First obtain the main written rejection reasons. Then rebuild the proposal around records, purpose and realistic repayment cash flow. Applying again with the same unexplained figures may leave the original problem unresolved.

A ₹12 lakh sales month can still have a repayment gap

₹70,000 minus ₹85,000 leaves a ₹15,000 gap. Sales may be healthy while repayment cash is insufficient. This is a simple cash illustration, not a bank’s prescribed debt-service coverage calculation or an automatic rejection rule.

Match the rejection reason to an improvement

A difference between GST sales and financial statements is not automatically wrongdoing. Timing, credit notes and classification can explain it. The proposal should show the reconciliation.

What the collateral-free rule actually covers

RBI’s February 2026 amendment applies to relevant MSE loans sanctioned or renewed on or after 1 April 2026. Under the cited MSME Master Direction, covered Scheduled Commercial Banks, excluding Regional Rural Banks, must not accept collateral for eligible Micro and Small Enterprise loans up to ₹20 lakh, subject to the voluntary gold/silver exception.

Banks may dispense with collateral up to ₹25 lakh based on financial position, track record and internal policy. That higher limit is discretionary.

This addresses collateral, not approval. A bank still appraises repayment and risk. Medium enterprises and every NBFC do not automatically receive the same treatment under this particular direction.

Collateral is additional security. Primary security is associated with the financed asset or business assets—for example, a charge on the machine being financed. Collateral-free does not mean there can be no primary security.

The amendment permits gold or silver voluntarily pledged within the collateral-free limit. That exception is not a general requirement to offer jewellery. Interest, valid charges, documentation and repayment obligations can still apply.

Choose finance that fits the need

A machine that creates benefits over years may need term finance. Inventory and customer credit consume working capital. Borrowing for a machine will not necessarily solve overdue customer collections.

For a ₹15 lakh machine, also consider installation, power connections, training, operator cost, maintenance and additional stock. Forecast incremental output and cash collections, not just capacity on the supplier’s brochure.

Build three cash-flow cases

1. Base: realistic orders, selling prices, costs and collection dates.
2. Lower utilisation: fewer units sold while fixed expenses remain.
3. Delayed collections: sales occur, but customers pay later.

Show taxes, working-capital changes, existing debt, proposed principal and interest, and repayment timing. If using DSCR—debt-service coverage ratio—define the numerator and repayments consistently with the lender’s method. There is no single universal approval ratio for every facility.

After rejection: a practical sequence

Keep the application and acknowledgement. Seek the main written reasons. Correct records or credit-report errors where supported. Reassess the amount, purpose and tenure. Prepare a clear use-of-funds statement, repayment forecast and downside case before reapplying.

The RBI direction provides a credit-decision timeline of no more than 14 working days for covered MSE loans up to ₹25 lakh. This is a decision timeline, not a promise of sanction or immediate disbursement. Read the bank’s published checklist and acknowledgement requirements; other facilities follow applicable norms.

If a process issue remains unresolved, use the lender’s grievance process and then assess the appropriate escalation route. A grievance does not automatically overturn a commercial credit decision.

Common questions

Does Udyam guarantee a loan? No. Registration identifies eligible enterprises; it does not prove repayment capacity. The specific rule above concerns MSEs, not every MSME category.

Can a new business apply without three years of returns? Some facilities serve new businesses. Documentation and appraisal depend on the product and lender.

Will a guarantee scheme ensure approval? No. The lender still applies the relevant scheme and credit criteria.

Your practical next step: prepare a one-page statement showing the loan purpose, amount, existing repayments and monthly cash available before debt repayments. Use that to identify the real gap.

Sources

• RBI MSME Master Direction, updated February 2026 ↗
• RBI February 2026 collateral amendment ↗
• Government Udyam portal ↗

Agree the basis before comparing

Check the supplier’s legal entity, account reference and period. Establish whether figures include tax, whether multiple branches are combined, and whether advances are shown separately. Use the statement’s closing balance and detailed transactions, not only an email demanding payment.

A fictional ₹30,000 difference

The supplier’s statement is ₹1,50,000 and your books show ₹1,20,000. Investigation finds a valid ₹18,000 invoice absent from your books and a ₹12,000 payment already posted in your books but not credited by the supplier. Assume both amounts use the same tax and currency basis.

You record the missing invoice once and ask the supplier to apply the payment. You do not record the ₹12,000 payment again. The fact that the totals reconcile does not by itself decide whether the invoice is an expense, inventory or an asset, or whether any input tax credit is eligible.

Review four document streams

• Invoices: match the order, receipt or service evidence, price and duplicate references.
• Returns and credit notes: identify the reason, agreement and whether both parties recorded them.
• Payments: match date, amount, bank reference and allocation.
• Advances: identify which delivery or invoice the amount is intended to settle.

Do not let disputed deductions disappear

You may believe a short delivery supports a deduction, while the supplier has not accepted it. Show the disputed amount explicitly and retain the evidence. Do not quietly remove the payable or assume a self-created debit note settles every legal and tax consequence. Agreed credits, disputed claims and unallocated payments are different situations.

Use reconciliation as a payment control

Before a significant payment, check whether the invoice number appears more than once, whether a bank import duplicated the original entry, and whether an advance already covers part of the amount. Changes to supplier bank details need independent verification through a trusted contact route, with approval appropriate to the business. A reconciliation is most valuable before an avoidable duplicate or incorrect payment occurs.

Questions that often come up

Can I rely on a supplier balance confirmation alone? It is useful evidence, but individual invoices and payment differences may still need examination.

What if the supplier never sends a statement? Reconcile your document records and seek confirmation of significant or uncertain balances. Keep an evidence trail of your review.

Should every missing bill be posted immediately? First establish that it belongs to the business and period, is not duplicated, and has the appropriate supporting evidence and classification.

Your next practical step

Reconcile the largest suppliers before the next major payment run. Keep agreed balances and unresolved disputes separate. Include the resulting actions in your month-end closing process.

Sources

• Supplier statement reconciliations and completeness — ACCA ↗
• Accounting-system transaction flows — ACCA ↗

Separate the unit and order costs

Define exactly what the customer is buying: quantity, specification, tolerances, packing, inspection, delivery and credit terms. Identify the costs that arise for each unit and those that arise once for the order. A supplier quote that omits special testing or freight is not directly comparable with one that includes them.

A fictional batch comparison

Assume material and variable processing cost ₹400 per good unit. Each order also causes ₹6,000 of setup and ₹1,000 of order-specific packing/delivery. These order costs are assumed incremental for each separate batch and have not been included in ₹400.

A ₹650 unit quote earns ₹6,500 on ten units against ₹11,000 of listed costs: a ₹4,500 shortfall before other costs. On 100 units it earns ₹65,000 against ₹47,000, leaving ₹18,000 before other costs. This is not an automatic reason to accept or reject either order; it shows why the batch assumptions matter.

Markup is still different from margin

If the ten-unit order needs a 25% markup on the listed ₹11,000, the quoted amount is ₹13,750, or ₹1,375 per unit before GST. The ₹2,750 difference is 20% of ₹13,750. It is not necessarily net profit: general fixed costs, finance, tax and excluded risks still need consideration. See the Price-Setting Calculator for the denominator distinction.

Consider the commercial alternatives

• Show an order setup charge separately when commercially appropriate.
• Set a minimum order value supported by your cost working.
• Offer a different unit rate for a genuinely larger batch.
• Combine compatible production runs only when quality, timing and specifications allow it.
• Confirm charges for design changes, retesting or expedited delivery before accepting the scope.

Check capacity and the time horizon

A special order using otherwise idle capacity needs a review of additional cash flows and any benefit forgone elsewhere. Existing fixed-cost allocation is not automatically an incremental cost. But regularly quoting only additional cash cost can leave the wider business unable to cover rent, people and equipment. Short-term acceptance analysis and a sustainable pricing policy answer different questions.

If the job displaces a better order, include the contribution lost from the displaced work in the decision. Also check whether a low introductory quote creates future expectations or conflicts with existing commitments. The simple table assumes available capacity, no displacement and no additional quality or collection risk.

Questions that often come up

Is every setup cost fixed forever? No. In this example it is fixed for one batch but repeats with each separate order. Cost behaviour depends on the activity being considered.

Can the customer’s larger quantity always reduce cost per unit? Not necessarily. Larger orders can create overtime, extra tooling, storage or working-capital needs.

Does this determine a legally prescribed price? No. It is a management quotation example with stated assumptions, not a statutory valuation.

Your next practical step

Take one recent small order. Rebuild its working using good output, setup, testing, rework, delivery and credit terms. Compare the accepted price with the cost and risks actually assumed. Explore CAS-10: Direct Expenses for traceable job charges.

Sources

• Relevant cash flows and opportunity costs — ACCA ↗
• CAS-10 and other cost standards — ICMAI ↗

Check the report’s basis first

Identify the business, period and accounting basis. Check whether sales are net of returns and discounts and whether tax collected for government has been excluded appropriately. Compare the same length of period. A one-month result and a three-month result need adjustment before a direct comparison is meaningful.

Follow a fictional trading business

This example assumes no manufacturing activity. Purchases and stock use a consistent cost basis, and recoverable GST is excluded. Depreciation shown below relates to administrative assets and has not already been included in cost of sales.

Cost of goods sold is ₹80,000 + ₹3,00,000 − ₹1,00,000 = ₹2,80,000. Gross profit is ₹5,00,000 − ₹2,80,000 = ₹2,20,000. After the listed remaining costs, ₹65,000 remains. These are simplified management-reading figures, not a complete prescribed financial-statement format.

Read the percentages with their labels

Gross margin here is ₹2,20,000 ÷ ₹5,00,000 = 44%. The ₹65,000 result is 13% of sales before tax and other unlisted items. Calling both figures “profit margin” without qualification invites confusion. A manufacturer’s gross-profit presentation may involve production costs not included in this trading example.

Ask what changed and why

• Did net sales change because of price, quantity, mix or returns?
• Did product cost change because of purchase rates, yield, freight or stock valuation?
• Did operating expenses include a one-off event, missing accrual or duplicated bill?
• Does depreciation reflect the period and correct assets?
• Has the interest cost changed with borrowing or the payment schedule?

Connect the result with other records

Credit sales can increase profit before cash is collected. Stock purchases can consume cash before they become cost of goods sold. A loan receipt brings cash but is not sales; principal repayment reduces borrowing rather than becoming an ordinary operating expense. These connections are why a P&L alone cannot explain liquidity.

Use the balance sheet to see what is owned and owed at the reporting date, including stock, customers, suppliers and borrowings. Use cash-flow information to understand receipts, payments and financing. Financial-statement requirements depend on the entity and applicable framework; this article teaches the relationship without claiming IFRS or Ind AS compliance.

Questions that often come up

Does buying more stock always reduce this month’s profit by the amount paid? No. Unsold stock may remain an asset under the applicable valuation rules. Check the cost-of-sales calculation and any write-down.

Is a higher gross margin always better? Investigate the cause. A missing purchase or overstated closing stock can make it appear stronger without improving the business.

Can I read profit as available money to withdraw? No. Collections, working-capital needs, debt repayments and other obligations also matter.

Your next practical step

Choose the largest three movements against a comparable period. Write one evidence-based explanation and one action for each. Use our profit-versus-cash guide to connect the result with liquidity.

