing a structured mechanism for correcting past tax filings while ensuring timely tax payments. Reasons for Filing ITR-U Correcting Errors: Incorrectly declared income Wrong selection of income heads Errors in tax calculations Omitted deductions or exemptions Reporting Missed Income: Including income that was not reported in the original return. Adjusting Tax Credits: Correcting errors in the calculation of tax credits. Search Table of Contents Who is Required to File Income Tax Returns (ITR) in India? Consequences of Not Filing ITR Now Let us Discuss ITR-U (Updated Return) Eligibility for Filing ITR-U Reasons for Filing ITR-U Latest Blog and News Audit & Assurance Blog Bookkeeping & Accounting GST Income Tax Consultancy ITR e-Filing Knowledge Update Payroll (PF & ESIC)