Question 1

Who is required to file an Income Tax Return (ITR) for FY 2025-26 (AY 2026-27)?

Accepted Answer

Filing is mandatory for any individual whose gross total income exceeds the basic exemption limit — ₹2.5 lakh (below 60 years, old regime), ₹3 lakh (senior citizens 60–80 years, old regime), ₹5 lakh (super senior citizens above 80 years, old regime), or ₹4 lakh (new regime, applicable from AY 2026-27 per Budget 2025). Additionally, filing is compulsory regardless of income if you: have deposited more than ₹1 crore in current bank accounts; incurred more than ₹2 lakh on foreign travel; paid electricity bills exceeding ₹1 lakh; have foreign assets or signing authority in a foreign account; wish to claim a TDS refund; want to carry forward capital or business losses; or are a company or firm.

Question 2

What are the income tax slab rates for FY 2025-26 (AY 2026-27)?

Accepted Answer

Under the New Tax Regime (default): income up to ₹4 lakh — Nil; ₹4–8 lakh — 5%; ₹8–12 lakh — 10%; ₹12–16 lakh — 15%; ₹16–20 lakh — 20%; ₹20–24 lakh — 25%; above ₹24 lakh — 30%. Section 87A rebate makes tax Nil for income up to ₹12 lakh (effectively ₹12.75 lakh for salaried individuals after ₹75,000 standard deduction). Under the Old Tax Regime: up to ₹2.5 lakh — Nil; ₹2.5–5 lakh — 5%; ₹5–10 lakh — 20%; above ₹10 lakh — 30% (with 87A rebate making tax Nil up to ₹5 lakh). Health and Education Cess of 4% applies on tax plus surcharge under both regimes.

Question 3

What is the due date for filing Income Tax Returns for AY 2026-27?

Accepted Answer

For individuals, HUFs, and firms not requiring tax audit — 31st July 2026. For businesses and professionals subject to tax audit under Section 44AB — 31st October 2026. For companies — 31st October 2026. For transfer pricing cases (international or specified domestic transactions) — 30th November 2026. Belated or revised returns can be filed up to 31st December 2026. Updated returns (ITR-U) can be filed within 2 years from the end of the assessment year, i.e., up to 31st March 2029.

Question 4

What happens if I miss the ITR filing deadline for AY 2026-27?

Accepted Answer

If you miss the 31st July 2026 due date, you can file a belated return by 31st December 2026. A late filing fee under Section 234F applies — ₹5,000 if total income exceeds ₹5 lakh, or ₹1,000 if total income is ₹5 lakh or below. Interest at 1% per month under Section 234A is charged on any outstanding tax liability. Critically, filing a belated return means you lose the right to carry forward capital losses and business losses (other than house property losses) to future years. The return can still be revised up to 31st December 2026.

Question 5

What is the difference between the New Tax Regime and the Old Tax Regime for FY 2025-26?

Accepted Answer

The New Tax Regime is the default from AY 2024-25 onwards and offers lower slab rates but does not allow most deductions. Key features for AY 2026-27: basic exemption ₹4 lakh, 87A rebate up to ₹12 lakh (zero tax), standard deduction ₹75,000 for salaried/pensioners, and employer NPS deduction under 80CCD(2). The Old Tax Regime has a ₹2.5 lakh exemption and 87A rebate up to ₹5 lakh, but allows deductions like 80C (₹1.5 lakh), 80D (health insurance), HRA, home loan interest under Section 24(b) (₹2 lakh), 80CCD(1B) NPS (₹50,000), and standard deduction of ₹50,000. The old regime is generally beneficial if your total eligible deductions exceed approximately ₹3.75 lakh. Salaried individuals can switch regimes every year; those with business income can switch only once.

Question 6

What is Advance Tax and when is it payable for FY 2025-26?