Sources

• Presentation of financial statements — IFRS Foundation ↗
• Cash-flow categories — IFRS Foundation ↗
• Inventory and period adjustments — ACCA ↗

For a single owner, a proprietorship may offer a simple beginning. For a partnership-style business, consider an LLP. For conventional outside equity and shares, a company is often more suitable. These are starting points, not automatic recommendations.

Compare the three options

What each structure means in ordinary language

Proprietorship: you and the business are the same legal person

You own the business directly. It may need GST, Udyam, trade, food, labour or other registrations, depending on the activity. There is no single company-incorporation certificate that creates a proprietorship.

A home-based food seller, for example, should consider food-related approvals, GST, bookkeeping, product cost and personal exposure. A simple ownership structure does not remove those obligations.

LLP: a separate entity with partners

An LLP ordinarily needs at least two partners and two designated partners, with at least one meeting the statutory Indian-residency requirement. The agreement should explain contributions, profit sharing, responsibilities and exit terms.

Two engineering consultants may prefer this partnership-style arrangement. The LLP can own assets and enter contracts in its own name. It does not issue company equity shares.

Private limited company: ownership through shares

A conventional private company generally needs at least two members and two directors. An eligible sole founder can separately evaluate an OPC. A company often fits plans for outside equity investment or employee share arrangements, subject to the applicable legal requirements.

Ownership and management are different roles: shareholders own shares; directors manage through the company’s governance framework. A founder can hold both roles.

Limited liability still has limits

Suppose a director personally guarantees a ₹25 lakh company borrowing. Separate company identity does not cancel that guarantee. Fraud, personal contracts and specific statutory responsibilities can also create personal exposure.

Ask what you are signing, who is responsible and whether security or guarantees are required.

Plan the recurring work before incorporating

A proprietorship may still need accounts, income-tax returns, GST/TDS compliance, sector approvals and tax audit where applicable.

An LLP generally maintains books and files Form 8, Form 11, applicable tax returns and event-based forms. The familiar ₹40 lakh turnover and ₹25 lakh contribution figures require careful application. MCA’s Form 8 instructions use an auditor-certification trigger where either limit is exceeded, while the audit-exemption wording in Rule 24(8) must also be read. If only one limit is crossed, obtain a documented review of the operative rule and current form requirements before claiming exemption. Audit of accounts and certification of a form are separate tasks.

A company generally needs audited annual financial statements even with low or nil turnover, auditor appointments, annual filings, registers and applicable meeting and event-based compliance. Keeping a company inactive does not, by itself, switch these off.

Audit names do not mean the same assignment

A professional’s expertise or ability to certify one form does not automatically authorise every audit.

Three decisions to discuss with your adviser

1. A single-owner local business: compare simplicity with contractual and personal risks; check licences first.
2. Two owners purchasing machinery: discuss ownership terms, contributions, guarantees, decision-making and an exit plan when comparing LLP and company.
3. A startup seeking share investors: consider share capital, dilution, employee equity, investor terms and the recurring cost of company compliance.

Tax also matters. Compare total business and owner-level tax, withdrawals and distributions using your figures. There is no universally cheapest structure for every income level and plan.

Common questions

Does Udyam create a company? No. It identifies eligible enterprises under the MSME framework. It does not replace incorporation, GST or sector licences. Official government Udyam registration is free; a separately engaged adviser may charge for assistance.

Can a proprietorship borrow? Yes, subject to lender appraisal. It cannot sell company shares.

Can I change the structure later? Often there are routes, but assets, liabilities, contracts, licences, registrations and taxes need review. Do not assume a tax-free or paperwork-free conversion.

Your practical next step: write down the owners, funding plan, main risks, expected annual compliance budget and what should happen if an owner leaves. Compare structures against those facts.

Sources

• MCA Acts and Rules ↗: Companies Act, including Sections 139, 141 and 148; LLP Act and Rule 24
• MCA Form 8 instruction kit ↗ — read with the current filing version
• Section 141, official government reproduction ↗
• Government Udyam portal ↗

Accounting separation is not separate legal identity

A proprietorship is not a separate legal person from its owner. Nevertheless, useful business accounts separate the business activity from the proprietor’s personal transactions. That accounting distinction helps explain operating performance without confusing it with personal spending.

Classify the transaction before posting

A fictional capital movement

Assume opening proprietor capital is ₹2,00,000. Business profit is ₹60,000, the proprietor introduces ₹10,000 and takes ₹25,000 for personal use. There are no other capital adjustments in this example.

The calculation is ₹2,00,000 + ₹60,000 + ₹10,000 − ₹25,000 = ₹2,45,000. Profit remains ₹60,000; it does not become ₹35,000 because of the drawings. Capital is also not a statement of the bank balance: it reflects the owner’s residual interest after the business’s assets and liabilities are considered.

An everyday reimbursement example

Suppose the proprietor pays a supported ₹5,000 business software bill personally. The books record the appropriate cost and a corresponding owner balance. When the business later pays ₹5,000 back, it settles that balance. Charging software expense a second time would overstate cost. Actual recognition, period allocation and any tax credit depend on the facts; possession of a payment receipt alone does not establish tax deductibility.

Make mixed transactions easier to review

• Use a dedicated business bank account where practical.
• Keep invoices and a short purpose note for reimbursements.
• Identify personal spending promptly instead of leaving it in miscellaneous expenses.
• Reconcile the proprietor’s account each month.
• Have significant or unusual adjustments reviewed and retain the history.

Do not apply the drawings label to every legal structure

A company’s money is not a director’s personal fund. Payments involving directors, shareholders or LLP partners may raise separate salary, reimbursement, loan, distribution, approval, disclosure and tax questions. The proprietorship example above is not permission to use an informal drawings account in those entities. See the business-structure comparison before applying the same approach elsewhere.

Questions that often come up

Does keeping money in the business make it profit? No. Profit comes from income and expenses under the relevant accounting basis, not from the owner’s withdrawal decision.

Is every personal-bank payment excluded from business accounts? No. A genuine business transaction paid personally may still require recording with the corresponding owner funding or reimbursement balance.

Does bookkeeping classification decide tax treatment? No. Business purpose, evidence and applicable tax provisions must be considered separately.

Your next practical step

Review the last month’s transfers to and from the proprietor. Classify each as contribution, drawings, reimbursement or another supported transaction, and check that the same expense was not recorded twice.

Sources

• Accounting concepts and scope — ICAI ↗
• Financial-statement presentation and owner equity — IFRS Foundation ↗

Define what is being counted

• Use the item code and variant, not a similar-looking product description.
• Use one unit: pieces, cartons, kilograms and metres cannot be compared without a supported conversion.
• List every relevant location, including goods at job-workers or in transit where appropriate.
• Separate your goods from goods held for another party.
• Control receipts, dispatches and transfers around the count time.

A fictional difference that is not a loss

Post the supported 40-unit dispatch: expected stock becomes 960. Add the overlooked carton to the count: verified physical stock becomes 960. The corrected figures agree. Treating the original 60 units as a loss would have misstated the result and left the real process errors unresolved.

Investigate movement before value

Trace opening quantity, receipts, issues, production, returns and transfers. In a simple quantity bridge, opening stock plus receipts less issues gives expected closing stock. A production environment may also need yield, normal loss, rework and unit-conversion records. Returns should be assessed for both quantity and condition; a returned item is not automatically saleable.

If an unexplained shortage remains, preserve the count sheets and movement evidence. Review access, handling and authorisation without assuming who caused it. A properly approved adjustment should identify the reason and responsible reviewer. Altering prior quantities merely to match a count can conceal a recurring control weakness.

Damaged stock is a different question

Goods can be physically present but damaged or difficult to sell. That is not the same as missing quantity. Valuation depends on the applicable accounting or statutory framework, relevant cost and recoverability. A blanket percentage reduction for every old item is not a substitute for evidence. Review CAS-25 and inventory valuation and distinguish that lesson from the specific rules governing your statement.

Use a difference register

Questions that often come up

Can goods at a job-worker still belong to us? Yes, physical location alone does not establish ownership. Check agreements and records, including confirmations where appropriate.

Can a stock adjustment resolve the problem? It can correct an approved record, but does not explain the cause. Repeated adjustments need process review.

Is a cycle count enough? Counting selected items throughout the year can help. The design depends on risk and record quality; it does not automatically replace every financial-reporting or audit requirement.

Your next practical step

Choose one high-value or frequently adjusted item. Recount it, reconcile its recent movements and document the cause before changing value. For goods that are present but not moving, use the separate slow-moving stock guide.

Sources

• Inventory existence, rights and cut-off — ACCA ↗
• Inventory cost and condition — IFRS Foundation, IAS 2 ↗
• Cost Accounting Standards catalogue — ICMAI ↗

Start with a clean invoice balance

Agree each invoice to its receipt allocation, returns and approved credit notes. Check whether a payment has arrived without a customer reference or has been allocated to the wrong invoice. Chasing an already-settled invoice wastes time and weakens trust. Record the accepted credit terms and any documented change.

Use a consistent ageing basis

For a collection report, days overdue normally means days after the agreed due date. An invoice issued 45 days ago with 60-day terms is not yet overdue. Invoice-age reports can also be useful, but label them clearly. Statutory disclosure schedules may use prescribed categories and should be prepared separately.

Suppose ₹10,000 of the 31–60-day balance is disputed. It is already included in ₹1,50,000. Adding it again would incorrectly show ₹1,60,000. Track “disputed” as a status attached to the invoice, alongside its ageing bucket.

Give each obstacle a different response

Run a focused collection meeting

1. Review the largest overdue balances and any amount crossing a risk threshold.
2. Confirm the unresolved issue and the evidence needed.
3. Record who will act, the next contact and the promised payment date.
4. Distinguish a customer promise from a verified bank receipt.
5. Review whether further credit should continue under the agreed policy.

Do not judge the team only by how many calls were made. Review verified cash received, disputes resolved and commitments missed. A ledger balance reduced by a credit note or write-off is not a collection. Keep approved settlements and accounting adjustments visible in a separate bridge.

Look beyond total overdue value

Concentration matters: the same ₹1,50,000 spread across many customers creates a different exposure from one customer owing the entire amount. Compare due balances, credit limits and recent payment behaviour. A healthy average collection period can hide a few seriously overdue accounts.

Questions that often come up

Should we stop supply immediately? Review contract terms, credit policy, commercial consequences and the facts. No single overdue-day threshold fits every customer.

Can we add interest automatically? Interest entitlement depends on the agreement and applicable law. The report itself does not create that right. See the separate MSME payment-rule guide where relevant.

Should an old balance be written off? Age is a warning, not the whole recoverability assessment. Obtain evidence and approval; tax treatment is a separate question.

Your next practical step

Take the ten largest overdue invoices. Give each one a confirmed balance, cause, owner and next event. Review progress against those commitments, rather than sending the same reminder to everyone.

Sources

• Credit terms, monitoring and collections — ACCA ↗
• Working-capital relationships — ACCA ↗

Decide who provides each record

Set an internal timetable that fits transaction volume and the availability of records. Identify who supplies sales, purchases, payroll, inventory and bank information, who posts adjustments, and who reviews the finished accounts. A five-day close is not automatically better than a seven-day close if the shorter process misses important costs.

