Author: Sanjeev Archak

Month Close Series-Tax Payments

by Sanjeev Archak Sanjeev Archak No Comments

Tax payments to Government are a major part of a business. Like any other general ledger the tax payable accounts have to be reviewed and reconciled every month. In the fourth part of the month close series, we shall look at how to prepare the books to make tax payments.

Taxes paid by a business can be classified into three buckets:

  1. Income Tax payments including Withholding taxes (WHT)
  2. Goods & Service Tax (GST) or Sales Tax
  3. Payroll Taxes

Governments across the world trust business’s to collect taxes and deposit them on time. Every business needs to develop mechanisms to ensure taxes are deducted and paid without fail. Non-payment of taxes will lead to major compliance risks like penalties  or even business closure.

How to handle income taxes?

Income taxes are required to be paid every year or even on quarterly basis. In countries like India, income taxes are required to be paid in advance every quarter. These quarterly payments are paid on estimated profits. To arrive at profits, one has to:

1.Estimate the sales for the year:

This has to be done in conjunction with the sales department. Estimated revenue numbers have to be arrived on basis of sound underlying assumptions. These numbers have to be revised every quarter based on the actuals of the previous quarter.

2.Estimate the expenses for the year:

Expenses, both direct & indirect, have to be extrapolated for the year. This requires that recurring expenses like salary, utilities etc. have to be estimated based on inputs from the department heads.

The difference between the two would be estimated profits. The taxes are arrived at after applying the relevant tax rates. A provision entry has to be passed in the books to reflect the tax liability. The Finance team now has to set aside money for payment of taxes as part of the cash flow plan.

Withholding taxes (WHT) are deducted from vendor payments. These deductions have to be deposited to the Govt every month. An accountant must be familiar with:

  1. Rates of WHT
  2. Categories of payments covered under WHT
  3. Dates of payment of WHT

To ensure correct WHT is done every month, the accounting team must ensure that all the vendor bills are accounted. Further, correct rates of WHT must be applied. This process is complete only when the WHT amounts are deposited with the Government.

At the end of every month, the WHT deductions must be reconciled with the WHT payments. As a thumb rule, the WHT balance must be zero after the payment.

How to handle GST or Sales Tax?

GST or sales taxes are part of the indirect tax system. These are levied on sale of goods or services. Essentially, these taxes contain two components:

  1. Input Tax
  2. Output Tax

Input taxes are those charged by the vendor on their invoices. Output tax is what you collect from your customers. Input taxes are set off against the output. If the output outnumbers the input, it is paid to the Government. However, if input is more than the output it is carried forward to be used in the next month.

To close the books every month, an accountant has to set off the input credit with the output in the books. This will enable him to arrive at tax payable/carry forward every month. This account gets closed only on payment of taxes.

How to handle payroll taxes?

Payroll taxes comprise of  two components:

1.Employee welfare payments:

These payments contain deductions from salary and a matching contribution from the employer. An accountant must be aware to post the employee deductions to a liabilities account in the balance sheet. The contributions from the employer must be posted to an expense account in the P&L.

These accounts must be closed once the amounts are deposited with the Government.

2.Employment taxes levied by the Government:

A business acts as a pass through agent when it comes to collecting tax and depositing with the Government. Taxes deducted from the employees are a liability, hence must be posted to a liabilities account in the balance sheet. These accounts must be closed once the amounts are deposited with the Government

The tax payments are time bound and have to be monitored. The best way to review the balances would be to add these accounts to a dashboard. A tool like Zoho Books allow you add key ledger accounts to the dashboard.Every business needs to reduce the risk of non-compliance. This requires a very skilled accounting team. We at, Integra Books, can help with managing compliance. We are a line away.




Month Close Series-Expense Reimbursements

by Sanjeev Archak Sanjeev Archak No Comments

Expense reimbursements are always considered a challenge due to the importance attached. Reimbursing employees requires accounting teams to sift through piles of receipts, audit them and approve the expense reports.

If the volume of reimbursements are high, the process is prone to becoming inefficient. Another problem will be delays in payments, this is can result in employee being displeased. In this post, we shall learn the importance of expense management in the month close process.

Why expense reimbursements matter?