Accepted Answer

Advance tax is income tax paid in instalments during the financial year when your estimated tax liability exceeds ₹10,000. For FY 2025-26, the schedule is: 15th June 2025 — at least 15% of estimated tax; 15th September 2025 — at least 45% (cumulative); 15th December 2025 — at least 75% (cumulative); 15th March 2026 — 100%. Senior citizens (60 years or above) with no business income are exempt from advance tax. Shortfall in advance tax attracts interest under Section 234B (1% per month on shortfall below 90% of assessed tax) and Section 234C (1% per month on instalment-wise deferment). Timely payment avoids these interest costs.

Question 7

What is a Tax Audit and who needs to get it done for FY 2025-26?

Accepted Answer

A tax audit under Section 44AB is mandatory for: businesses with total turnover or gross receipts exceeding ₹1 crore (this limit is ₹10 crore if aggregate cash receipts and cash payments during the year do not exceed 5% of total receipts and payments respectively); professionals with gross receipts exceeding ₹50 lakh; and persons opting out of the presumptive taxation scheme under Sections 44AD/44ADA if their income is below the presumptive rate. The audit must be conducted by a practising Chartered Accountant, and the audit report (Form 3CA/3CB with Form 3CD) must be filed on the e-filing portal by 31st October 2026.

Question 8

How can I save income tax legally for FY 2025-26?

Accepted Answer

Under the Old Tax Regime, key tax-saving options include: Section 80C — up to ₹1.5 lakh (PPF, ELSS, LIC premium, NSC, home loan principal, tuition fees, 5-year FD); Section 80CCD(1B) — additional NPS contribution up to ₹50,000; Section 80D — health insurance premium up to ₹25,000 (₹50,000 for senior citizens) for self/family, plus ₹25,000–₹50,000 for parents; Section 24(b) — home loan interest up to ₹2 lakh for self-occupied property; HRA exemption for salaried employees paying rent; standard deduction of ₹50,000. Under the New Tax Regime, savings are limited — employer NPS contribution under 80CCD(2) (up to 14% of salary for central govt employees, 10% for others) and standard deduction of ₹75,000 are the primary benefits. The new regime is best for those with income up to ₹12.75 lakh (salaried) or with limited deductions.

Question 9

What should I do if I receive an Income Tax Notice?

Accepted Answer

Do not ignore any income tax notice — non-response can lead to ex-parte assessment and heavy penalties. First, identify the type of notice: Section 143(1) is an intimation (usually minor adjustments); Section 143(2) is a scrutiny notice requiring detailed documentation; Section 148/148A is for reassessment of escaped income; Section 156 is a demand notice for tax payable. Log in to the e-filing portal (incometax.gov.in) to view the notice and respond electronically within the stipulated time. Reconcile the discrepancy with your Form 26AS and AIS before responding. It is strongly advisable to consult a Chartered Accountant — Bhowal Associates specialises in drafting responses, attending hearings, and representing clients before the Income Tax Department.

Question 10

What is a Faceless Assessment and how does it work?

Accepted Answer

Faceless Assessment (under Section 144B) is a system where income tax assessments are conducted entirely electronically — there is no physical interface between the taxpayer and the Assessing Officer. Cases are randomly assigned to assessment units across India, and all notices, submissions, and orders are exchanged through the e-filing portal. The system also includes Faceless Appeals (under Section 250) and Faceless Penalty proceedings. This eliminates geographical bias, reduces corruption, and ensures transparency. Taxpayers must respond to notices through the portal within the specified time, attaching all supporting documents. Professional representation by a CA or tax advocate is permitted and recommended for complex cases.

Question 11

What are the TDS rates applicable for FY 2025-26?