Follow the balances before the headline profit

Cut-off means recording a transaction in the period to which it belongs. A payment date alone does not settle that question. For example, a service already received may need to be recognised even though the supplier’s bill is still awaited; assess the evidence and the accounting basis.

Why payment and expense can differ

Accrual accounting recognises income and expenses in their relevant period. An accrual records an incurred amount not yet paid or billed. A prepayment is an amount paid for a benefit that relates to a future period. These are ordinary timing concepts; they are not permission to invent costs or inflate assets.

A fictional monthly profit correction

A simple management report shows ₹50,000 profit. It charged the entire ₹24,000 annual insurance premium to the first month of cover, although only ₹2,000 relates to that month. It omitted ₹6,000 of supported service costs already incurred and ₹4,000 of applicable period depreciation. Assume the report uses accrual accounting and all other figures are correct.

The correction is ₹50,000 + ₹22,000 − ₹6,000 − ₹4,000 = ₹62,000. It does not create cash. The corresponding balance-sheet effects must also be recorded: a remaining prepayment, a payable and depreciation against the asset. This is a limited illustration, not a complete financial statement or tax computation.

Keep a controlled adjustment log

• Record the reason, amount, period, evidence and preparer for each adjustment.
• Have an appropriate reviewer approve significant or unusual entries.
• Identify entries requiring later reversal, replacement by an actual bill or reassessment.
• Keep the original record and correction trail; avoid unexplained deletion.
• Compare final reports with the previous month and investigate unusual movements.

Questions that often come up

Can we close with some missing information? Sometimes estimates are necessary, but state their basis, uncertainty and responsible owner. A material unexplained gap should not silently become a final figure.

Should we lock the period? An approved period lock can reduce accidental changes. A controlled reopening process is still needed when a valid correction is identified.

Does closing mean GST and income-tax returns are correct? No. Reconciliations help, but tax eligibility, adjustments and filing requirements need their own checks.

Make the output short and useful

Finish with the profit-and-loss statement, balance sheet, cash position and an action list. Explain the three largest unusual movements and what management should do next. Link unresolved items to the person responsible and a target date. Start with the bank reconciliation guide if the cash balance itself is uncertain.

Sources

• Period adjustments, accruals and prepayments — ACCA ↗
• Cut-off, accuracy and classification — ACCA ↗

First, open the relevant year under “View Filed Returns” on the official Income Tax portal. Read the processing history and any notices. A refund claimed in your return is different from a refund determined by the department.

Your status tells you what to do

A simple refund example

Assume your eligible tax credits are ₹57,000 and final tax liability is ₹41,000. The refund claimed is ₹16,000. This fictional calculation assumes the credits are correctly reported and no other adjustment is needed.

If the department determines ₹16,000 but properly adjusts ₹6,000 against a demand, the balance is ₹10,000. A lower receipt therefore does not always mean a bank failure.

1. Check verification first

The general verification period is 30 days from filing. Late verification can change the date treated as the filing date and produce applicable late-filing consequences. Where relevant, check the condonation procedure; acceptance is not automatic.

Uploading an ITR is not the same as verifying it. A confirmation that it is verified is not confirmation that processing is finished.

2. If processing is pending

Check notices, pending actions and registered email. Compare the return with Form 26AS, relevant AIS information, TDS certificates and challans where needed. These records serve different purposes; reconcile differences rather than assuming every AIS entry is taxable income.

For example, if an employer’s certificate shows ₹57,000 TDS but the department’s credit record shows ₹47,000, a bank-account change will not resolve the missing credit. The deductor’s filing may need correction. Keep evidence and avoid claiming the same credit twice.

Department guidance gives an indicative four-to-five-week period for refund credit following verification. It is not a guaranteed deadline. If a delay remains unexplained after status and communication checks, use the official grievance facility with the relevant year and acknowledgements.

3. If payment failed

Read the actual failure reason. Common issues include an unvalidated or closed bank account, a name mismatch, an incorrect IFSC or an inoperative PAN where linking requirements apply. Respect applicable PAN–Aadhaar exemptions.

1. Check account details under My Profile → My Bank Account and complete validation.
2. Open Services → Refund Reissue → Create Refund Reissue Request.
3. Select the eligible failed-refund record and an eligible validated bank account.
4. Complete verification and retain the transaction ID.

The portal manual controls if menu labels change. Refund reissue delivers a failed payment; it does not recalculate income, add missing credits or cancel a demand.

4. If a demand is involved

Open Pending Actions → Response to Outstanding Demand and examine the year, amount and underlying order. Compare previous payments, orders and rectification outcomes before selecting agreement, disagreement or partial disagreement.

A proposed adjustment requires attention to the communication and response period. For cases governed by the 1961 Act, Section 245 is relevant. A demand already adjusted may require the appropriate further remedy; merely changing a bank account will not undo it. Do not agree solely because a demand appears on screen.

Which law and year should you check?

The Income-tax Act, 2025 commenced on 1 April 2026. Income for FY 2025–26, reported for AY 2026–27, remains under the 1961 Act and its transition provisions. Tax year 2026–27 falls under the new Act. Processing a refund after April 2026 does not by itself move an older year to the new law.

Keep these records ready

PAN, relevant year, return acknowledgement, verification record, computation, processing intimation, tax-credit evidence, challans, bank validation details and any demand or refund-failure communication.

Common questions

Should I file another return because the refund is late? Delay alone is not a reason. First identify the status; a revised return has its own legal conditions and deadlines.

Can another account receive the refund? The reissue procedure permits selection of an eligible validated account. Follow the live portal’s conditions.

When does professional review help? Where there is a substantive adjustment, disputed credits, a prior-year demand or a notice with a response deadline. The remedy depends on the order and year.

Your practical next step: save the status and processing intimation, identify the matching row in the table, and follow that route.

Sources

• Refund status manual ↗
• Refund reissue manual ↗
• Verification time limit ↗
• Demand response ↗
• New Act and transition ↗

Define the activity and time period

Ask what is changing: units produced, batches, machine hours, deliveries or customers served. Then choose a period and an operating range. A monthly rent can be fixed for the next month but change when a lease expires. A setup charge may stay the same for a batch while total setup cost rises with the number of batches.

A fictional unit-cost comparison

Assume monthly rent is ₹30,000 and variable material cost is ₹80 per unit. The factory can produce either 1,000 or 2,000 units without extra rent or other step costs. Ignore all other costs solely for this illustration.

The second case costs ₹80,000 more in total, but average included cost falls from ₹110 to ₹95 because the same rent is spread over more units. This is not evidence that producing more will always increase profit: selling prices, demand, unsold stock, capacity and other costs still matter.

Do not confuse behaviour with traceability

Direct means a cost can be traced economically to the chosen product, job or activity. Variable describes how it changes with activity. A salaried person dedicated to one department can be direct to that department and fixed over the month. Shared power can be indirect to one product while having a usage-driven component. See CAS-1: Classification of Cost for those separate dimensions.

Use the classification for the right decision

Contribution analysis subtracts the relevant variable costs from revenue, leaving an amount to cover fixed costs and profit. A full cost statement can include allocated fixed costs for a different purpose. Do not mix a full cost per unit containing rent with a contribution calculation that subtracts the same rent again.

For one additional order, ask which future cash flows change, whether extra fixed costs arise and whether another opportunity is displaced. For long-term pricing, examine how the business covers its overall cost base. Neither “all fixed costs are irrelevant” nor “every allocated cost changes with this order” is a safe general rule.

Questions that often come up

Are wages always variable? No. Review employment terms, overtime and staffing thresholds. The relationship may differ across employees and periods.

Is depreciation always a cash payment this month? No. It is an allocation of asset cost. Cash investment and depreciation affect decisions and reports differently.

Can I estimate behaviour from two months alone? Treat that cautiously. Price changes, seasonality, product mix, maintenance and abnormal events can distort the comparison.

Your next practical step

Classify your ten largest costs using an activity, time period and operating range for each. Document uncertainty, then test the classification against actual records before relying on it for a major quote or expansion decision.

Sources

• Cost-volume-profit assumptions — ACCA ↗
• Relevant costs for decisions — ACCA ↗
• CAS-1 and CAS-3 — ICMAI ↗

Start with net sales excluding GST. Subtract the costs caused by those sales. Then check whether the balance covers fixed expenses. A marketplace bank payout is not a profit figure.

Follow one fictional order

Assume this is a retained order: the customer keeps the goods and the sale remains valid. All amounts below use a consistent tax basis: eligible recoverable GST is excluded; non-recoverable taxes remain in the relevant cost.

Contribution means the amount left to cover fixed and other remaining expenses. ₹100 ÷ ₹500 = 20% contribution margin. It is not necessarily 20% net profit.

The example assumes fixed production overhead is not hidden in the ₹250 product figure. If you use a full product cost that already contains fixed overhead, adjust the model before subtracting monthly fixed expenses again.

Why the payout is different

A settlement may deduct commission, shipping, refunds, GST TCS, income-tax TDS and temporary reserves. Some are expenses, some are tax credits and some are timing differences.

Where Section 52 GST TCS applies, the notified combined rate is 0.5%: 0.25% CGST plus corresponding SGST/UTGST, or 0.5% IGST. The mechanism has conditions; do not apply it indiscriminately to every online transaction. Section 9(5) arrangements require separate analysis. Income-tax provisions also need the correct year and law.

Returns cost more than the refund—but not always the full product cost

Review outward freight that is not refunded, reverse freight, unrecovered fees, damage and handling. Deduct reimbursements and account for saleable stock recovered.

If 100 shipped orders yield 90 retained orders, and the ten returned orders create ₹900 of net losses, an allowance is ₹900 ÷ 90 = ₹10 per retained order. This is an average for that order group, not a charge actually incurred on each retained order.

If returned stock can be sold again, do not write off its entire purchase cost as well as keeping it in inventory. Avoid deducting the same shipping or fee twice.

Check advertising using the right denominator

₹7,000 spent on advertising that produces 200 retained orders gives ₹35 per retained order for that campaign. It is not automatically the cost of acquiring one new customer. Repeat customers, organic orders and the attribution method affect that measure.

Separate campaign-variable advertising from a fixed monthly marketing budget when preparing break-even calculations.

Calculate break-even only after cleaning the costs

Assume monthly fixed expenses are ₹25,000, with no amounts already charged in the ₹400 variable cost pool. At ₹100 contribution per retained order:

Break-even = ₹25,000 ÷ ₹100 = 250 retained orders.

At ₹50 contribution, it becomes 500. At zero or negative contribution, increasing volume does not produce a normal positive break-even under this model. The example assumes a stable product mix and costs within the relevant output range.

Markup, margin and discounts

Adding 20% to ₹400 cost produces ₹480 sales and ₹80 difference. That is a 16.67% margin on sales, not 20%.

To receive ₹500 after a seller-funded 10% discount, the pre-discount price must be ₹500 ÷ 90% = ₹555.56, approximately. This is an ex-GST illustration; real customer prices also depend on tax, marketplace fee bases and promotion terms. Fees linked to price must be recalculated when the price changes.

Track these each month

Net sales, variable cost, contribution, net return losses, fixed expenses and settlement differences. Compare by product and channel. Reconcile orders, credit notes, stock, invoices, settlements, tax credits and bank receipts.

Your practical next step: analyse one product for one month using the table above. Run a promotion case with lower realised price and a stress case with more returns before accepting the campaign.

