Reading list: Doing Business in India? TaxKitab’s Guide to Mastering Indian Tax Rules
India’s growing economy and expanding digital infrastructure make it an attractive destination for businesses — both domestic and international. But with opportunity comes responsibility, especially when it comes to tax compliance.

Whether you’re launching a startup, managing an established company, or entering the Indian market as a foreign entity, understanding and following India’s complex tax laws is critical. This step-by-step guide by TaxKitab breaks down what businesses need to know — and do — to stay compliant with Indian tax regulations in 2025.

Step 1: Choose the Right Business Structure

Your tax obligations begin with how your business is structured. In India, common business structures include:

Proprietorship

Partnership Firm

Limited Liability Partnership (LLP)

Private Limited Company (Pvt Ltd)

Public Limited Company

Branch or Liaison Office (for foreign companies)

Each structure has different tax treatments, compliance requirements, and documentation needs. For example:

LLPs are taxed as partnerships, with relatively simpler compliance.

Pvt Ltd companies face stricter compliance and are taxed separately from owners.

Foreign entities must register with the Reserve Bank of India (RBI) and comply with FEMA regulations.

TaxKitab Tip: Choose your structure based on your capital plans, liability comfort, and long-term business goals.

Step 2: Register for a Permanent Account Number (PAN)

A PAN (Permanent Account Number) is mandatory for any business operating in India. It's your unique identifier for income tax purposes.

You’ll need PAN for:

Filing income tax returns

Opening a business bank account

Entering into financial contracts

Deducting or collecting TDS

Businesses must also obtain a Tax Deduction and Collection Account Number (TAN) if they are required to deduct or collect taxes at source.

Documents Required: Company registration documents, proof of address, identity of directors/partners, etc.

Step 3: Understand Your Direct Tax Obligations
a. Income Tax

Indian businesses are taxed on their net profits under the Income Tax Act, 1961. Tax rates vary by entity type:

Domestic companies:

22% base rate for most companies (under section 115BAA)

15% for new manufacturing companies (under section 115BAB)

LLPs: 30% flat rate

Foreign companies: 40% base rate (plus applicable surcharge & cess)

b. Advance Tax

If your total tax liability exceeds ₹10,000 in a year, you must pay advance tax in four instalments (June, September, December, and March).

Non-compliance can lead to interest penalties under sections 234B and 234C.

Step 4: Register for GST (Goods and Services Tax)

GST is India’s unified indirect tax system, replacing various state and central taxes.

Mandatory GST Registration:

Annual turnover exceeds ₹40 lakhs (₹20 lakhs for service providers)

Inter-state sales

E-commerce sellers

Businesses involved in import/export

Types of GST:

CGST & SGST – For intra-state sales

IGST – For inter-state sales

GST returns must be filed monthly (GSTR-1, GSTR-3B) or quarterly under the QRMP scheme.

TaxKitab Tip: Use automated GST software to reconcile invoices, e-invoices, and e-way bills to avoid input tax credit (ITC) mismatches.

Step 5: Comply with TDS (Tax Deducted at Source)

Businesses making specific payments (like salary, rent, professional fees, etc.) must deduct TDS before paying vendors or employees, then deposit it with the government.

Common TDS rates:

Salary: Slab-based

Rent: 10%

Contractor services: 1% or 2%

Professional fees: 10%

TDS Returns:

Quarterly filing is mandatory using Form 24Q (for salary) and Form 26Q (for non-salary).

Due dates: 31 July, 31 October, 31 January, and 31 May

Late filing attracts penalties under section 234E and interest under section 201.

Step 6: Maintain Proper Books of Accounts

As per the Income Tax Act and Companies Act:

Companies and LLPs must maintain books at their registered office.

Records must be preserved for at least 8 years.

Key records include:

Sales & purchase ledgers

Invoices & expense receipts

Bank statements & reconciliations

Payroll records

Tax computation and filings

Accounting software like Tally, Zoho Books, or QuickBooks India helps automate and organize records efficiently.

Step 7: File Annual Returns & Tax Filings
a. Income Tax Return (ITR)

ITR-6: For companies

ITR-5: For LLPs

Due date: 31 October (or 30 September if subject to audit)

b. Tax Audit

Required if:

Turnover exceeds ₹1 crore (₹10 crores for businesses using digital transactions)

Gross receipts exceed ₹50 lakh for professionals

Audit report (Form 3CD & 3CA/3CB) must be submitted online.

c. ROC Filings (for Companies/LLPs)

MGT-7: Annual return

AOC-4: Financial statements

Form 11 & Form 8: For LLPs

Missed filings can attract late fees of ₹100 per day and additional penalties.

Step 8: Stay Compliant with State-Specific Taxes & Labour Laws

Some businesses may also need to comply with:

Professional Tax (in states like Maharashtra, Karnataka, etc.)

Shops & Establishment License

ESI & EPF if employee count exceeds thresholds

Trade License from local municipal authorities

Understanding local laws where your business operates is key to full compliance.

Step 9: Consider Tax Incentives and Exemptions

The Indian government offers several schemes and tax reliefs for startups and MSMEs:

Startup India Tax Exemption (Section 80-IAC)

Reduced corporate tax rates for new companies

R&D Incentives under Section 35

Exporters’ benefits via SEZ or EPCG schemes

Consult with a tax advisor to evaluate eligibility and file required declarations.

Conclusion: Partner with Experts, Stay Ahead

India’s tax system can be challenging to navigate — but with the right knowledge, systems, and support, businesses can stay compliant and even gain a competitive edge. Failing to comply not only risks penalties but can also affect funding, licensing, and long-term sustainability.

At TaxKitab, we help businesses simplify their Indian tax journey through technology-driven solutions, expert advisory, and up-to-date compliance support.

Whether you're a domestic startup, SME, or a foreign company entering India, smart tax compliance starts with the right guidance — and that's what we’re here for.