Accepted Answer

Key TDS rates for FY 2025-26: Section 192 (salary) — as per applicable slab rates; Section 194A (interest from banks/post office) — 10% (threshold: ₹40,000 for non-seniors, ₹50,000 for senior citizens); Section 194C (contractor payments) — 1% for individuals/HUFs, 2% for others (threshold: ₹30,000 per payment or ₹1 lakh p.a.); Section 194H (commission/brokerage) — 5% (threshold: ₹15,000); Section 194I (rent on land/building) — 10% (threshold: ₹2.4 lakh p.a.); Section 194J (professional/technical fees) — 10% for professional services, 2% for technical services (threshold: ₹30,000); Section 194Q (purchase of goods) — 0.1% (threshold: ₹50 lakh p.a.); Section 194S (virtual digital assets) — 1% (threshold: ₹10,000 or ₹50,000 for specified persons). TDS must be deposited by the 7th of the following month (30th April for March deductions).

Question 12

Who is required to register under GST?

Accepted Answer

GST registration is mandatory for businesses with aggregate turnover exceeding ₹40 lakh (₹20 lakh for service providers and special category states). Additionally, businesses engaged in inter-state supply, e-commerce operators, casual taxable persons, and those required to pay tax under reverse charge must register regardless of turnover.

Question 13

What are the different types of GST returns and their due dates?

Accepted Answer

Key GST returns include: GSTR-1 (outward supplies) — 11th of next month or quarterly; GSTR-3B (monthly summary) — 20th of next month; GSTR-9 (annual return) — December 31; GSTR-9C (reconciliation statement) — December 31. Composition dealers file GSTR-4 annually by April 30.

Question 14

What is Input Tax Credit (ITC) and how can I claim it?

Accepted Answer

Input Tax Credit (ITC) allows you to reduce the GST paid on purchases from the GST payable on sales. To claim ITC, the supplier must have filed their GSTR-1, the invoice must appear in your GSTR-2B, goods/services must be received, and payment must be made within 180 days. ITC cannot be claimed on personal expenses, motor vehicles (with exceptions), and certain blocked credits under Section 17(5).

Question 15

What is the penalty for late filing of GST returns?

Accepted Answer

Late filing of GSTR-3B attracts a late fee of ₹50 per day (₹25 CGST + ₹25 SGST) for returns with tax liability, and ₹20 per day (₹10 CGST + ₹10 SGST) for nil returns. The maximum late fee is capped at ₹10,000 per return. Interest at 18% per annum is also charged on the outstanding tax amount.

Question 16

What should I do if I receive a GST Show Cause Notice (SCN)?

Accepted Answer

A GST Show Cause Notice must be responded to within the specified time limit, typically 15-30 days. Read the notice carefully to understand the allegation — it could relate to ITC reversal, tax demand, registration cancellation, or penalty. Gather supporting documents, prepare a detailed reply addressing each point, and submit it through the GST portal. Professional assistance from Bhowal Associates is strongly recommended for SCN responses.

Question 17

Can I claim a GST refund and what is the process?

Accepted Answer

GST refunds can be claimed for excess tax paid, exports (zero-rated supplies), inverted duty structure, and excess balance in electronic cash ledger. The refund application is filed in Form RFD-01 on the GST portal. The department must process the refund within 60 days. If not processed, interest at 6% per annum is payable by the department.

Question 18

What is the GST Composition Scheme and who can opt for it?

Accepted Answer

The Composition Scheme is a simplified GST compliance option for small businesses with turnover up to ₹1.5 crore (₹75 lakh for special category states). Composition dealers pay tax at a fixed rate (1% for traders, 5% for restaurants, 6% for service providers) and file quarterly returns. However, they cannot collect GST from customers or claim ITC.

Question 19

What is the difference between a Private Limited Company and an LLP?

Accepted Answer

A Private Limited Company has shareholders and directors, requires a minimum of 2 members, has more compliance requirements, and is suitable for businesses seeking investment or scalability. An LLP (Limited Liability Partnership) has partners, requires minimum 2 partners, has fewer compliance requirements, and is suitable for professional services and small businesses. Both provide limited liability protection.

Question 20

What are the annual compliance requirements for a Private Limited Company?