Sources

• GST Council: Notification 15/2024–Central Tax ↗
• Government explanation of the TCS reduction ↗
• CBIC GST portal ↗ — CGST Act Sections 9(5) and 52; read with later amendments
• Income Tax Department ↗ — applicable e-commerce deduction and tax-credit guidance for the relevant year

Know what the original budget assumed

Record planned output, selling prices, input quantities, rates and fixed costs. Identify what changes with activity and what is expected to remain fixed within the relevant operating range. A budget is a model of assumptions, not just last year’s expenses with a percentage added.

A fictional material-cost comparison

Assume one finished unit requires one kilogram of material, with no yield loss. Budgeted output is 1,000 units at ₹50 per kilogram. Actual output is 1,200 units, using exactly 1,200 kilograms purchased at ₹52. All figures use the same tax and cost basis.

Actual cost is ₹12,400 above the original budget, but ₹10,000 relates to producing 200 additional units. The remaining ₹2,400 reflects the higher rate under these assumptions. Calling all ₹12,400 “waste” would be wrong. If actual material quantity also differed from the requirement for 1,200 good units, a separate consumption or yield analysis would be needed.

Do not flex every cost automatically

A flexed budget asks what the budget would have been at the actual activity level. A monthly rent assumed fixed within the operating range should not rise merely because output rises. A new shift, extra premises or capacity threshold may create a step increase. Document that operational change rather than fitting every item into one linear formula.

Use a consistent sign convention

State whether the report calculates actual minus budget or budget minus actual. Then label the business effect as favourable, adverse or requiring explanation. A plus sign alone is ambiguous: extra revenue and extra expense have different implications. If the comparison budget is zero, a percentage difference is undefined; show the rupee movement and explain it.

Write commentary that leads to action

Questions that often come up

Is spending less always good? No. Lower maintenance spending may defer necessary work. Lower material spending may reflect lower output or quality. Review the operating result as well as expense.

Should we rewrite the budget when results are poor? Preserve the approved baseline. A revised forecast can be useful, but should not erase the record against which performance is assessed.

Does this replace detailed standard-cost analysis? No. The example isolates one volume and one price effect. Real businesses may need product mix, yield, labour and capacity analysis.

Your next practical step

Choose one material or expense line with a significant difference. Reconstruct its original assumptions, adjust only the appropriate activity component and document the residual cause. Link the conclusion to a purchasing, pricing or process action.

Sources

• Flexible and flexed budgets — ACCA ↗
• Cost behaviour and activity assumptions — ACCA ↗

Start with three matching details

Use the same bank account, currency and closing date. Compare the statement balance with the corresponding bank ledger, not with total cash across all accounts. A current-account available balance may also reflect holds or borrowing limits; establish what the bank figure represents. The worked example below uses positive deposit balances, not an overdraft.

Put each difference in the right category

A fictional reconciliation, step by step

Assume the books show ₹3,00,000. Bank charges of ₹1,500 and interest income of ₹400 have not been recorded. The books also include a ₹30,000 deposit not yet credited and a ₹20,000 issued cheque not yet presented.

The updated books remain ₹2,98,900. The ₹10,000 net timing difference explains why the statement shows ₹2,88,900. Do not record another ₹10,000 expense to force agreement. When the pending items clear, they should disappear from the reconciliation without duplicating the original book transaction.

Make the checking process repeatable

1. Begin with the previous approved reconciliation and identify items still open.
2. Match receipts and payments using amount, date and transaction reference.
3. Inspect one-to-many settlements: a platform payout may contain several invoices and deductions.
4. Record supported book corrections, then prepare the remaining timing bridge.
5. Assign an owner and next review date to each unresolved item.

Old outstanding items need evidence

A deposit described as “in transit” for several months needs follow-up. An old cheque may have expired, been cancelled or been replaced. Establish what actually happened before changing the bank ledger or the amount owed to the supplier. A clearing account can temporarily organise identified settlements; it should not become a permanent hiding place for differences.

Questions that often come up

Does agreement prove there is no error? No. Offsetting mistakes can cancel numerically. Review the individual transactions and unusual entries as well as the final total.

Should every customer receipt be booked as fresh sales? No. It may settle an existing invoice, be an advance or relate to another transaction. Identify it before posting.

Can I reconcile only at year-end? Monthly reconciliation is a useful starting routine; high transaction volumes or risk may justify more frequent checks. This is a management recommendation, not a universal statutory frequency.

What to prepare for a review

Keep the statement, bank ledger, previous reconciliation, payment references, deposit evidence and an unresolved-item list. A clear explanation supported by records is more useful than an unexplained zero difference. For a wider record review, see our month-end closing guide.

Sources

• Bank reconciliation principles — NCERT material on IIT Kanpur’s SATHEE platform ↗
• Accounting accuracy and reconciliation checks — ACCA ↗

Make the report explainable

Choose a review date and define the age basis: receipt date, batch date or last movement. A transfer between stores can make an old item appear new if the report measures only the latest posting. Reconcile total quantity and value to the stock records, then check a sample against physical stock and supporting receipts.

Ask four questions about each material item

Can it be used against a confirmed requirement? Is its physical condition acceptable? Is there a realistic sale or return route? Who will decide the next action and by when? For a trading business in Vellore or a manufacturing unit in Ranipet, these questions can turn an unread spreadsheet into a monthly operating discussion.

Keep value assessment separate from age bands

AS 2 measures inventory at the lower of cost and net realisable value. Net realisable value considers estimated selling price less completion and selling costs. An age band alone does not establish that value. Keep evidence such as recent comparable sales, completion estimates and disposal quotations. Apply the relevant accounting framework, including the specific treatment of materials held for production.

For example, a discontinued finished item has a recorded cost of ₹50,000. Supported expected selling proceeds are ₹43,000 and necessary selling costs are ₹3,000, with no further completion cost. The illustrated net realisable value is ₹40,000. That assessment comes from evidence, not an automatic “over 180 days” percentage. The figures are fictional and do not establish a policy for every stock category.

Give the report an owner

Classify actions as use, return, rework, sell, investigate or retain with a recorded reason. Assign a responsible person and target date. Review whether the last month’s decisions happened before adding another list of old stock. Separate management actions from any accounting adjustment; authorised review is needed for both.

Use the downloadable ageing register for a focused review. Do not upload customer drawings, confidential price lists or inventory files through the general website enquiry form.

தமிழ் சுருக்கம்

நீண்ட நாட்களாக நகராத சரக்குகளுக்கு இருப்புக் காலப் பட்டியல் (Stock Ageing Report) மட்டும் போதாது. தேவை, நிலைமை, உரிமை மற்றும் மீட்கக்கூடிய மதிப்பை ஆய்வு செய்து, ஒவ்வொரு முக்கியப் பொருளுக்கும் நடவடிக்கை, பொறுப்பாளர் மற்றும் மறுஆய்வு தேதியை நிர்ணயியுங்கள்.

Practical next step

Download the related blank worksheets and record the assumptions and follow-up actions.

Sources

• ICAI — Accounting Standard 2, Valuation of Inventories ↗

Start with a comparable requirement

For an engineering unit in Ranipet or a fabricator serving customers around Chennai, write down the quantity, specifications, acceptable rejection level and delivery period first. A lower quote is useful only if it buys an equivalent usable component. Obtain freight, inspection, tooling and minimum-order terms before comparing prices.

Build two decision columns

For in-house production, include the variable costs of the required quantity and fixed spending that can genuinely be avoided during the decision period. If the same capacity could earn a contribution from another confirmed opportunity, include the contribution sacrificed. Do not invent an opportunity cost simply because a machine has a rated capacity.

For buying, include the supplier price and the additional costs caused by outsourcing. Keep costs that continue under both options outside the comparison. Check taxes separately on a consistent recoverability basis.

A worked example

Consider 1,000 components. In-house variable cost is ₹80 each and avoidable fixed spending is ₹10,000. Relevant making cost is therefore ₹90,000. Buying at ₹85 each, plus ₹3,000 of additional receiving and inspection costs, totals ₹88,000. Buying is lower by ₹2,000 under these assumptions. If no fixed spending can actually be avoided, making instead costs ₹80,000 and becomes the lower-cost option. This is an illustration, not a client result.

Record what the numbers leave out

Review supplier reliability, confidentiality of drawings, customer approvals, rework responsibility and whether restarting production later would be difficult. Compare an order-sized decision with the same period of costs; do not mix annual overhead with a single batch.

Before deciding, keep the supplier quotation, a short calculation of avoidable costs and the production manager’s capacity assessment together. Use the make-or-buy worksheet to document the assumptions. Where the result is close, test a change in rejection rates or delivery costs rather than treating a small calculated difference as a guaranteed saving.

தமிழ் சுருக்கம்

நிறுவனத்திலேயே உற்பத்தி செய்வதா அல்லது வெளியிலிருந்து வாங்குவதா? இரு முடிவுகளுக்கிடையே மாறும் செலவுகளை ஒப்பிடுங்கள். தவிர்க்கக்கூடிய நிலையான செலவுகளையும், உண்மையான மாற்றுப் பயன்பாட்டால் இழக்கும் பயனையும் சேர்த்துப் பாருங்கள். தரம், விநியோக நேரம் மற்றும் பயன்படுத்தக்கூடிய திறனையும் கவனிக்க வேண்டும்.

Practical next step

Download the related blank worksheets and record the assumptions and follow-up actions.

Explore the engineering quotation decision room. Its examples are fictional and should be adapted to your own records.

Sources

• ACCA — Relevant costs ↗

Put both quotations on the same basis

Record the material specification, quantity, unit of measurement, delivery location and commercial terms. A kilogram, a roll and a finished usable piece are not interchangeable measures. If quotations use different units, document the conversion and check it against the specification.

Separate purchase cost from payment amount

AS 2 includes directly attributable purchase costs and deducts trade discounts and rebates; taxes subsequently recoverable are excluded. Whether a particular GST amount is recoverable requires a separate eligibility review. Do not assume that every tax shown on an invoice is either a cost or an available credit.

The accompanying calculator therefore asks for the supplier amount before separately identified recoverable taxes, a confirmed discount, freight, reviewed non-recoverable taxes, other directly attributable acquisition costs and usable quantity. It does not decide tax eligibility or replace the entity’s applicable accounting framework.

A worked purchase comparison

Supplier A charges ₹1,00,000 for 1,000 usable units. A confirmed discount of ₹2,000, freight of ₹4,000 and directly attributable inspection of ₹1,000 give a comparison cost of ₹1,03,000, or ₹103 per unit. Supplier B quotes ₹101 per unit delivered for the same 1,000 usable units, with no other acquisition costs in this illustration. Supplier B is lower by ₹2 per usable unit, although A’s starting price was ₹100. All amounts here use the same tax basis.

Check the unusual items separately

Do not quietly spread abnormal losses or penalties across the accepted quantity. Investigate and classify them. AS 2 excludes abnormal waste and selling costs from inventory cost. Entities applying Ind AS must follow their applicable framework instead.

Keep a quotation comparison sheet with the purchase order. At receipt, compare ordered, received, rejected and accepted quantities. At invoice approval, verify the freight agreement and discount actually available. If the inputs change, update the comparison before treating the original result as a permanent standard cost.