According to Association of Certified Fraud Examiners (ACFE), 15% of business fraud stems from reimbursements with a median annual loss of $26,000. Organizations cannot allow reimbursements to go overlooked–otherwise, they risk losing thousands of dollars to expense fraud.

If you’re looking for an easier way to manage this process while still maintaining the integrity of your data and expense management operations, here are some concrete methods for simplifying reimbursements for your team.

Identify Reimbursable Expenses?

An organization must lay down a clear policy identifying expenses which can and cannot be reimbursed. By setting clear boundaries around what is and isn’t considered a reimbursable expense, you’re much less likely to have employees submitting irrelevant reimbursement requests. Here are some common reimbursable expense categories:

  1. Travel and accommodation
  2. Meals and entertainment
  3. Communication and office supplies
  4. Medical reimbursements

Implement an effective reimbursement policy:

A policy needs to be comprehensive. Since, expense are incurred by employees across departments, a policy must be evolved after due consultations with all departments. An ideal policy must contain:

  1. Expenses which can be reimbursed
  2. Spending limits based on job roles
  3. When & how to submit claims
  4. Process for approving the claims

It is important to note that recording all the expenses incurred is vital on time as they are tax deductible. Needless, to say they have to be submitted within timelines.

Employees in the organization must have easy access to the policy. Such policies must be drafted in simple languages and must be easy to read.

How to facilitate payments?

The end result of a reimbursement process is the payout to the employees. Direct deposits to the employee’s bank account of approved reimbursements are very efficient.

Another way to handle payments would be use expense cards. These cards can be issued to frequent spenders. These cards which are preloaded can be used to track expenses.

One must take care to ensure that reimbursements must not be part of the salary slips. This will save taxes for the employees.

How to implement an expense reimbursement process?

An expense process must ensure:

  1. Expense policy is adhered
  2. Easy submission of claims
  3. Automate pre & post travel approvals
  4. Flag policy violations
  5. Pass the audit test
  6. Reduce risk of frauds
  7. Processing of large claims

These can be achieved by using an expense management tool. A tool like, Zoho Expense, can automate the claim submissions using workflows regardless of the volume.

Automating Expense Reimbursements:

With digitization, you can re-engineer the way expense reimbursement is handled in your firm and better manage your finances.

Firstly, it provides employees the ability to capture and record an expense as and when it’s incurred via a mobile app. Your employees no longer have to save receipts and wait until the business trip is completed to enter their expenses manually. Thanks to the defined workflows, each expense report is automatically forwarded to the approver, validated, and processed within minutes.

As for the finance team, any expense report submitted to them would have already been thoroughly audited by the software to fish out policy violations, notifying employees of any flags immediately. Also, the software provides your finance team with digital copies of relevant documents as well as notifications on approvals and deadlines to ensure they don’t miss out any report.

Impact on accounting:

Despite being a routine accounting task, expense reimbursement has a massive impact on your P&L. Finance controllers must ensure that all the expense claims are submitted on time, provisions are made for payments. Not just that, accounting teams must ensure that employees are paid on time.

An effective expense management tool must minimize errors, cut overspending or overpayment at its source, and provide insights into discretionary spending to improve your firm’s productivity, cash flow, and overall financial health.

Let us automate your expense processing. Drop us a line here.

Using Accounting Workflow to Increase Efficiency

by Sanjeev Archak Sanjeev Archak No Comments


What to Look for in the Monthly Financial Statements

Every Finance Controller is faced with the tough task of making the accounting function efficient. An efficient accounting team meets deadlines and works efficiently with other teams. If you find yourself putting out fires every day, working without a plan, missing deadlines, despite long hours. This is clear case of your accounting function not leveraging the power of accounting workflow.

What is an Accounting Workflow?

A workflow is defined as a sequence of processes through which a piece of work passes from start to finish. An accounting workflow lays down a sequence of steps that everyone needs to follow. A well designed workflow will avoid micromanagement, streamline your processes.

To start a workflow one must develop standard operating procedures (SOP). These must be shared with team members. In doing so, onboarding new employees becomes a breeze. This will create superior employee and customer experience.