Accepted Answer

Annual compliances include: filing of Annual Return (MGT-7) within 60 days of AGM, filing of Financial Statements (AOC-4) within 30 days of AGM, holding Annual General Meeting (AGM) within 6 months of financial year end, Director KYC (DIR-3 KYC) by September 30, income tax return filing, and statutory audit. Event-based compliances are additional.

Question 21

What is Director KYC and when must it be filed?

Accepted Answer

Director KYC (Form DIR-3 KYC) is an annual compliance requirement for all directors holding a DIN (Director Identification Number). It must be filed by September 30 each year. Failure to file results in deactivation of the DIN, which prevents the director from signing any company documents until the KYC is filed with a late fee of ₹5,000.

Question 22

What is a Section 8 Company and how is it different from a Trust or Society?

Accepted Answer

A Section 8 Company is a non-profit company registered under the Companies Act, 2013 for charitable, educational, scientific, or social objectives. Unlike a Trust (governed by Trust Act) or Society (governed by Societies Registration Act), a Section 8 Company has a more structured governance framework, is regulated by MCA, and offers greater credibility for funding and donor purposes.

Question 23

What are the penalties for non-compliance with MCA filing requirements?

Accepted Answer

Penalties for MCA non-compliance can be significant. Late filing of annual returns and financial statements attracts additional fees of ₹100 per day per form. Non-filing can lead to company strike-off, director disqualification, and prosecution. Directors of companies that have not filed returns for 3 consecutive years are disqualified from being directors of any company for 5 years.

Question 24

How can a company be closed or struck off?

Accepted Answer

A company can be voluntarily closed through the Fast Track Exit (FTE) scheme by filing Form STK-2 if it has no assets, liabilities, or business activity. The process requires a board resolution, declaration of solvency, and filing with the ROC. The ROC publishes a notice and, if no objections are received, strikes off the company from the register.

Question 25

What is 12A registration and why is it important for NGOs?

Accepted Answer

12A registration (now 12AB under the amended provisions) grants income tax exemption to trusts, societies, and NGOs on their income used for charitable purposes. Without 12A/12AB registration, the organization's income is taxable like any other entity. It is a fundamental registration for any charitable organization to operate tax-efficiently.

Question 26

What is 80G registration and how does it benefit donors?

Accepted Answer

80G registration allows donors to claim a tax deduction of 50% or 100% of the donated amount from their taxable income. This makes your organization more attractive to donors as they receive a tax benefit. For the organization, it increases donor confidence and facilitates fundraising. Both 12A and 80G registrations are now valid for 5 years and must be renewed.

Question 27

What is the difference between a Public Trust and a Private Trust?

Accepted Answer

A Public Charitable Trust is created for the benefit of the general public or a section of the public and is eligible for tax exemptions under 12A/80G. A Private Trust is created for the benefit of specific individuals or families and is not eligible for charitable tax exemptions. Public trusts are regulated by state-specific Public Trust Acts, while private trusts are governed by the Indian Trusts Act, 1882.

Question 28

Does an NGO need to file an Income Tax Return?

Accepted Answer

Yes, all NGOs — whether registered as trusts, societies, or Section 8 companies — must file an Income Tax Return annually, even if their income is exempt under Section 11/12. The ITR must disclose all income, expenditure, and details of charitable activities. Failure to file can result in loss of tax exemption and penalties.

Question 29

What is the audit requirement for trusts and NGOs?

Accepted Answer

Trusts and NGOs with total income exceeding ₹2.5 lakh (before exemption) must get their accounts audited by a Chartered Accountant and file the audit report in Form 10B/10BB along with the ITR. The audit verifies that funds have been utilized for charitable purposes and that the conditions of 12A/80G registration are being met.

Question 30

What happens if an NGO receives a notice from the Income Tax Department?

