Lesson 1 : Difference about Business and Tax Registration

Welcome to Legal Guides of MyOnlineCA. First of all Congratulation to becoming an Entrepreneur in India. Here you learn about basic legal things or gyan which is need by each Indian entrepreneurs. Before starting a business in India you have to always to know about the 2 things which are required to start any type of the business in India.

Lesson 1 : Gyan about Business and Tax Registration

a) Business Registration                       b) Tax Registration

So it’s applicable to all the business from Product or Service based Online or Offline any type of the Business. Business Registration or Tax Registration Concept is the same for all type of the Business.

Now Let’s understand about the Business and Tax Registration in a simplified manner.

a) Business Registration –

When you start the business you always need a Brand Name  or Company Name or Firm Name or Enterprise Name. So now if you are doing the business on any brand or business name then you have to always need to register that business or business name. In simple words, Business Registration refers to register a legal entity which is able to do the business in India legally. even indirectly business registration is taking the permission from the government to the start the business transactions.

Here are some top advantages why you have to register your business legally –

  • You can issue an invoice to your customers.
  • You are able to do the business legally as per the government law
  • You can integrate the payment gateway in your website/app.
  • You can sign the legal agreements with the third parties.
  • You can build your brand and trustworthiness between customer.
  • You can open a separate business bank account on the company name.
  • You can receive the payments from Customers.
  • You can issue the internship certificate to interns.
  • You can hire the employees as per the government regulations.

So above are some benefits regarding the register a Business in India. When you register your business in India there are the 2 main terms which are used in the business registration.

1.) Legal Entity – Legal Entity refers to a separate business or company or firm name where the owner is able to do the business in India on a Brand Name & people know that products or services on that particular business name.

2.) Business Bank Account – Right now you have a personal saving bank account where banks give you the interest on your Money but in the business, there is a different thing. For the doing all business transactions you need and have to maintain a separate business bank account. So as per the Reserve Bank of India Guidelines each bank can open a business current bank account only on the Registration & legal certification basis where it’s on the company or business or brand name.

Summary Point on Business Registration – In simple manner business registration means to register a business in India which gives you a separate identity for your business and gives the rights for doing the business across India. Business Registration Legal Entity & Current Business Bank Account is Mandatory before starting any type of the business.

Lesson 2 : Learn about How to Choose Legal Entity

Now Let’s talk about the Tax Registration

b) Tax Registration –

After the business registration in India, you can start the business simply after the opening a current bank account but the government needed the taxes. so these are the 2 type of the taxes :-

1.) Direct Taxes (Income Tax) : – Direct taxes refer the taxes by the government on the business owners or companies which are applicable on the net profit of the business. For Ex – Income Tax. Now every person in India which is earning from India are liable to paying the income tax to the government. similarly each business owners and company or firm have to pay the taxes to the government on the profit. it’s required the PAN Card, yes PAN Card is linked with the Income Tax in India.

2.) Indirect Taxes (VAT+CST | Service Tax | GST) :- Indirect taxes refer the taxes by the government which is recovered indirectly from the end customers through the business. For Ex – you purchase a product or take the service from the business which charges the VAT/CST or Service Tax ( Note – The new term from 2017 it’s called GST). So tax registration is applicable only after the crossing certain turnover limits which are different from VAT/CST or Service Tax.

VAT+CST – It’s a state wise and required when you cross 5 lakh Rupees turnover limit Per Year in most of the states.

Service Tax – Its handle by the central government and required when you cross 9 lakh Rupees turnover limit per year.

GST – It’s a new and mixture concept of the VAT+CST | Service Tax which is required when you cross 20 lakh rupees turnover limit per year. 

Summary on Tax Registration Point : Direct Tax Registration like PAN Card is required before starting the business in India but Direct Tax Registration is not required in the starting. it’s required when you cross certain turnover limits or have some conditional situation with the parties or customer when it’s required in the starting of business. For Ex – for selling on e-commerce portal required indirect tax registration in the starting or as a sole proprietorship firm.