insights.vprpca.com

Author: VPRPCA Team

  • TDS on Commission for FY 2026–27 (What You Need to Know)

    TDS on Commission for FY 2026–27 (What You Need to Know)


    If your business pays commission — whether to agents, brokers, or intermediaries —
    TDS compliance is something you simply can’t ignore.
    Every year, we see businesses either:
    • deduct TDS incorrectly, or
    • miss it altogether and face notices later
    So let’s break this down in a simple, practical way for FY 2026–27.


    What is TDS on Commission?
    TDS on commission is governed by Section 194H of the Income-tax Act, 1961.
    In simple terms, if you are paying someone commission or brokerage, you are required to
    deduct TDS before making the payment.


    Applicable TDS Rate for FY 2026–27
    For FY 2026–27, the applicable rate is:
    • 2%TDS on commission or brokerage
    However:
    • If PAN is not provided → 20% TDS
    In certain cases (as per government relaxations/updates), rates may change
    temporarily — always check latest notifications

    Threshold Limit
    TDS under Section 194H applies only if:
    • Total commission paid during the year exceeds ₹20,000
    If it’s below this limit → no TDS required


    What qualifies as “commission”?
    This is where most confusion happens.
    Commission generally includes payments made to:
    • Sales agents
    • Brokers
    • Marketing intermediaries
    • Channel partners
    Basically, if someone is earning a percentage or incentive for facilitating a
    transaction, it likely falls under commission.


    When should TDS be deducted?
    TDS must be deducted at the earlier of:
    • At the time of credit of commission (even if not paid), OR
    • At the time of actual payment
    This is a common mistake — many businesses wait until payment, but credit in books
    also triggers TDS.


    Example (Simple understanding)
    Let’s say:
    • You pay an agent ₹50,000 as commission
    Then:
    • TDS @ 2% = ₹1,000
    • You pay ₹49,000 to the agent
    • ₹1,000 is deposited with the government


    Due Dates You Should Not Miss (FY
    2026–27)
    TDS Deposit
    • By 7th of next month
    • For March →
    30th April
    TDS Return (Form 26Q)
    • Quarterly filing is required
    Late filing or delay = interest + penalty


    Common mistakes we see
    From a practical standpoint, these are very common:
    • Not deducting TDS on incentives/discount-like commissions
    • Ignoring TDS because payment is “informal”
    • Deducting late (after payment)
    • Not depositing TDS on time
    • Missing PAN → leading to higher TDS liability


    Special situations to watch
    Some cases need extra attention:
    • Commission vs professional fees (194H vs 194J confusion)
    • Discounts vs commission (especially in trade setups)
    • Foreign payments (different TDS provisions apply)
    If you’re unsure, it’s better to classify correctly upfront than fix it later.


    Why proper TDS compliance matters
    Many businesses underestimate this, but TDS defaults can lead to:
    • Disallowance of expense under income tax
    • Interest and penalties
    • Notices from the department
    • Increased scrutiny in assessments


    Final thoughts
    TDS on commission may look simple, but in practice, small errors can create bigger
    issues later.
    The key is:
    • Identify applicable payments correctly
    • Deduct on time
    • Deposit and file returns properly

  • How to File DRC-03 in GST (A Practical Step-by-Step Guide)

    How to File DRC-03 in GST (A Practical Step-by-Step Guide)


    If you’ve been working with GST for a while, chances are you’ve come across situations
    where a mistake slips through — maybe a short payment, incorrect ITC claim, or a
    missed liability.
    That’s where DRC-03 comes in.
    It’s essentially a way to voluntarily correct things and pay dues before they become a bigger
    problem.
    Let’s walk through what it is and how to file it properly.

    What is DRC-03?
    DRC-03 is a form available on the GST portal that allows you to make voluntary payments
    towards:

    • Tax
    • Interest
    • Penalty
    • Late fees

      You can file it:
    • On your own (before any notice), or
    • Within 30 days of receiving a Show Cause Notice (SCN)
      In simple terms, it’s your way of saying: “I’ve identified this liability, and I’m settling it.”
      Important: Filing DRC-03 within 30 days of SCN is critical — it can help you avail penalty
      relief. Missing this window may result in higher penalties.


    When should you file DRC-03?
    In practice, we usually see DRC-03 being used in situations like:

    • Tax underpaid in earlier returns
    • Incorrect ITC claimed
    • There’s a mismatch highlighted by GST notices
    • You agree with a liability raised in an SCN
    • Intimation received in DRC-01A
      Filing it early (before notice) often helps avoid unnecessary penalties and scrutiny.


