Taxation for entrepreneurs

GST: a worked example

If a registered business makes an illustrative intra-state taxable sale of ₹1,000 at an assumed 18% total GST rate, the invoice would show ₹90 CGST plus ₹90 SGST and a ₹1,180 total. This is arithmetic, not a statement that your product is taxed at 18%. Rates, exemptions and classification vary. Input tax credit, eligibility, timing and payment require separate calculation. Check the applicable CBIC rate schedules and notifications.

Registration is state/UT based where required. Threshold exemptions and compulsory-registration rules depend on the supply and circumstances; do not apply a single threshold to all businesses. The GST registration guide explains the process and jurisdiction.

Income tax: keep the tax year clear

A sole proprietor reports business income in their own return; a company or LLP has its own entity-level obligations. Profit is not the same as turnover, and GST collected is not business income simply because cash was received. Keep invoices, receipts, bank records, asset and loan records separately.

For assessment year 2026–27, the Income Tax Department describes presumptive income for eligible businesses under the earlier 1961 Act: ordinarily at least 8% of qualifying turnover, or 6% for specified non-cash receipts received within the prescribed period. Eligibility, limits and exclusions apply. Example: ₹10 lakh of qualifying digital receipts × 6% = ₹60,000 presumptive business income, not ₹60,000 tax; other income, deductions and the applicable regime affect the final liability. AY 2026–27 return rules.

The department says the Income Tax Act, 2025 applies from 1 April 2026 and consolidates presumptive provisions under section 58. Do not assume an older assessment-year form governs a later year. Income Tax Department: new Act.

Cash planning and filings

Set aside tax from receipts rather than treating the full bank balance as available to spend. Reconcile sales, expenses and tax invoices monthly; check advance-tax, withholding, GST return and audit obligations against your actual facts and relevant year. For state-level questions, see the state guide.

Sources checked: 28 October 2026. Examples are educational and do not determine an individual's tax liability.