Examples of a Workflow:

A basic of example of a workflow can be onboarding a new vendor. On boarding involves:

  1. Vendor Onboarding Form-collection of information from the vendor
  2. Creating of Vendor Master-processing the information of vendor
  3. Accounting vendor bills/PO’s/vendor payment-results of the processing

These three steps can be distributed to various members of the team so that everyone else can focus on the tasks at hand.

Is there a need for an Accounting Workflow?

You will need a workflow if your answer is a “Yes” to these questions:

  1. Do your vendors call you for payments?
  2. Are you receivables mounting due to lack of follow up?
  3. Do find yourself out of inventory by not placing orders?

An accounting software with inbuilt workflow can solve all these problems. We recommend Zoho Books and its workflows to ease your accounting woes. Zoho Books is a cloud based accounting software which can be accessed remotely.

How to write a Workflow?

A workflow contains three components:

  1. List of steps-defining the order of occurrence
  2. List of participants-who does what
  3. Triggering events- to start the workflow

A list of steps is normally contained in the SOP’s that organization will have for every department. The participants must be listed in the SOP’s as well.

What are triggering events?

Triggering events are the catalyst for the workflow. Triggering events are:

  1. Event Based
  2. Date Based

Event Based Workflow:

If the workflow is Event Based, then the workflow is triggered when a module is:

  • Created
  • Edited
  • Created or Edited
  • Deleted

A workflow is triggered when:

  1. When any field is updated
  2. When any selected field is updated
  3. When all selected field are updated

Further, workflow can be triggered:

  1. Just Once-The workflow would be executed when the criteria is met for the first time.
  2. Every time-The workflow would be executed every time the criteria is met.

A use case of this flow is when a workflow is triggered when a new customer is on boarded by the sales team. The Accounting team gets an email or in app alert about the addition. Further, this workflow can be extended to intimate the stakeholders if a large sales order is approved

Date Based Workflow:

A date based workflow on any number of days before or after the execution of the task. The time of execution in terms of hours and minutes can be configured. The execution of the workflow can be:

  1. Once
  2. Monthly
  3. Yearly

A date based workflow can be used to alert the sales department when a Sales Order expires. This workflow can be run every month to ensure the extension of sales orders.

The number of workflows than organization can create is limitless. In doing so, it can bring various departments on the same page, leading to better co-ordination. The accounting function will get more efficient as inputs get streamlined.

Accounting teams often fall back on excel sheets to get things done. Accounting Workflows will reduce the excel sheets in use. So, automate away and keep working smarter!

At Integrabooks, our advisors are trained to assist you with automation. Please drop a line here.


Outsourced Accounting-How can it help you?

by Sanjeev Archak Sanjeev Archak No Comments

Every business owner faces the challenge of managing finances on his own. Handling money and operations becomes a daunting task. This takes away valuable time and head space of an entrepreneur. Outsourced accounting will ease the burden on founders. In this blog, we will explore how outsourced accounting can help you.

What is Outsourced Accounting?

Put simply, outsourced accounting means hiring a third party to handle all or some of your accounting functions for you.

Why outsource your accounting?

Outsourced accounting services can:

1.Save Time:

This is most obvious benefit for a business. Having an accountant handle the books will enable the founders to concentrate on operations.

2.Cost Savings:

An outsourced accountant will be any day be more cost effective than an in house accountant. Employee costs include not just salary but other benefits plus a share in overheads like office expenses etc.

3.Attain Scale:

The accounting department has to match the scale of operations. This is often not the case, as there might not be flexibility in skill set of accountants. An outsourced party will provide the flexibility required to match the business growth.

To outsource or not to outsource?

Ultimately, the best route for you will depend on several factors. Be sure to consider all of the following:

1.  Your Budget:

Your budgets often determine the service provider you choose. The budget that you allot for accounting must be commensurate with size and scale of your organization.

2. Define Clear Scope of Work:

It is vital a scope of work is agreed with the outsourced accountant. The scope should define:

  • The areas of responsibility-output the accountant is expected to put out
  • How inputs are provided-this is essential for the accountant to do his job
  • Timelines-covering both input and output

3. Size & Scale of the Outsourced Accountant:

An accounting partner must have all the resources i.e., manpower & tools, required to handle your needs. His flexibility to adapt his processes to handle your business needs will be vital.

