Account Keeping for Self-employed By Athulya - December 22, 2018 Last Updated at: Sep 07, 2020 2386 While Ind-AS 103 pertains to business combinations, Ind-AS 116 relates to principles for recognition, presentation and disclosure of leases. In the wake of the pandemic, many lessors have extended rent concessions to lessees. However, applying the Ind-AS 116 requirements for changes to lease payments could have posed practical difficulties in the current situation. “We urge upon RBI to consider, as a one-time measure, to allow NBFCs to draw-down from their Reserves and adjust towards additional Expected Credit Losses provision requirement, more than provision calculated as per normal Probability of Default and Loss Given Default,” Finance Industry Development Council, a representative body of assets and loan financing NBFCs, said in a letter to RBI Governor. Auditors and company executives told that higher provisioning may be necessary as the pandemic-induced sharp dip would have increased difficulties for these businesses already hit by the ongoing slowdown. In many cases, auditors have asked companies to provide up to 50%. To keep complete and systematic records of all the financial transactions throughout the financial year, account keeping is essential. If you manage to maintain the accounts of your business, you will not have to burden your memory by remembering everything that happens in your company. Bookkeeping also helps you to ascertain the financial position of your business. Account keeping is basically maintaining the records of the income and expenditure. This will help maintain accuracy. Its mandatory for a self-employed person to have proper records of accounts. It’s inevitable for any person as they need to submit tax returns and to manage money. Explore our legal help services to protect your intellectual property, secure funding from Venture Capitalists & comply with the many regulations of the MCA information and resources to help you through your end to end business requirement. Register a Company PF Registration MSME Registration Income Tax Return FSSAI registration Trademark Registration ESI Registration ISO certification Patent Filing in india Though an accountant would help us with the task we should be well informed too. When it comes to account keeping income tax plays a major role. Income tax rules Any individual who earns and gets an income in India is subject to income tax, be it a resident or a non-resident of India. Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest. When the income is up to Rs.2,50,000 there is no tax. Between Rs 2.5 lakhs and Rs 5 lakh 5 percent tax will be imposed. Between Rs 5 lakhs and Rs 10 lakhs 20 percent tax must be paid to the government. When the income is above 10 lakhs 30 percent tax must be paid. It is not mandatory to file income tax returns when the total income is less than 2 and half lakhs but there are advantages of filing the income tax returns. Section 80 of the Income tax act states that certain amount can be deducted from the filing which includes house rent paid, interest, pension amount, expenditure incurred on medical treatment (including nursing), training and rehabilitation of handicapped dependent relative, interest on educational loan, house loan can be deducted so for all this account keeping is a must. A self-employed person has to pay a tax of 15.3 percent but it can be deducted through tax returns so the most important for everything is account keeping. Get FREE legal advice now Accounting tips Some pointers on maintaining accounts and tax deductions are Bookkeeping – A proper bookkeeping system should be done to ensure an organised and accurate record maintenance. Separate the finances – Business finances and personal finances should be separated. This means having separate bank accounts and credit cards for both. In turn it makes it easier to manage the true position of any business Pay by card – Payment should be done directly by card or through the bank as one would receive statements that can be used as a record for the purchases done and the same applies for payments also Keep good records – Make sure the receipts for any purchase or business expenses are well maintained and also the credit card statements and the bank papers Record of the income and expenses – This not only helps to complete tax returns but also to understand the position of the business. Put in place the payment policies – This means payment which is done before delivery or on delivery. If credit system is followed, it is better the time period is as short as possible and following the invoices which are not paid is very important for proper account keeping. Get an accounting software – We can also use spreadsheet but the ideal one is to use accounting software which will save time and money in the long run. It is better to hire an accountant who will help identify the issues and take decisions promptly to improve the business Claim vehicle and travel expenses – An employed person can claim travel expenses but self employed person cannot do so. Claim household bills – A claim can be placed for a portion of household bills if working from home. This applies even if we spend a couple of hours a week working from home. The things that can be claimed include electricity, gas and the broadband. To claim all this is necessary to keep proper accounting. However with vehicle expenses the proportion claimed must be reasonable. For all the above mentioned things proper receipts, challans, bank statements, credit card, debit card statements should be maintained in a proper way. Therefore account keeping is very important for a self employed person. Account keeping facilitates a smooth and easy decision-making process. Being a business owner, you can also calculate the losses suffered and the profits earned in the business during a particular business year. Also, accounting records provide sturdy bases for filing returns of direct and indirect taxes. Thus, it is apt to say that accounting plays a crucial role in the better functioning of an enterprise.