Accepted Answer

NGOs can receive notices for various reasons — non-filing of ITR, discrepancies in income/expenditure, improper utilization of funds, or queries about 12A/80G compliance. It is important to respond within the stipulated time with proper documentation. Bhowal Associates specializes in handling income tax notices for trusts and NGOs and can provide end-to-end support.

Question 31

What are the different types of business structures available in India?

Accepted Answer

The main business structures are: Sole Proprietorship (simplest, no separate registration), Partnership Firm (2-20 partners), LLP (limited liability, fewer compliances), Private Limited Company (separate legal entity, limited liability, suitable for growth), Public Limited Company (for large businesses seeking public investment), and One Person Company (OPC) for single entrepreneurs.

Question 32

How long does it take to register a Private Limited Company?

Accepted Answer

With all documents in order, a Private Limited Company can typically be incorporated within 7-10 working days. The process involves name reservation, DIN and DSC application, drafting of MOA and AOA, and filing of SPICe+ form with the MCA. Bhowal Associates manages the entire process to ensure smooth and timely incorporation.

Question 33

What documents are required for company registration?

Accepted Answer

For directors/shareholders: PAN card, Aadhaar card, passport-size photograph, address proof (bank statement/utility bill), and identity proof. For registered office: utility bill (not older than 2 months) and NOC from the owner. For foreign nationals: passport and address proof. All documents must be self-attested.

Question 34

Is GST registration mandatory at the time of business registration?

Accepted Answer

GST registration is not automatically required at the time of business registration. It becomes mandatory when your aggregate turnover crosses the threshold limit (₹40 lakh for goods, ₹20 lakh for services) or if you engage in inter-state supply, e-commerce, or other specified activities. However, voluntary GST registration is possible even below the threshold.

Question 35

What is Startup India recognition and what are its benefits?

Accepted Answer

Startup India recognition (DPIIT recognition) is available to entities incorporated less than 10 years ago with annual turnover below ₹100 crore and working on innovation or scalable business models. Benefits include: 3-year income tax exemption (subject to conditions), exemption from angel tax, fast-track patent examination, self-certification under labour and environmental laws, and access to government tenders.

Question 36

How is residential status determined for income tax purposes?

Accepted Answer

Residential status is determined based on physical presence in India during the financial year. You are a Resident if you are in India for 182 days or more in a year, OR 60 days or more in a year AND 365 days or more in the preceding 4 years. If you do not meet these conditions, you are a Non-Resident Indian (NRI). There is also a Resident but Not Ordinarily Resident (RNOR) status for returning NRIs.

Question 37

What income of an NRI is taxable in India?

Accepted Answer

For NRIs, only income that accrues or arises in India is taxable in India. This includes: salary for services rendered in India, income from property situated in India, capital gains on assets located in India, interest from NRO accounts, and business income from operations in India. Income earned abroad is not taxable in India for NRIs.

Question 38

What is the difference between NRE and NRO accounts?

Accepted Answer

NRE (Non-Resident External) accounts hold foreign earnings converted to INR — the principal and interest are fully repatriable and interest is tax-free in India. NRO (Non-Resident Ordinary) accounts hold India-sourced income (rent, dividends, etc.) — repatriation is subject to limits and interest is taxable in India. NRIs should maintain both accounts for different purposes.

Question 39

What is DTAA and how does it benefit NRIs?

Accepted Answer

DTAA (Double Taxation Avoidance Agreement) is a treaty between India and other countries to prevent the same income from being taxed twice. NRIs can claim DTAA benefits to either exempt certain income from Indian tax or claim credit for taxes paid abroad. India has DTAAs with over 90 countries including USA, UK, UAE, Canada, Australia, and Singapore.

Question 40

Does an NRI need to file an Income Tax Return in India?

Accepted Answer

An NRI must file an ITR in India if their taxable income in India exceeds the basic exemption limit (₹2.5 lakh), they have capital gains from Indian assets (even if below exemption limit), they want to claim a tax refund, or they have income from business/profession in India. Filing is also advisable to maintain a clean tax record for future transactions.

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