Tax accounting in India is governed by various laws, regulations, and guidelines issued by the central government, state governments, and regulatory authorities. The key regulatory framework for tax accounting includes:
- Income Tax Act, 1961: The Income Tax Act is the primary legislation governing the levy, administration, and enforcement of income tax in India. It specifies the rules for computing taxable income, claiming deductions, filing tax returns, and other tax-related matters.
- Goods and Services Tax (GST) Act: The GST Act governs the levy, administration, and enforcement of GST in India. It defines the scope of taxable supplies, rates of tax, input tax credit mechanisms, registration, filing of returns, and compliance requirements under the GST regime.
- Accounting Standards (AS): The Institute of Chartered Accountants of India (ICAI) prescribes Accounting Standards (AS) that govern the recognition, measurement, presentation, and disclosure of financial transactions and events for financial reporting purposes, including tax accounting.
- Tax Audit Guidelines: The Income Tax Act mandates tax audits for certain taxpayers, such as companies, businesses, and professionals, meeting specified turnover or income thresholds. Tax audit
guidelines issued by the Central Board of Direct Taxes (CBDT) provide instructions and procedures for conducting tax audits and reporting requirements.
- Transfer Pricing Regulations: Transfer pricing regulations govern transactions between related parties, including cross-border transactions, to ensure that they are conducted at arm’s length prices. The Income Tax Act includes transfer pricing provisions, and the CBDT issues guidelines and rules for compliance.
- Advance Pricing Agreements (APAs): APAs provide a mechanism for taxpayers to seek advance certainty and agreement from tax authorities on transfer pricing methodologies for their international transactions. Taxpayers can enter into APAs with the CBDT to mitigate transfer pricing disputes and uncertainties.
- Goods and Services Tax Network (GSTN): The GSTN is a technology platform that facilitates GST compliance, including registration, filing of returns, payment of taxes, and reconciliation of invoices. Taxpayers are required to interact with the GSTN portal for various GST-related activities.