தமிழ் சுருக்கம்

விலைப்புள்ளியில் (Quotation) உள்ள அடிப்படை அலகு விலை (Unit Price) மட்டும் போதாது. தள்ளுபடி, சரக்குப் போக்குவரத்துச் செலவு, பொருந்தும் மீட்க முடியாத வரிகள் மற்றும் பயன்படுத்தக்கூடிய அளவைச் சேர்த்து ஒப்பிடுங்கள்.

Practical next step

Download the related blank worksheets and record the assumptions and follow-up actions.

Sources

• ICAI — Accounting Standard 2, Valuation of Inventories ↗

Identify the actual alternative

Confirm the discount applies to the amount being compared and that payment on the discount date will qualify. Count the days between that payment and the normal contractual payment date. Do not use an overdue or legally impermissible payment date as the source of extra credit. Any applicable MSME payment obligations need separate consideration.

Work through the example

On a comparable ₹1,00,000 amount, a 2% discount means paying ₹98,000 on day ten instead of ₹1,00,000 on day thirty. Keeping ₹98,000 for those twenty extra days costs ₹2,000, a period cost of approximately 2.0408%. A simple annualised comparison is about 37.24%. An effective annualised comparison is about 44.59%, assuming the same arrangement could repeat and compound throughout a 365-day year. That repetition is a mathematical assumption, not a predicted annual expense.

Compare rates on the same basis

Do not compare an effective annual figure with a borrowing rate that excludes fees and then declare a saving. Consider the actual funding period, charges, available limit, security terms and cash needs elsewhere in the business. If paying early leaves insufficient cash for wages or an essential purchase, the discount percentage alone does not settle the decision.

The accompanying tool displays both annualised measures and the days accelerated. It does not recommend taking a loan, changing agreed terms or delaying statutory payments. For irregular purchases, examine the rupee amount and cash dates first; an annualised percentage can look dramatic even when the transaction is small.

Keep the decision traceable

Save the supplier’s written terms and evidence that the discount will be accepted. Confirm the invoice and tax documentation needed for the arrangement. Use the result alongside the existing working capital cycle tool, then record why taking or declining the discount suits the business’s actual cash position.

தமிழ் சுருக்கம்

முன்கூட்டியே பணம் செலுத்தும் தள்ளுபடியை மதிப்பிடும்போது, கிடைக்கும் தள்ளுபடியுடன் எத்தனை நாட்கள் முன்பே பணம் செலுத்த வேண்டும் என்பதையும் பார்க்க வேண்டும்.

Practical next step

Download the related blank worksheets and record the assumptions and follow-up actions.

Sources

• ACCA — Accounts receivable management ↗

Dyeing, bleaching, printing and finishing units in Tiruppur, Erode and Karur mostly work on fabric that belongs to someone else, for a rate per kilogram. The rate has to cover dyes, steam, water, effluent treatment and the batches that come back for reprocessing.

GST on job work, and the credit that builds up

A unit that buys dyes and chemicals at 18% and bills job work at 5% builds up input credit. A refund under the inverted-rate rule is limited to credit on input goods, and views differ on how it applies to job work, so take advice before making or relying on a claim.

Job-work procedure. The owner of the fabric sends it on a delivery challan without tax. Goods that do not come back within the time limit are treated as a supply. The owner reports the movements in Form ITC-04.

Zero liquid discharge

Dyeing and bleaching units in Tiruppur have had to run with zero liquid discharge since the Madras High Court's orders, and most treat their effluent through common effluent treatment plants. The Pollution Control Board's consent conditions for a unit decide what it must treat and recover. For costing, the point is that treatment is part of the cost of every kilogram processed.

TDS and export schemes

Customers who pay processing charges deduct TDS at 1% or 2% as for a contractor. Match what was deducted with your annual tax statement (Form 168) each quarter, and investigate missing entries with the deductor before claiming credit under the applicable rules; a reporting mismatch needs correction and evidence.

Garment and made-up exporters claim rebates under the RoSCTL (Rebate of State and Central Taxes and Levies) and RoDTEP (Remission of Duties and Taxes on Exported Products) schemes. Both have been extended in stages by notification: RoSCTL to 30 September 2026 or until its scheme for the next Finance Commission cycle is approved, and RoDTEP to 31 December 2026. Check the current end date before quoting a rebate in a price. A processor's rates are often negotiated against what the exporter earns, so it helps to know the rebate rates.

Cost records and cost audit

The Companies (Cost Records and Audit) Rules, 2014 list yarn and woven fabrics under textiles. Knitted fabric and garments are not in the listed headings, and a job worker's processing charge is not a listed product. A company that makes listed yarn or fabric is covered once it crosses the turnover limits. The Cost Audit Applicability Checker works through the tests. The cost audit page sets out the limits, forms and dates.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025 and the Companies (Cost Records and Audit) Rules, 2014.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular unit. Refund of accumulated credit in particular depends on the facts and on how the rule is applied.

Sources

• Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025, CBIC ↗
• Rule 89 of the CGST Rules: refunds, CBIC ↗
• Common effluent treatment plants in Tiruppur, Tamil Nadu Textiles Department ↗
• Extension of the RoSCTL scheme, notified April 2026, Press Information Bureau ↗
• Extension of the RoDTEP scheme to 31 December 2026, Press Information Bureau ↗
• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗

GST

The monthly cycle, kept reconciled.

• GST registration and amendments
• GSTR-1 and GSTR-3B filing
• GSTR-2B reconciliation and ITC review
• Annual return GSTR-9 and reconciliation statement GSTR-9C
• E-invoice and e-way bill support
• Refund applications

TDS & TCS

Deduction, deposit, return, reconciliation.

• Quarterly TDS and TCS statements
• Reconciliation with books and challans
• Form 130 and Form 131 certificates (earlier Form 16 and Form 16A)
• Correction statements and default resolution
• Lower deduction certificate support
• Review of payments to micro and small suppliers under the 45-day payment rule

Income tax

Filing, and the questions that follow.

• Returns for companies, firms, LLPs, proprietorships and individuals
• Advance tax computation
• Reconciliation of Form 26AS and AIS (Form 168 from tax year 2026-27) before filing
• Responses to notices and intimations
• Representation before income-tax authorities as an authorised representative
• Rectification and refund follow-up

Company, LLP & other filings

Annual and event-based filings with the Ministry of Corporate Affairs (MCA), certified where the law permits.

• Annual filings: AOC-4 and MGT-7/7A with supporting schedules
• Director filings: DIR-12, DIR-3 KYC and DIR-6
• Capital and securities: PAS-3 and SH-7
• Charges: CHG-1, CHG-4 and CHG-9
• Registered office and resolutions: INC-22, MGT-14 and INC-28
• Auditor and managerial: ADT-1, MR-1 and MR-2
• Dormant and general filings: MSC-1, MSC-3, MSC-4 and GNL-3
• LLP Form 8, Form 11 and event-based filings
• Professional tax, Udyam and State registrations
• Compliance calendar for the year

Can a Cost Accountant handle our GST and income tax work?

Yes, for registration, returns, reconciliations, replies to notices and representation. Cost Accountants are recognised as authorised representatives under the GST law, and may appear before income-tax authorities as authorised representatives. Reports the law reserves for a Chartered Accountant, such as the tax audit report, are not undertaken; we prepare the workings and coordinate with your Chartered Accountant where one is required.

What changed in GST rates, and does it affect our invoicing?

From 22 September 2025, the 12% and 28% slabs were removed, leaving 5% and 18% as the main rates, with a 40% band for specified luxury and demerit goods. Rate masters, price lists and billing software needed updating from that date, and credit notes for earlier supplies carry the original rate.

Which MCA forms can you certify and file?

The forms a Cost Accountant in whole-time practice may pre-certify include INC-22, INC-28, PAS-3, SH-7, CHG-1, CHG-4, CHG-9, MGT-14, DIR-6, DIR-12, ADT-1 and GNL-3. Some forms, such as AOC-4 and the annual return, name the professionals who may certify them. We prepare and file these returns, and where the form calls for another professional's certification we coordinate it.

Paying micro and small suppliers

The MSME 45-day payment rule article sets out the payment deadlines, the interest and the tax consequences of paying a micro or small supplier late.

Laws

CGST/SGST Acts, 2017; Income-tax Acts, 1961 and 2025; Companies Act, 2013; LLP Act, 2008

Filing requirements, forms and due dates change from time to time, and the position applicable to a business is assessed on its own facts. Certifications reserved by law for other professionals are coordinated with them rather than undertaken by the firm.

A sugar mill buys cane at a price set by the government, sells sugar under a monthly release quota, and makes the rest of its money from molasses, ethanol, bagasse and power. Costing has to carry all of them at once.

Cost records and cost audit

Sugar and industrial alcohol are in Table A of the Companies (Cost Records and Audit) Rules, 2014, the list for regulated sectors, under tariff headings 1701, 1703 and 2207. For a sugar company:

Micro and small enterprises are outside the cost-records rule.

The rules apply to companies. Co-operative sugar mills are governed by their own law, though the same costing serves them equally. The cost audit page sets out the forms and dates.

Prices set by the government

Tamil Nadu adds a State incentive to the central price. Cane cost per tonne therefore has to be taken from the season's government order, not from the central figure alone.

GST

Because electricity is exempt, a mill that sells power has to reverse part of its common input credit.

TDS on common payments

Whether the purchase-of-goods TDS applies to cane bought from farmers needs advice, as for other farm produce. The TDS & TCS Checker works out the rate and dates for a payment.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025 and the Companies (Cost Records and Audit) Rules, 2014.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular mill. Prices and quotas are changed by government order during the season.

Sources

• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
• Cabinet approves cane FRP of ₹365 a quintal for the 2026-27 season, Press Information Bureau ↗
• Cabinet approves cane FRP for the 2025-26 season, Press Information Bureau ↗
• Notification 17/2023-Central Tax (Rate): molasses ↗
• GST Council, 56th meeting press release ↗
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗

A rice mill works on a thin margin per quintal. The result turns on how much head rice each quintal of paddy gives and on what the bran, brokens and husk fetch. It also turns on the cost of holding paddy bought in a few weeks and milled over months.

GST on rice, by-products and milling

The 25 kg line is applied to each package, so several small labelled packs inside a larger sack remain taxable. The rates on rice, bran and husk were not changed in September 2025.

Hulling for a government agency under the public distribution system has been treated as exempt in some cases. Whether that applies depends on the agency and the contract, so check it before billing; otherwise the 5% rate applies.

Hulling for government agencies

Mills that hull paddy for a government agency are paid a hulling charge and must hand back rice at a fixed out-turn. The central norm is 67% for raw rice and 68% for parboiled rice. A mill that recovers less makes up the shortfall from its own pocket, so the recovery it actually achieves needs measuring lot by lot.

TDS and cash payments

Whether the purchase-of-goods TDS applies to paddy bought directly from farmers is not settled by a clear exemption, so take advice on it. The ₹10,000 limit on cash payments has an exception for agricultural produce bought from the grower; keep the purchase records that show it. The TDS & TCS Checker works out the rate and dates for a payment.

Cost records and cost audit

Rice is not among the products listed in the Companies (Cost Records and Audit) Rules, 2014. Edible oils are listed, so a company that makes rice bran oil is covered for that product once it crosses the turnover limits. The Cost Audit Applicability Checker works through the tests. The cost audit page sets out the limits, forms and dates.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025 and the Companies (Cost Records and Audit) Rules, 2014.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular mill. The GST position on packed rice and on hulling for government agencies turns on the packing and the contract.