    Things to keep ready

    Before you start, make sure you have:

    Notice reference (if you’re responding to one)

    Your GST login credentials

    A clear calculation of tax, interest, and penalty (if any)

    Relevant financial year and tax period


    Step-by-step: How to file DRC-03
    Here’s how you can do it on the GST portal:

          1. Login to the GST portal
            Go to the GST website and log in with your credentials.
          2. Go to the DRC-03 section
            Navigate to:
            Services → User Services → My Applications
            From the dropdown, select:
            “Intimation of Voluntary Payment – DRC-03”
          3. Choose the type of payment
            You’ll be asked to select:
            Voluntary payment (before notice), or
            Payment against SCN (after notice)
            Choose the one that applies to your case.
          4. Fill in the required details
            You’ll need to enter:
            Reason for payment
            Relevant section
            Financial year
            Tax period
            Take your time here — accuracy matters.
          5. Enter tax amounts
            Break down the liability into:
            CGST / SGST / IGST
            Interest
            Penalty( if applicable)
            Make sure your calculations are correct — especially interest.
          6. Offset the liability
            You can pay using:
            Electronic Cash Ledger (mandatory for interest and penalty)
            Electronic Credit Ledger (only for tax)
            Important:
            Interest and penalties must be paid in cash — ITC cannot be used for these. This is a very common mistake
          7. Submit and file
            Review everything carefully
            Submit using DSC or EVC
            Once filed, an ARN (Acknowledgment Reference Number)will be generated Keep this for your records.


          A few practical points (from experience)

          • DRC-03 cannot be revised once filed, so double-check everything
          • Partial payment against SCN is not allowed
          • Interest calculation is often where mistakes happen
          • If it’s linked to a notice, make sure the reference is correctly mentioned
          • Keep documentation handy in case of future queries


          New Update: DRC-03A (Important to Know)
          A recent development is the introduction of Form DRC-03A.

          This allows taxpayers to:

          • Adjust or link payments made via DRC-03 against a demand order

          This is especially useful if you’ve already made a voluntary payment and later receive a formal demand.


          Common mistakes to avoid
          Over the years, we’ve seen a few recurring issues:

          • Filing under the wrong reason/section
          • Paying only tax but missing interest
          • Incorrect allocation between CGST/SGST/IGST
          • Filing in a hurry without proper working

          Avoiding these can save a lot of back-and-forth later.


          Why filing DRC-03 early helps
          Taking a proactive approach has its benefits:

          • Reduces chances of penalties
          • Shows good compliance behaviour
          • Helps close issues faster
          • Avoids escalation into litigation


          Final thought
          DRC-03 is not just a form — it’s a compliance correction tool.

          Used correctly, it can help you fix issues early and stay on the right side of GST regulations.

          If you’re unsure about calculations or applicability, it’s always better to take a second opinion before filing.

        • GSTR-3B Compliance Updates: What Businesses Need to Do Differently

          GSTR-3B Compliance Updates: What Businesses Need to Do Differently

          Introduction

          The Goods and Services Tax (GST) framework continues to evolve, with periodic updates aimed at improving compliance, transparency, and reporting accuracy. In recent times, there has been a noticeable shift towards tighter data validation, system-driven reconciliation, and increased scrutiny in GST filings, particularly in GSTR-3B.

          These developments require businesses to revisit their filing processes, strengthen internal controls, and ensure higher accuracy in reporting.

          This article outlines the key compliance developments and their practical implications for taxpayers.

          What is GSTR-3B?

          GSTR-3B is a monthly summary return filed by registered taxpayers, providing details of:

          • Outward supplies
          • Input Tax Credit (ITC) availed
          • Tax liability

          It plays a critical role in GST compliance, tax payment, and cash flow management.

          Key Compliance Developments in GSTR-3B

          1. Increased Focus on Data Reconciliation

          Tax authorities are increasingly aligning data across:

          • GSTR-1
          • GSTR-3B
          • E-invoicing data

          Significant mismatches may trigger system alerts, notices, or further scrutiny. This makes reconciliation a crucial part of the compliance process.

          2. Stricter Validation of ITC Claims

          Input Tax Credit claims are now subject to tighter validation mechanisms:

          • ITC should align with supplier filings reflected in GSTR-2B
          • Delayed or non-filing by suppliers may impact ITC availability
          • Ineligible ITC claims are more likely to be identified through system checks

          Businesses must ensure accuracy and eligibility before claiming ITC.