4.Comprehensive Solutions:

An ideal accounting partner is the one who provides a full range of solutions. If not, you will expend a lot of effort to gets pieces of work done from diverse solution providers.

How Integra Books can help?

Integra Books combines technology and human expertise to ensure a beneficial experience out of the decision to outsource accounting services. We are a modern and effective way of managing your finance as a business.

We offer a full range of corporate and financial services starting from registering a company to managing everyday accounts and payroll. Backed by over 20 years of founders experience and skilled team, we are here to help you. Drop us a line here.


Month Close Series-Reviewing Accounts Receivable

by Sanjeev Archak Sanjeev Archak No Comments

Accounts Receivable (AR)  is the money owed to your business by customers. In the third part of the month close series, we will look at the relevance of AR. The month end close process involves recording, reconciling, and reviewing all business transactions and finalizing the account data for the month. Reviewing Accounts Receivable is an important part of the month close process.

What is accounts receivable?

Accounts receivable is any amount of money your customers owe you for goods or services they purchased from you in the past. This money is typically collected after a few weeks and is recorded as an asset on your company’s balance sheet. You use accounts receivable as part of accrual basis accounting.

Does accounts receivable count as revenue?

Accounts receivable is an asset account, not a revenue account. However, under accrual accounting, you record revenue at the same time that you record an account receivable.

Why is accounts receivable important?

Having lots of customers is great. But if some of them pay late or not at all, they might be hurting your business. Late payments from customers are one of the top reasons why companies get into cash flow or liquidity problems.

How to review accounts receivable?

Businesses often struggle to collect money on time, resulting in poor cash flow management and bad debt. So make sure your customers are paying without delay.

Here are a few steps to follow:

  1. Create an accounts receivables report. You can do this using a software like Zoho Books 
  2. Follow up with customers who’ve exceeded their credit period
  3. Account for items such as discounts, and credit notes for disputes or returns
  4. Recognize bad debt

You can use a simple financial ratio like accounts receivable turnover ratio to see how fast customers are paying you. The ratio is a product of dividing net sales by average accounts receivable.

How will this help in month close?

Review of accounts receivable will help the stakeholders to develop ways to get paid faster and manage cash flows. A regular AR review will help in:

Developing a crystal-clear credit policy:

A business must develop a clear policy for when you can and cannot extend credit to your customers. It is prudent to vet new customers by looking at their credit worthiness. Another tool is to enforce interest for delayed payments.

Offer more payments methods:

If you only offer limited payment options, customers may be more inclined to drag their feet when the invoice due date rolls around. There are costs associated with accepting credit card payments, so be aware of these ahead of time, but allowing customers to pay using their credit cards is usually win-win: you’ll get paid faster and they can rack up points.

Call them and schedule regular reminders:

Simply getting on the phone with a client and reminding them about unpaid invoices can often be enough to get them to pay. Sending email reminders at regular intervals—say, after 15, 30, 45, and 60 days—can also help jog your customers’ memory.

Thus, a monthly review of AR can throw up a lot of information which a business can use to get better. Cash coming into the business at the right time will keep the wheels turning.

Tired of doing your own accounting, we will be glad to help. Get in touch here.


Month Close Series-Banking Transactions

by Sanjeev Archak Sanjeev Archak No Comments

In the second part of the month close series, we will look at the relevance of banking transactions. A month close process involves recording vendor bills, raising invoices, counting inventory & reconciling general ledgers.

An account which needs to be reconciled is your bank account. We have covered the need for doing bank reconciliation in a post here. In this post we will learn how to handle bank transactions with a view to close the books.

Banking Transactions-traditional way:

Historically, accountants have been handed bank statements to compare with general ledger entries. The bank statements have evolved from being on paper to excel statements. But the task of comparison has remained the same over the years. An accountant is required to prepare a bank reconciliation statement identifying missing transactions.

For smaller entities doing the reconciliation manually will still work. However, large business’s which have thousands of entries will have to find a way to automate the reconciliation process.

Banking Transactions- modern way:

Accounting software, like Zoho Books, now makes it easy for the books to “sync” the bank statements and  perform auto reconciliations. Once the bank accounts are synced, the accounting team needs to:

  1. Identify recurring transactions
  2. Set up rules to auto classify these recurring transactions

Examples of recurring transactions are bank charges, tax payments.