Sources

• CBIC Circular 19/19/2017-GST: milling of paddy ↗
• CBIC Circular 153/09/2021-GST: milling for the public distribution system ↗
• FAQs on GST on pre-packaged and labelled goods, Press Information Bureau ↗
• Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025 (rice bran, heading 2302), CBIC ↗
• CAG report on procurement and milling of paddy: out-turn norms ↗
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗
• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs

Ranipet, Vellore, Ambur and Vaniyambadi tan hides, finish leather and make footwear, much of it for export. Profit depends on how much saleable leather each hide gives, on work passed between tanneries and footwear units, and on money that comes back months after it goes out.

GST after the 2025 rate changes

From 22 September 2025, finished leather and footwear up to ₹2,500 a pair moved from 12% to 5%.

The rate on footwear follows the sale value of each pair, so the same article can fall on either side of the line depending on its price. Rates on leather goods such as bags, belts and wallets vary by product, and need checking against the tariff heading.

Exports are zero-rated: the exporter either ships without charging tax under a letter of undertaking and claims a refund of input tax, or pays tax and claims it back. Which route leaves less money locked up depends on the credits the unit carries.

TDS and TCS on common payments

Whether trimmings and shavings are “scrap” for TCS depends on whether they can be used as such, so it needs checking for each kind of waste. The TDS & TCS Checker works out the rate and dates for a payment or sale.

Cost records and cost audit

Leather, leather goods and footwear are not among the industries listed in the Companies (Cost Records and Audit) Rules, 2014, so the rules do not require cost records or a cost audit for them. A company that also makes a listed product, such as rubber or plastic items under the listed tariff headings, is covered for that product. The Cost Audit Applicability Checker works through the tests.

The costing itself is useful with or without the rule: it is what yield control, job-work rates and export pricing rest on.

Paying small suppliers and job workers

Many job workers and small suppliers are registered on Udyam as micro or small enterprises. They have to be paid within the agreed period, and never more than 45 days after acceptance, or within 15 days where nothing was agreed in writing. An amount paid late is allowed as an expense only in the year it is actually paid (Section 37(2)(g), earlier 43B(h)). The MSME Payment Checker works out the dates for each invoice. The article on the MSME 45-day payment rule explains the rule in full.

Export credits

Exporters can claim duty drawback and credit under the RoDTEP (Remission of Duties and Taxes on Exported Products) scheme. Both are income of the order and belong in its costing. The scheme has been extended in stages by notification, so check that it is running, and at what rate, when you quote.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025, the MSMED Act, 2006 and the Companies (Cost Records and Audit) Rules, 2014.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular business. GST rates in particular depend on the tariff heading of each product and, for footwear, on its sale value.

Sources

• Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025, CBIC ↗
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗
• Section 394 of the Income-tax Act, 2025: TCS, Income Tax Department ↗
• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs

It applies to every listed company. An unlisted public company is covered if, in the preceding financial year, it had paid-up capital of ₹50 crore or more, turnover of ₹200 crore or more, borrowings from banks or public financial institutions above ₹100 crore at any time, or deposits of ₹25 crore or more. A private company is covered only by two tests: turnover of ₹200 crore or more, or borrowings above ₹100 crore at any time. The borrowing test looks at any point during the year, not just the closing balance.

Can a Cost Accountant be appointed as internal auditor?

Yes. Section 138 names a Chartered Accountant, a Cost Accountant, or such other professional as the Board decides. The internal auditor may be an individual, a firm or a body corporate, and may or may not be an employee of the company.

Can our statutory auditor also do our internal audit?

No. Section 144 lists internal audit among the services a statutory auditor cannot provide to the company it audits, directly or indirectly.

Laws and guidance

Companies Act, 2013 (Section 138) and the internal audit guidance of the Institute of Cost Accountants of India (ICMAI)

Applicability of Section 138 depends on the company's class and figures for the preceding financial year, and is assessed case by case. Engagements are accepted only where independence requirements are met.

Most of a hospital's income is exempt from GST, many of its prices are set by insurers and government schemes, and much of its cash waits with them. That makes costing, credit and receivables work differently from the way they do in most businesses.

GST: what is exempt and what isn't

Healthcare services by a clinical establishment, an authorised medical practitioner or paramedics are exempt from GST. Around that exemption sit several items that are taxable, and the split decides how much input tax credit the hospital can keep.

Credit on inputs and services used for exempt treatment is not available, and credit on common costs has to be split between exempt and taxable income (Rules 42 and 43 of the CGST Rules). A hospital that does not track this split usually either loses credit it could keep or keeps credit it has to repay with interest.

Advance rulings bind only the hospital that applied for them. They show how the authorities have reasoned, but they are not a general rule.

TDS on common hospital payments

Whether a doctor is paid as a professional or as an employee depends on the terms of engagement, not on what the payment is called, and it decides which TDS applies. The TDS & TCS Checker works out the rate and dates for a payment.

Cost records and cost audit

Health services (running hospitals, diagnostic centres, clinical centres or test laboratories) are listed in Table B of the Companies (Cost Records and Audit) Rules, 2014. For a hospital run by a company:

Micro and small enterprises are outside the cost-records rule.

The rules apply only to companies. Hospitals run by trusts, societies, partnership firms or individual doctors are outside them, though the same costing is just as useful for pricing and decisions. The Cost Audit Applicability Checker works through the tests for a company. The cost audit page sets out the forms and dates.

Registration in Tamil Nadu

Every clinical establishment in Tamil Nadu has to be registered under the Tamil Nadu Clinical Establishments (Regulation) Act, 1997. This sits alongside the tax registrations: PAN, TAN, GST where there is taxable income, and professional tax.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025, and the Companies (Cost Records and Audit) Rules, 2014.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular hospital. The GST position in particular turns on the facts and the documents: how a service is billed, to whom and under what arrangement.

Sources

• GST exemption notification 12/2017-Central Tax (Rate), as issued on 28 June 2017 (health care at entry 74), GST Council ↗
• CBIC Circular 32/06/2018-GST (food to in-patients, retention by hospitals) ↗
• Notification 03/2022-Central Tax (Rate): hospital rooms above ₹5,000 a day, CBIC ↗
• Tamil Nadu Authority for Advance Ruling: Kumaran Medical Center, 2022 (medicines and implants supplied to patients), GST Council ↗
• GST Council, 56th meeting press release (rates from 22 September 2025) ↗
• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗
• Tamil Nadu Clinical Establishments (Regulation) Act, 1997: 2018 amendment that renamed it and made registration compulsory, Tamil Nadu Government Gazette ↗

Tamil Nadu's handloom trade runs through master weavers, independent weavers, co-operative societies and showrooms. Margins depend on silk and zari prices that move with the market, on work given out on piece rates, and on long credit through the festival and wedding seasons.

GST after the 2025 rate changes

From 22 September 2025, most of the handloom chain moved to 5%: yarn, zari, fabric and job work.

Until 2025, weavers of silk and cotton cloth often built up credit because yarn was taxed at a higher rate than cloth. With yarn, zari and cloth now all at 5%, that is much less common, though it can still happen where dyes, chemicals or packing are bought at 18%.

Registration. The turnover limits in Tamil Nadu are in the table below. A weaver doing job work is supplying a service, so the lower limit applies.

Selling through an online marketplace needs registration, except for small sellers within the State, who can enrol instead.

TDS on weavers and purchases

Weaving to your order using yarn you supplied counts as “work” for TDS. Buying finished sarees from a weaver who used their own yarn is a purchase of goods, not work. The TDS & TCS Checker works out the rate and dates for a payment.

Paying weavers on time: the 45-day rule

Many weavers and small units are registered on Udyam as micro enterprises. A buyer has to pay them within the agreed period, and never more than 45 days after acceptance, or within 15 days where nothing was agreed in writing.

An amount owed to a micro or small supplier and paid late is allowed as an expense only in the year it is actually paid (Section 37(2)(g), earlier 43B(h)). A year-end payable to weavers can move your profit from one year to the next. Suppliers registered only as traders are outside this rule. The MSME Payment Checker works out the dates and the year for each invoice. The article on the MSME 45-day payment rule explains the rule in full.

Weavers' co-operative societies

A co-operative society engaged in a cottage industry such as handloom weaving can deduct the whole of its profit from that activity in computing its income (Section 149 of the Income-tax Act, 2025, earlier 80P). The society still keeps accounts, has them audited under the co-operative law and files its return.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025 and the MSMED Act, 2006.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular business. GST classification in particular turns on the product: the fibre, how it is made and how it is sold.

Sources

• Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025, CBIC ↗
• GST Council, 56th meeting recommendations, including textile rates, September 2025, Press Information Bureau ↗
• CBIC: GST registration thresholds by State ↗
• Notification 34/2023-Central Tax: small e-commerce sellers ↗
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗
• Income-tax Act, 2025, as amended by the Finance Act, 2026, Income Tax Department ↗

Component makers around Chennai, Ranipet and Hosur sell to buyers who fix the price, ask for a reduction every year and schedule deliveries by the day. Profit depends on knowing the cost of each part: machine time, material yield, rejections and tooling.

GST

Tooling supplied by the customer. Moulds and dies that the vehicle maker owns and sends free of charge are not added to the value of the parts, where the contract makes tooling the customer's responsibility. Where the contract makes tooling the supplier's responsibility and the customer provides it free, its cost, spread over the parts, is added to their value. The contract wording decides which applies.

Cost records and cost audit

Whether the Companies (Cost Records and Audit) Rules, 2014 apply depends on the tariff heading of what the company makes. Iron and steel products, base metals, machinery and mechanical appliances, electrical machinery, rubber and plastics are listed. Motor vehicle parts classified under heading 8708 are not. For a listed product:

• Companies earning more than 75% of revenue from exports in foreign exchange, operating from a special economic zone, or generating electricity for captive use are exempt from cost audit.
• Micro and small enterprises are outside the cost-records rule.

The Cost Audit Applicability Checker works through the tests, and the cost audit page sets out the forms and dates.

MSME rules, as supplier and as buyer

From 1 April 2025 an enterprise is classed as micro, small or medium by its investment and its turnover.

Micro and small suppliers have to be paid within the agreed period, and never more than 45 days after acceptance, or within 15 days where nothing was agreed in writing. A buyer who pays late can claim the expense only in the year of payment (Section 37(2)(g), earlier 43B(h)).

Companies with turnover above ₹250 crore have to be on a TReDS (Trade Receivables Discounting System) platform, where a supplier can discount its invoices. The MSME Payment Checker works out the dates for an invoice. The article on the MSME 45-day payment rule explains the rule in full.

TDS and TCS

The TDS & TCS Checker works out the rate and dates for a payment or sale.

Before relying on this article

The law this article follows: GST as amended from 22 September 2025, the Income-tax Act, 2025 and the Companies (Cost Records and Audit) Rules, 2014.

Rates and limits change with each Finance Act and GST notification.

This article is a summary for planning, not advice for a particular unit. Cost-record coverage in particular depends on how each product is classified.