          3. Increased Reliance on Auto-Populated Data

          Auto-populated data fields based on GSTR-1 and e-invoicing are being increasingly relied upon:

          • Reduces manual data entry errors
          • Increases accountability for consistency across returns
          • Requires careful validation before final submission

          4. Increased Scrutiny Through Data Analytics

          With advanced analytics and system-based monitoring, authorities can:

          • Identify discrepancies across returns quickly
          • Track inconsistencies in ITC claims and tax payments
          • Initiate notices or inquiries where required

          Impact on Businesses

          1. Higher Compliance Responsibility

          Businesses must maintain accurate, real-time, and well-documented records to ensure consistency across filings.

          2. Need for Regular Reconciliation

          Periodic reconciliation is no longer optional—it is essential to avoid mismatches and future disputes.

          3. Risk of Financial Exposure

          Incorrect reporting or delayed filing may lead to:

          • Interest liability
          • Penalties
          • Notices and follow-ups

          What Businesses Should Do Differently

          1. Strengthen Internal Controls

          • Maintain proper documentation
          • Ensure accurate and timely invoice recording

          2. Conduct Regular Reconciliation

          Match and verify:

          • Purchase register
          • GSTR-2B
          • Filed GST returns

          3. Verify ITC Before Claiming

          Avoid claiming ineligible or mismatched Input Tax Credit.

          4. Stay Updated with Regulatory Changes

          Regularly track updates, notifications, and system changes to remain compliant.

          Common Mistakes to Avoid

          • Claiming ITC without ensuring supplier compliance
          • Ignoring mismatches between returns
          • Delayed filing of GSTR-3B

          Conclusion

          Recent developments in GSTR-3B compliance reflect a shift towards tighter controls, increased automation, and data-driven monitoring. Businesses must adapt by strengthening their processes, ensuring accurate reporting, and adopting a proactive approach to compliance.

          Timely and accurate filing not only helps avoid penalties but also enhances financial discipline and credibility.

          For professional assistance in GST compliance, reconciliation, and return filing, businesses may consider consulting experienced professionals to ensure accuracy and efficiency.

        • Top 10 Mistakes to Avoid While Filing ITR for AY 2026–27

          Top 10 Mistakes to Avoid While Filing ITR for AY 2026–27

          Filing your Income Tax Return (ITR) is not merely a compliance requirement—it is a financial responsibility that directly impacts your tax liability, refunds, and long-term financial record. With increased digitization and data integration by the Income Tax Department, inaccuracies in filing can now be detected more easily than ever.

          For Assessment Year 2026–27, taxpayers must exercise greater diligence to avoid common yet critical mistakes that could lead to notices, penalties, or loss of legitimate tax benefits.

          This article outlines the top 10 mistakes to avoid while filing your ITR, along with practical insights to ensure accurate and compliant filing.

          1. Choosing the Wrong ITR Form

          One of the most fundamental errors is selecting an incorrect ITR form. Each form is designed for specific taxpayer categories:

          • ITR-1: Salaried individuals with simple income structure (income up to ₹50 lakh and limited complexity)
          • ITR-2: Individuals with capital gains and no business/professional income
          • ITR-3: Individuals with business or professional income

          Filing the wrong form may render your return defective under Section 139(9), requiring refiling within a stipulated time.

          2. Not Reporting All Sources of Income

          Many taxpayers report only their primary income. However, it is essential to disclose all sources of income, including:

          • Interest income (savings accounts, fixed deposits)
          • Dividend income
          • Freelance or side income
          • Capital gains

          The Income Tax Department cross-verifies your data with AIS (Annual Information Statement). Any mismatch may lead to notices or scrutiny.

          3. Ignoring Form 26AS and AIS Reconciliation

          Before filing your return, ensure proper reconciliation of:

          • Form 26AS
          • AIS (Annual Information Statement)
          • TIS (Taxpayer Information Summary)

          Failure to match these with your declared income may result in inconsistencies and possible notices.

          4. Incorrect Claim of Deductions

          Claiming deductions without proper eligibility or documentation is a common issue. Typical errors include:

          • Incorrect claims under Section 80C
          • Claiming HRA without valid rent receipts
          • Deducting ineligible expenses

          All deductions must be supported by valid documentation and comply with applicable provisions.

          5. Not Selecting the Appropriate Tax Regime

          Taxpayers now have the option to choose between:

          • Old regime: Allows deductions and exemptions
          • New regime: Lower tax rates with minimal deductions

          Failing to evaluate both options can result in higher tax liability. A comparative analysis should always be undertaken before filing.

          6. Errors in Personal and Bank Details

          Incorrect details such as:

          • PAN
          • Aadhaar
          • Bank account number
          • IFSC code

          can delay refunds or lead to rejection of the return. Ensure your bank account is pre-validated for smooth processing.