The customer receipts can be matched to sales invoices using the “best match” feature within the software. A similar treatment can used for vendor payments. Once the customer receipts, vendor payments and bank charges are recorded, the accountant now needs to do the bank reconciliation.

Modern accounting software now come with auto reconciliation features which eliminate the need for excel based reconciliation. Post  reconciliation, a major item in the month close list is ticked off.

Thus, using features of syncing and auto reconciliation, accounting function can save a lot of man hours. The team can direct their efforts to work which is more strategic in nature.

Integrabooks can help you increase efficiency. Contact us here.

Month Close Series-Streamlining Accounts Payable

by Sanjeev Archak Sanjeev Archak No Comments

Every accountant is familiar with the pressures that accompanies the month end close. Every finance controller or CFO is required to ensure that all accounts are reconciled and all the number add up. Month close is crucial to ensure that information is provided to decision makers and investors. Closing the books every month requires accounting to liaison with multiple departments. In bigger entities close process is complex. Streamlining Accounts Payable (AP) is an important part of month close process.

Why Accounts Payable is critical?

Vendors are major stakeholders in the success of a business. A team handling AP must :

  1. Onboard Vendors – with all details
  2. Raise Purchase Orders- send to vendors
  3. Track delivery-get confirmation from other departments on delivery from the vendor
  4. Perform 3 way match-between PO, goods received notes & vendor invoice
  5. Pay the vendor-as per credit terms.

Accounts payable may be one of the things that a business needs to handle, but it is often the most complex. This is due to multiple levels of approvals that are required from departments like sourcing, production and finance. We have seen many organization rely on emails to run these approvals. Due to this, AP suffers from a lack of visibility. Invoices have to traverse a long road to reach the payment cycle.

It is imperative that the approvals configured within the books of accounts. Zoho Books allows users to set multi-level approvals within the books. This prevents accounting teams from being flooded with emails from other departments.

How to streamline Accounts Payable?

Finance controllers should take a hard look at their department to find areas of improvement. Here is how Accounts Payable can be streamlined:

  1. Ensure faster approvals to get a clear picture of planned cash outflows
  2. Use Dashboards to highlight the accounts payable
  3. Ensure the credit periods are adhered
  4. Get all the documentation to satisfy audit requirements
  5. Create a standardized channel to which all vendors submit invoices to reduce lost invoices or duplicate entries
  6. Set up a vendor/supplier portal so they can view their invoice statuses without taking up AP’s time with phone calls and emails

An efficient bill processing system will ensure that books are closed every month on time and every time.  We would love to hear your thoughts, drop us a line here.


Financial Shared Services

by Sanjeev Archak Sanjeev Archak No Comments

What are Financial Shared Services?

Under the shared services center (SSC) model, low-value, back-office operations are consolidated in a central location to support the rest of the organization. A shared service center handles support functions like AR, AP, Payroll & Sourcing.

Traditionally, SSCs have been employed to handle data entry-heavy tasks. Thanks to accounting automation, SSC’s are increasingly taking on entire end-to-end processes, as well as expanding beyond transactional tasks to provide higher level support services. The purpose of SSC’s now are to enable finance teams to focus more on strategic work such as FP&A, budgeting, and data analytics. 

How SSC’s Operate?

SSC’s are either captive center’s within the organization or they are run by an outsourced partner. Many organizations use a hybrid approach, and use an SSC for some business processes, and an outsourcing provider for other processes. 

Developing an effective governance model is essential for the success of SSC’s. An important part of the model are service level agreements. These specify the scope of the services to be provided, the price, and generally also specify expected metrics of time and quality. 

Governance models may also include global process owners (GPO). A GPO takes responsibility for an entire end-to-end process for an organization. Assigning one person to oversee a process makes it possible to optimize that process, and ensure that all choices made with regard to that process are aligned with the overall goals and strategy of the organization. They serve as the point person for improving the integration of that particular process with all business units. 

What are the pros of having SSC’s?

The biggest benefit of shared services, obviously, is the cost savings by reducing redundancies in back office operations. Organizations also get a boost from improved operational efficiencies because all business units need to follow the same financial processes to interface successfully with the SSC. Improvements in transaction processing mean better and more timely data for decision making. 