Sources

• GST Council, 56th meeting: rate changes from 22 September 2025 ↗
• Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025, CBIC ↗
• CBIC Circular 47/21/2018-GST: moulds and dies supplied free by the customer ↗
• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
• Revised MSME classification from 1 April 2025: notification S.O. 1364(E), Ministry of MSME ↗
• Budget 2024-25 announcement lowering the TReDS onboarding threshold to ₹250 crore, Press Information Bureau ↗
• Form 127 FAQs, Income Tax Department ↗
• Section 393 of the Income-tax Act, 2025: TDS tables, Income Tax Department ↗

Two separate requirements

Cost records

A company in a listed industry keeps cost records once its overall turnover in the previous year was ₹35 crore or more.

• Applies to companies, including foreign companies, making listed products or providing listed services
• Records are kept in Form CRA-1, for each listed product or service
• Micro and small enterprises are outside the rule

Cost audit

A company that keeps cost records needs a cost audit only when it also crosses two further limits.

• Regulated sectors (Table A): overall turnover ₹50 crore or more, and ₹25 crore or more from the listed product or service
• Other sectors (Table B): overall turnover ₹100 crore or more, and ₹35 crore or more from the listed product or service
• Both limits are tested on the previous financial year

Who is exempt from cost audit

Three kinds of company keep cost records but need no cost audit.

• Companies whose revenue from exports in foreign exchange is above 75% of total revenue
• Companies operating from a special economic zone
• Companies generating electricity for captive use through a captive generating plant

Who is covered: points to check

• Table A lists regulated sectors, such as telecommunications, electricity, petroleum products, drugs and pharmaceuticals, fertilisers, and sugar and industrial alcohol.
• Table B lists non-regulated sectors: specified manufacturing and service activities including iron and steel, cement, chemicals, textiles, electrical and mechanical machinery, health services and several other categories.
• The exact description in the rules and the tariff heading of each product matter. A broad description such as “manufacturing company” is not enough by itself.
• Ordinary trading is generally not covered, except for the specified medical devices.
• A medium enterprise is not excluded merely because it is an MSME. Only micro and small enterprises are outside the rule.
• Where a company has products in both tables, covered turnover from both tables is added together, following the Revised FAQs, 2024 of the Institute of Cost Accountants of India (ICMAI). The overall-turnover limit decides which table's products are audited.
• An exemption from cost audit does not remove the requirement to keep cost records.

The article on cost records and cost audit works through examples, including a company with products in both tables.

The forms and the dates

A vacancy in the office of cost auditor is filled by the Board within 30 days. Forms CRA-2 and CRA-4 were replaced with new versions from 14 July 2025; the limits and dates did not change.

Who can be the cost auditor

• A Cost Accountant in practice, or a firm of Cost Accountants, appointed by the Board.
• The company's statutory auditor cannot also be its cost auditor.
• The qualifications and disqualifications that apply to statutory auditors apply here too, as far as they are relevant.
• The audit committee recommends the remuneration, the Board approves it and the shareholders ratify it.

If a company does not comply

A company that fails to keep cost records or have the audit done can be fined, and so can each officer in default (Section 148(8) read with Section 147).

What the rules do not cover

The rules apply only to companies. Partnership firms, LLPs, trusts, societies and proprietorships are outside them. The costing itself is useful to any business for pricing and decisions, whether or not the rules apply.

The Cost Audit Applicability Checker works through the tests for your company.

Do the Cost Accounting Standards apply if we are not covered by cost audit?

They apply directly where cost records are required, because Form CRA-1 requires records to follow the Cost Accounting Standards and GACAP. The Institute of Cost Accountants of India (ICMAI) has issued 25 standards, along with GACAP and 13 guidance notes. Even where they are not mandatory, they give a consistent basis for measuring cost, which makes comparison across periods meaningful.

Laws and standards

• Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014, as amended to 2025.
• Companies (Cost Records and Audit) Rules, 2014; Cost Accounting Standards (CAS) and Generally Accepted Cost Accounting Principles (GACAP)

The limits and forms are changed by notification of the Ministry of Corporate Affairs.

This page describes the law for information. Whether the rules apply to a company depends on the tariff heading of each product, its turnover and its exemptions.

Sources

• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs
• Instruction kit for Form CRA-4, Ministry of Corporate Affairs ↗
• Cost Auditing Standards, ICMAI ↗

Certificates with a clear legal basis

GST

GST law names a Cost Accountant alongside a Chartered Accountant for these.

• Refund claims above ₹2 lakh: the certificate that the tax has not been passed on to anyone else (Rule 89)
• Input credit claimed on stock when a business becomes liable to GST or changes scheme, where the claim is above ₹2 lakh (Rule 40)
• A special audit ordered by the tax officer, where the Commissioner nominates the auditor (Section 66)

Cost of production

Where goods move between branches or related parties and no market price is available, the goods can be valued for GST at 110% of the cost of production.

• A cost of production certificate prepared under Cost Accounting Standard 4
• Cost statements for pricing, tenders and price-revision claims

Company law

Cost audit is reserved for Cost Accountants in practice.

• The cost audit report in Form CRA-3
• Certification of some company e-forms that accept any practising professional

Foreign trade

The Handbook of Procedures accepts a Cost Accountant's certificate in several appendices.

• The certificate for issue of an EPCG (Export Promotion Capital Goods) authorisation (Appendix 5B)
• The consumption and stock register certificate (Appendix 4H) for Advance Authorisation and DFIA (Duty Free Import Authorisation)

What a Cost Accountant does not sign

• The tax audit report under the Income-tax Act: the law reserves it for a Chartered Accountant.
• The company's annual return certificate (MGT-7): that is a Company Secretary's.
• Some foreign trade appendices that name only a Chartered Accountant.

Other certificates, such as a net worth or turnover certificate, depend on what the authority asking for it will accept. Check with the bank or department before you commission one.

Stock and receivables audits for banks

Banks appoint stock auditors from their own panels, and many of those panels include Cost Accountants. The bank chooses the auditor, not the borrower.

UDIN: how to check a certificate is genuine

Since 1 October 2019, every certificate and report issued by a Cost Accountant in practice has to carry a Unique Document Identification Number generated on the Institute's portal. Anyone who receives the certificate can verify the number there.

Laws

The CGST Act and Rules, the Companies Act, 2013, the Foreign Trade Policy 2023 and the Income-tax Act, 2025.

The forms and who may sign them are changed by notification.

A certificate states what was examined and what was found. It is issued only after the records support it.

Sources

• Rule 89 of the CGST Rules: refunds, CBIC ↗
• CGST Rules, 2017 (Rule 40: credit in special circumstances), CBIC ↗
• Rule 30 of the CGST Rules: value based on cost, CBIC ↗
• Cost Accounting Standard 4 (revised), ICMAI ↗
• Appendix 4H: consumption and stock register certificate, DGFT ↗
• Section 515 of the Income-tax Act, 2025: meaning of accountant, Income Tax Department ↗
• UDIN Amnesty Scheme, 2020, ICMAI ↗
• Appendix 5B: certificate for issue of an EPCG authorisation, DGFT ↗

By 15 March

• Review the year's profit estimate so that the last advance tax instalment is based on a current figure.
• Pay that instalment, bringing the total to 100% of the year's estimated tax.

Before 31 March

Suppliers

• List what is owed to micro and small suppliers and pay whatever is past its due date. An amount paid late is allowed as an expense only in the year it is paid. The MSME Payment Checker works out the dates, and the article on the 45-day payment rule explains the rule.
• Ask suppliers for their current Udyam status where you do not have it.

Stock and assets

• Count stock on or close to 31 March, and keep the signed count sheets.
• Note stock held by job workers and material held for others.
• Identify slow-moving and damaged stock for valuation.
• Check the fixed asset register against what is on the floor.

Books

• Record expenses that belong to the year but are not yet billed.
• Reconcile bank accounts, and ask lenders and major parties for balance confirmations.
• Reconcile TDS deducted from you with your annual information statement (Form 168), and follow up on what is missing.
• Reconcile input tax credit in your books with GSTR-2B.

GST

• Decide whether to opt into or out of the composition scheme for the new year; the option is exercised before the year starts.
• Exporters: file the letter of undertaking for the new year, since it is valid for one financial year.
• Set up a new invoice number series to start on 1 April.

In April

• Deposit TCS (tax collected at source) collected in March by 7 April, and TDS deducted in March by 30 April.
• Collect fresh Form 121 declarations and lower-deduction certificates from payees; last year's do not carry over.
• Check the e-invoicing and e-way bill settings for the new invoice series.
• File the quarterly TDS and TCS statements for January to March by 31 May.

The Monthly TDS Checklist and the Compliance Calendar carry the dates for the rest of the year.

Before relying on this article: due dates are sometimes extended by notification, and some items do not apply to every business. Check the dates for the year on the relevant portal.

Sources

• Section 408 of the Income-tax Act, 2025: instalments of advance tax and due dates, Income Tax Department ↗
• TDS compliance FAQs, including the 30 April date for tax deducted in March, Income Tax Department ↗
• Rule 219 of the Income-tax Rules, 2026: due dates of TDS and TCS statements, Income Tax Department ↗

The answer is usually several times larger than the waste line suggests, and it is money already spent.

The idea in one paragraph

Every kilogram that enters a process leaves it either as product or as a loss: offcuts, rejects, evaporation, sludge, dust. MFCA follows the material by weight through each step and gives the loss its full share of cost. That share is the material itself, the energy used on it, the labour and machine time spent on it, and the cost of handling and disposing of it. Product and loss are costed in the same way, so the loss shows up as a figure management can act on.

A worked example

A unit processes 1,000 kg of material in a batch. 800 kg leaves as good product and 200 kg is lost. The figures are illustrative.

The usual cost sheet

All ₹3,05,000 is charged to the 800 kg of product, which gives ₹381.25 a kg. Waste appears only as the ₹5,000 disposal cost.

The same batch under MFCA

Material, energy and processing costs are shared by weight: 80% to product, 20% to the loss. Waste handling belongs entirely to the loss.

The product has cost ₹300 a kg. The loss has cost ₹65,000, which is 21% of everything spent on the batch, and 13 times the disposal cost that the usual cost sheet shows.

What the figure is for

The product did not become cheaper; the same ₹3,05,000 was spent. What changes is what management can see. A ₹5,000 waste line does not justify a project. A ₹65,000 loss in every batch does.

It also prices improvement. If the loss falls from 200 kg to 150 kg for the same 800 kg of output, the unit buys 50 kg less material: ₹10,000 a batch, before any saving in energy, processing and disposal.

Where it tends to matter most

• Processes with cutting or trimming losses: leather, garments, sheet metal, timber
• Processes with yield losses: chemicals, food, foundries, dyeing
• Any process where the material is expensive and the loss is treated as normal

How to start

• Pick one process and one month. Weigh what goes in and what comes out, product and loss separately.
• Reconcile the weights. What cannot be accounted for is itself a finding.
• Cost the loss with its share of material, energy and processing, and all of the disposal cost.
• Rank the losses by rupees, not by kilograms, and look at the largest first.

MFCA does not replace the cost records a business keeps. It reads the same data a different way.

About ISO 14051

ISO 14051 is the international standard that sets out a general framework for MFCA. It is a method a business can follow. It is not a certificate that a business or a firm can hold.

