Do i need to pay Income tax on first year of business?

Question

1. I am from Gujarat State of India. I have started my business in December 2007 and my first bill was deposit to my account on January 2008. If I earn more then 120,000 a year do i need to pay income tax in March 2009?

2. If yes do i need to pay from March 2008 to March 2009 or from December 2007 ?

3. Do i need to pay percentage on the net profit or just on the bills i received ? (ie 200000 is turnover and i have spend around 50000 after Electricity etc.)

I am really confused about this matter.

Answer 1

where is the consfusion. first of all you pay on the income you earn and not on the billings. as the name suggest income tax is on INCOME and in any case not on turn over. the accounts of yourbusiness have to be audited. the period of calculating income and paying income tax, if due, is from dec 2007 to march 2008. i.e financial year 2007-2008 and the relavent assessment year in 2008-2009.

it would be better for you if u employ ( full time or part time ) an accountant who can keep your account books and calculate income. ( net profit after all the expenses ) and a CA to file you income tax returns. dont try on your own

Answer 2

You need not pay any thing.  Do not worry about payment of Income tax.  If you earn more than 1.5 lakhs (after your business expenses like phone bills, shop rent, transport expenses, salaries paid etc.) between 1.4.2008 to 31.3.2009, then you have to pay tax.  In my view, you need not pay any tax.

Answer 3

In India the financail year is April 1, 2007 to March 31, 2008. You may need to file your income tax return for this period.

You will file Form ITR-4.

If your total income for FY 2007-08 is less than Rs. 1,10,000 you do not owe any tax.

For information on your Income Tax return and to download the forms, go to http://mytaxes.in/index.php?topic=32.0.

Answer 4

It depends on the amount of income that you have earned.

If your total income between April 1 of 2007 to March 31 of 2008, is greater than 1,10,000 then you have to pay the tax.

Since you are running a business, you can actually cut down your expenses for running the business from the calculation of the total income

Answer 5

Income Tax is payable on the nett income gained during a financial year (i.e April to March).  Even you have started your b'ness during December the income upto March is the income for that financial year.

For tax purpose you have to prepare the Balance Sheet which calculates your net profit like this (Adds: Your capital; Sales; Closing Stock; Cash in hand/bank & Less: Your Purchases, Expenses)

If this net profit exceeds Rs. 1,10,000. Then you have to pay tax.  I guess it will not cross this mark and you need not to pay any tax.  But you have to file your returns.  The last date is October 31.

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