Why SSC’s fail?

Poor planning The biggest reason why SSC initiatives fail is insufficient planning. Developing a new SSC or expanding the scope of an existing SSC is a huge and disruptive change that will be felt throughout the entire organization. At the very least, the design needs to specify in granular detail who will do what, where they will do it, and how they will do it. 

Inadequate resources The people assigned to plan and lead a new SSC can’t be expected to take on this project in addition to their usual responsibilities. Temporary staffing replacements may be needed.

Lack of benchmarking An essential part of planning is understanding the current status quo. Failing to benchmark current operations in terms of performance, headcount, and cost will make it impossible to measure the efficiencies gained by consolidating processes.

Resistance to change Another big reason that shared services fail is not dealing with the resistance to change. Because jobs will be cut or may change, human resources needs to take an active role throughout planning and implementation. For a finance shared service initiative, getting the support of financial controllers and CFOs at all the business units is key. They may not be willing to relinquish control, and they will need support to navigate any changes to their roles. 

Poor communication Overcommunication is impossible, but under communication is deadly. Adding a help desk to answer questions and to ensure synergies are in line and that all concerns are being met can help allay many of the fears people will have about change.

What is the future of SSC’s?

For many organizations, the future of shared services is here. With cloud ERPs, building a new SSC no longer requires investing in an expensive data center and infrastructure. It also makes it possible to develop virtual SSCs, which means talent can be from anywhere in the world. 

Advances in AI and RPA mean that more tasks can be done by machines alone. For SSCs, this means that headcount — and therefore costs — will continue to decrease. 

SSC’s will increase the ability of the accountants  to be strategic and to drive innovation across their organizations rather than limiting themselves to transactional accounting. Implementing an SSC means all the pieces of an organization have to be on the same page with processes and systems. All of that means CFOs and, really, anyone affiliated with the financial function, will have better numbers faster and easier.



Tax Calculation Made Simpler with Income tax Calculator 2020-21

by Sanjeev Archak Sanjeev Archak No Comments

The budget for the year 2020-2021 has created a lot of ripples of curiosity among the people due to its unusual features. In this budget, the Finance Minister has proposed the removal of about 70 different tax exemptions. This has made the tax calculation a much simpler and easier activity for many individuals. If you think your income is within the taxable regime, you need to keep in mind a few of the important things before you opt for a genuine income tax calculator 2020

income tax calculator 2020 - 21

Choosing the Regime

The biggest thing that a person needs to do is to choose the right tax calculation regime. As per the recent budget regime, there is a relaxation in the tax rates but with the condition of a lesser number of deductions. In this case, the best option is to make use of the income tax calculator ay 2020 21 to check through the right regime. You can calculate the payable taxes individually as per both the regimes and can check which one is more profitable for you. 

The Deductions

As per the new regime for 2020-21, there are 70 deductions that have been removed. Hence it becomes quite important for you to understand the deductions that will be made. The maximum amount of deduction that an employee can make is 10% of his or her salary. If you are choosing the new regime, the deductions will be made as per the 80CCD (2) of the Income Tax Act 1961. People who have chosen the old regime may have several deductions but have to pay a higher tax rate comparatively. 

How is This Calculated?

In order to come up with the right payable tax, you need to calculate the net taxable income for the financial year. 

Step – 1: The very first step in this calculation is to first accumulate the income of the financial year. This accumulation has to be the total taxable income for that financial year. 

Step – 2: Now, you need to know the deductions that you can claim for that particular financial year. Here, you need to check through the list of deductions removed if you are calculating the payable tax amount as per the regime of 2020-2021. 

Step – 3: When the deductions are made from the total income, you get the total taxable amount. 

Step – 4: On this, you need to apply the tax rate based on the slab you belong to so that you can calculate the amount that you need to pay as tax. 