          7. Missing the ITR Filing Deadline

          Timely filing is critical. Missing the due date may lead to:

          • Late filing fees under Section 234F
          • Interest on tax payable
          • Loss of ability to carry forward certain losses

          It is advisable to track deadlines and file well in advance.

          8. Not Reporting Capital Gains Properly

          Capital gains from:

          • Stocks
          • Mutual funds
          • Property transactions

          must be reported accurately with proper classification (short-term vs long-term). Errors in reporting may result in incorrect tax computation and notices.

          9. Failure to Verify the ITR

          Filing is incomplete without verification. The return must be verified within the prescribed time using:

          • Aadhaar OTP
          • Net banking
          • Digital signature

          An unverified return is treated as invalid.

          10. Filing Without Professional Review

          Many taxpayers rely entirely on automated tools without fully understanding the tax implications. While such tools are helpful, professional review ensures:

          • Accurate reporting
          • Compliance with latest tax provisions
          • Optimized tax planning

          Engaging a qualified Chartered Accountant can significantly reduce the risk of errors.

          Conclusion

          Filing your ITR accurately is not just about avoiding penalties—it is about maintaining financial credibility and ensuring tax efficiency.

          By being mindful of these common mistakes and adopting a structured approach, taxpayers can file their returns confidently and correctly for AY 2026–27.

        • New vs Old Tax Regime for FY 2025–26: Which One Saves You More?

          New vs Old Tax Regime for FY 2025–26: Which One Saves You More?

          With the evolving tax landscape in India, choosing between the old and new tax regimes has become a critical financial decision for taxpayers. While the new regime offers lower tax rates, the old regime continues to provide a wide range of deductions and exemptions.

          For FY 2025–26 (AY 2026–27), making the right choice can significantly impact your overall tax liability. This article provides a structured comparison to help determine which regime is more beneficial based on individual income profiles.

          Understanding the Two Tax Regimes

          Old Tax Regime

          The old tax regime allows taxpayers to claim various deductions and exemptions, including:

          • Section 80C (LIC, PPF, ELSS, etc.)
          • House Rent Allowance (HRA)
          • Standard Deduction
          • Interest on Home Loan

          New Tax Regime

          The new tax regime is designed to simplify taxation by offering:

          • Reduced tax rates
          • Minimal exemptions and deductions
          • Simplified compliance

          The new regime is now the default option unless the taxpayer chooses to opt out.

          Tax Slab Comparison for FY 2025–26

          Old Regime (Individuals below 60 years)

          • Up to ₹2.5 lakh: Nil
          • ₹2.5 lakh – ₹5 lakh: 5%
          • ₹5 lakh – ₹10 lakh: 20%
          • Above ₹10 lakh: 30%

          New Regime

          • Up to ₹3 lakh: Nil
          • ₹3 lakh – ₹6 lakh: 5%
          • ₹6 lakh – ₹9 lakh: 10%
          • ₹9 lakh – ₹12 lakh: 15%
          • ₹12 lakh – ₹15 lakh: 20%
          • Above ₹15 lakh: 30%

          Key Differences

          Deductions and Exemptions

          The old regime provides access to a wide range of deductions and exemptions, whereas the new regime allows only limited benefits.

          Ease of Filing

          The old regime involves more documentation due to multiple deductions. In contrast, the new regime offers a simplified filing process.

          Suitability

          The old regime is generally more suitable for individuals with significant investments and eligible deductions. The new regime is better suited for those who prefer a simplified structure with minimal tax planning.

          Which Regime Should You Choose?

          Old Regime may be preferable if:

          • Total deductions exceed ₹2–3 lakh
          • There is an ongoing home loan
          • Regular investments are made in tax-saving instruments

          New Regime may be preferable if:

          • Simplicity and ease of compliance are priorities
          • Deductions are minimal or not actively claimed
          • Lower tax rates are preferred without investment obligations

          Illustrative Example

          Consider a salaried individual with an annual income of ₹12 lakh:

          Under the old regime, if deductions amount to ₹2.5 lakh, the taxable income reduces significantly, potentially lowering the overall tax liability. Under the new regime, although deductions are not available, the reduced tax rates may still offer comparable or better outcomes.

          A detailed calculation is recommended before making a final decision.

          Important Considerations

          • Salaried individuals have the flexibility to switch between regimes each financial year.
          • Individuals with business income are subject to restrictions on switching regimes.
          • It is advisable to evaluate both regimes before filing the income tax return.

          Conclusion

          There is no universally optimal choice between the old and new tax regimes. The decision depends on an individual’s income structure, investment patterns, and financial objectives.

          A careful evaluation of both options ensures that taxpayers can minimize their tax liability while remaining fully compliant with applicable regulations.