Even though the method has been simplified after removing different exemptions, there are a number of people who might find it difficult to find out the exact amount that has to be paid as tax. They might either opt for a professional and pay a hefty commission or use the tax calculator AY 2020 21

Choosing the Right Tax Calculator

If you are unable to make the calculation manually and wish to seek the help of the income tax calculator 2020, you should make sure to choose the right one. Go through the reviews of different calculators well and check the details that the calculator is asking for. Make sure that the calculator includes these eminent steps:

  • Option to the financial year, gender, and age 
  • Providing the taxable salary and the deductions
  • Providing other details such as interest income and others
  • Providing other investment options such as under section 80D, 80C, and others if you wish to calculate as per the old slab
  • Ability to compare results calculated as per the old slab as well as the new slab 

These eminent steps in the calculator will help you in getting the right one.


Integra Books can offer you an easier way of calculating. Contact us to know the methods even further. You can conveniently calculate your tax for the financial year 2020 – 2021 by clicking here.

GST Return Late Payment Fee Calculator – All You Need to Know

by Sanjeev Archak Sanjeev Archak No Comments

Goods and Services Tax, commonly known as GST, has been applicable to all businesses operating in India since July 2017. This ambitious and targeted tax regime has been a major asset in subsuming a plethora of indirect taxes that were applicable to goods and services before its implementation.

late fee and interest in GST

However, a major problem statement GST has presented businesses with is the calculation of late payments, and the interest rates applicable to it. GST has two strata of operation, namely Central Goods and Service Tax (CGST) and States Goods and Service Tax (SGST). Under GST, the government has implemented certain procedures that determine the late fee and interests applicable to businesses failing to meet the payment timelines. Let’s take a closer look into the functioning of GST to understand how to calculate late fee and interest in GST.

Provisions of the GST Regulations

Under Section 50 of the CGST Act, the government of India has the right to collect defined interest rates on the tax dues of businesses. These tax dues consist of the taxes payable excluding interests and penalties, on certain goods and services. The government only imposes the interest for GST after the due taxes are paid by individuals/businesses, as the official GST portal doesn’t allow them to file for returns before paying their taxes.

This rate of interest is defined at 18%, which carries from the period from the date when the taxes are due until the date that taxes are paid. The GST department issues a notice, after which this interest has to be paid to file for returns every financial year. The late payments are cleared in the form of “challan”, which are issued on the official GST portal. A copy of this challan has to be sent to the jurisdictional tax officer. This challan is named Form DRC03.

How to Calculate Late Fee and Interest for GST Returns?

There are two ways to calculate the late fee and interest in GST to file for returns. The differences between them are subtle, but they are important to understand to get a grasp of interest and late fee calculator.

  1. Calculator Specifically for Late Fee 

 Late fees are charged under the GST laws in case of delays in filing for returns in GST by businesses or individuals. The late fees applicable right now on SGST and CGST is Rs 25 per day. You can calculate the late fees seamlessly on Integra Books’ interest and late fee calculator GST automatically. 

      2. Calculation Specifically for Interest on Late Payments or Filing                   for  GSTR 3B

If you have any GST dues, whether late payment or late filing, then an interest rate on them is applicable under the GST laws. These interest rates are applicable to every taxpayer who has made a delayed GST payment at 18% per annum. Interest rates are also applicable if an excess input tax credit is claimed at 24% per annum. These interest rates can be calculated on the interest and late fee calculator GST offered by Integra Books.

Now that you know about calculating the late fee and interest in GST, let’s take a look at some important dates, so you don’t miss out on filing for GST Returns:

  • The returns scheme for filing for GST Returns has been postponed to start from 30th September 2020.
  • E-invoicing for filing for GST returns has been postponed to start from 1st October 2020. This is only applicable for taxpayers who have an annual turnover of over Rs 100 crores for B2B transactions, or over Rs 500 crores for B2C transactions.

A recent update regarding  GST late fee payment 

Below are important highlights as per a recent update from the government by the Economic Times  on June 12th, 2020:

  • No late fee will be charged for taxpayers who do not have any tax liability but were yet to file returns for the period from July 2017 to January 2020  (prior to the COVID-19 period). 
  • Taxpayers who have liability but have not yet filed their returns can do so with late fee payment of maximum Rs 500 if returns are submitted by July 1, 2020.
  • During COVID-19 period of February, March and April 2020, the interest rate on late return filings by small taxpayers with turnover up to Rs 5 crore, will be reduced to 9% from 18%, if returns of inward supplies are filed till September 30.


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