This article is a plain-language companion to a paper by the author on material flow cost accounting in The Management Accountant, the journal of the Institute of Cost Accountants of India (September 2026). The paper is the author's own work, and its publication is not an endorsement of the firm by the Institute.

Before relying on this article: the figures are an illustration. How energy and processing costs are shared between product and loss depends on the process, so work the shares out from your own records.

How drawing power is usually worked out

The details come from your sanction letter, but the usual shape is:

1. Take stock at cost or market value, whichever is lower.
2. Take off what you owe suppliers for it, because the bank lends against stock you have paid for.
3. Take off the margin on stock, often around a quarter.
4. Add debtors within the agreed age, often 90 days, less the margin on debtors.
5. The total, or the sanctioned limit if lower, is the drawing power.

A short example

If the sanctioned limit is ₹1 crore, this business can draw ₹75 lakh this month, not ₹1 crore. The margins and the 90 days here are illustrative; yours are in the sanction letter.

What the bank leaves out

• Stock that is obsolete, damaged or slow-moving
• Stock held on behalf of others, such as material received for job work
• Debtors older than the agreed period, and amounts due from group concerns
• Uninsured stock, where the sanction requires insurance

What the bank compares it with

• Your books: stock, debtors and creditors on the statement date
• GST returns: sales and purchases for the period
• Earlier statements: sudden jumps or a figure that never moves
• The stock auditor's count, usually once a year

A difference is not always an error, but have the explanation ready. A statement prepared from the books, with a working that someone else can follow, avoids a dispute.

Keeping it in step

• Prepare the statement from the stock records, not from memory of last month's figure.
• Value stock the same way each month, and the same way as in the annual accounts.
• Age the debtors every month, and take the old ones out before the bank does.
• Keep the working with the statement.

Before relying on this article: the method, margins and periods are set by each bank's sanction terms. Use yours.

The material: no tax, with a time limit

• The owner (the principal) sends inputs or capital goods to the job worker on a delivery challan, without charging GST.
• The principal keeps the input tax credit on those goods.
• Inputs have to come back, or be sold from the job worker's premises, within one year. Capital goods have three years. The Commissioner can extend these by up to one and two years on sufficient cause, and moulds, dies, jigs, fixtures and tools have no time limit.
• If they do not, the goods are treated as supplied on the day they were sent out, and tax with interest becomes due.

Moulds, dies, jigs, fixtures and tools sent to a job worker are not subject to the time limit.

The processing charge: the job worker's supply

The job worker charges GST on the processing charge alone, not on the value of the material. From 22 September 2025 the rates are:

A job worker below the registration limit for services does not charge GST. The principal can take credit for the GST it is charged, where its own output is taxable.

Who keeps the records

• The principal accounts for the goods and reports what was sent and received back in Form ITC-04: half-yearly where turnover is above ₹5 crore, yearly otherwise.
• The job worker keeps a record of material received, processed, returned and held, customer by customer.
• Waste and scrap from the process can be sold by the job worker if registered, on payment of tax; otherwise by the principal.

Where it goes wrong

• Material lying with a job worker past one year, unnoticed until an audit.
• Challans that do not match what was returned, so losses cannot be explained.
• The wrong rate on the charge after the September 2025 change.
• TDS (tax deducted at source) deducted by the principal from the processing charge as a contract payment, and not matched by the job worker with its tax statement.

Before relying on this article: rates depend on the kind of goods worked on, and are changed by notification. Check the current entry for your work.

Sources

• Notification 9/2025-Integrated Tax (Rate): GST rate schedules from 22 September 2025, CBIC ↗
• Rule 45 of the CGST Rules: goods sent to a job worker and Form ITC-04, CBIC ↗
• Circular of November 2017: milling of paddy as job work, CBIC ↗

The valuation steps in Rule 28

Rule 28 of the Central Goods and Services Tax (CGST) Rules sets the steps for supplies between distinct or related persons:

1. The open market value of the goods.
2. If that is not available, the value of goods of like kind and quality.
3. If that is not available either, a value based on cost (Rule 30) or by other reasonable means (Rule 31).

Two options sit alongside these. Where the goods will be sold on as they are, the supplier can choose 90% of the price the recipient charges an unrelated customer. And where the recipient can take full input tax credit, the value declared on the invoice is treated as the open market value.

When the invoice value is accepted

For most branch transfers of finished goods, the receiving branch can take full credit, so the invoice value is accepted. The cost-based rule matters where it cannot: for example where the recipient makes exempt supplies, or where the item is one on which credit is blocked.

110% of cost: what counts as cost

Rule 30 values the supply at 110% of the cost of production or manufacture, or of acquisition. The rule does not define cost. Cost Accounting Standard 4 (CAS-4), issued by the Institute of Cost Accountants of India (ICMAI), was written for this purpose and is the accepted way of working it out. In outline, cost of production takes in:

• Materials consumed, net of credits and recoveries
• Direct wages and salaries, and direct expenses
• Works overheads, quality control and research costs relating to production
• Administrative overheads that relate to production
• Adjustments for opening and closing work in progress, and credit for scrap and by-products

Selling and distribution costs, interest and abnormal costs are left out.

A short example

The certificate

The rule does not itself require a certificate. In practice the working is certified by a Cost Accountant in the format given in the standard, so that the value can be supported if the GST department asks. The certificate is for a period, and is revised when costs change materially.

Before relying on this article: valuation depends on the facts of each supply, including whether the recipient can take full credit. Check the current rules for your case.

Sources

• Rule 28 of the CGST Rules: value of supply between distinct or related persons, CBIC ↗
• Rule 30 of the CGST Rules: value based on cost, CBIC ↗
• Cost Accounting Standard 4 (revised), ICMAI ↗

The challan takes a few minutes. The care goes into four choices on it. They decide which account the money is credited to. A wrong one can come back months later as a default notice for tax you did in fact pay.

Before you start

• Your TAN (tax deduction and collection account number) and its e-filing password. Monthly TDS is paid from the TAN login, not the PAN (Permanent Account Number) login.
• The month's TDS payable account, split by section and by payee: company or not, and resident or not. Each combination needs its own challan.
• A way to pay: net banking, a debit card or UPI; or RTGS/NEFT or a bank counter, using a challan generated on the portal. The portal shows the options your bank supports.

The steps

1. Log in to the e-filing portal at incometax.gov.in with your TAN as the user ID.
2. Go to e-File, then e-Pay Tax, and choose New Payment. When asked, pick the Income-tax Act, 2025 and tax year 2026-27.
3. Choose the Pay TDS/TCS tile.
4. Say whether the payee is a company or not, and whether they are resident or non-resident.
5. Choose the type of payment. For the ordinary monthly deposit this is 200: TDS/TCS payable by taxpayer.
6. Add each nature-of-payment code with its tax. Put any interest or late fee in its own box, not in the tax box. One challan takes up to 20 codes.
7. Choose how to pay, and pay.
8. Download the challan receipt.

The four choices that decide where the money goes

1. Is the payee a company?

The portal asks about the payee, the person you deducted from, not about you. A company paying a consultant's TDS answers “not a company”, because the consultant is not one. The answer sets the major head: 0020 for company payees and 0021 for everyone else. This is the most common mix-up, because it feels as though the head should describe the business paying.

2. Resident or non-resident

Payments to residents and non-residents go on separate challans, with their own codes. If you deducted tax from both residents and non-residents in a month, you need two challans.

3. Type of payment

Use 200 for your own monthly deposit. 400 is only for paying a demand the Income Tax Department has raised against your TAN, for example after processing a statement. The other options on the list are for PAN-based demands and other receipts. A routine deposit made under 400 may not be available for your statement.

4. Nature-of-payment code

Each kind of payment now has a four-digit code set by the portal. Some old sections are split into several codes: contractors who are individuals and those who are not, professional fees and technical fees, rent of buildings and rent of machinery. Choose by the description in the list, and make sure it matches the section you will report for that payee in the quarterly statement. If they differ, the challan shows as unmatched and the statement shows a short payment.

After you pay

• The receipt shows three things you will need in the quarterly statement: the BSR (Basic Statistical Return) code of the bank branch, the date of deposit and the challan serial number. Together they make up the Challan Identification Number (CIN).
• Match the amount paid to the TDS payable account for the month, and file the receipt with the month's papers.
• If you paid late, pay the interest before you file the statement: 1.5% a month from the date of deduction to the date of payment, counting part of a month as a whole month.

Common mistakes

If a challan has gone wrong

• Not yet used in a statement: correct it on TRACES (tdscpc.gov.in) through the online challan correction. The year, the major head, the minor head (type of payment) and the nature-of-payment code can be changed, and requests are usually processed in 24 to 48 hours.
• Moving a payment to or from a non-resident section needs approval from your TDS officer. It cannot be done online.
• Already used in a statement: correct the statement instead, by filing a correction statement.
• The “Challan Correction Request” on the e-filing portal is for PAN challans such as advance tax. TDS challans paid under a TAN are corrected on TRACES.

If you do not have a TAN: Form 141

Some deductors do not need a TAN: a buyer of property from a resident seller; a resident individual or HUF (Hindu undivided family) buying property from a non-resident seller; and an individual or HUF not liable to tax audit who pays rent, or large contract or professional fees. They pay and report in one step with Form 141, from their PAN login, within 30 days from the end of the month in which they deducted. Any other buyer of property from a non-resident still needs a TAN. The TDS & TCS Checker tells you whether a payment falls here.

Before relying on this article: the steps and field names follow the Income Tax Department's material as of September 2026. The portal's screens and codes are updated from time to time, so follow what the portal shows on the day you pay.

Sources

• ITNS 281N FAQs, Income Tax Department ↗
• Challan Correction Request user manual, Income Tax Department ↗
• OLTAS challan correction FAQs, TRACES ↗
• Form 138 (TDS statement for salary) FAQs, Income Tax Department ↗

For most businesses, the tax itself does not change overnight. What changes is the language of compliance: the year, the sections, the rules and the forms. This article sets out what a business owner or finance team needs to know, and what to update first.

One “tax year” instead of two years

The 1961 Act taxed the income of a “previous year” in the following “assessment year”. The 2025 Act uses a single “tax year”, which is the financial year in which income is earned. The first tax year under the new Act is 2026-27, running from 1 April 2026 to 31 March 2027.

The Income Tax Department's transition FAQs confirm that there is no missing year or overlap. Income of FY 2025-26 is assessed in assessment year (AY) 2026-27 under the 1961 Act. Returns and tax audit reports for that year use the forms notified under the old rules (including Forms 3CA, 3CB and 3CD), even where they are filed after 1 April 2026.

Where the familiar provisions have moved

The new Act groups many provisions into tables. The table below lists the references businesses meet most often.

Thresholds and rates for most TDS items have been carried into the new tables. The table below gives examples.

Which Act applies to a transaction near 1 April 2026

For TDS, the transition FAQs look at the event that triggers deduction: credit to the payee's account or payment, whichever is earlier. If that event happened before 1 April 2026, the 1961 Act applies. If it happened on or after 1 April 2026, the 2025 Act applies.

This matters for March 2026 invoices that were paid in April 2026, and for provisions made at the year-end. Keep the date of credit in your records, not only the date of payment. The same logic applies to remittances abroad. Form 15CA and Form 15CB are replaced by Form 145 and Form 146. A remittance made on or after 1 April 2026 uses the new forms, even where the income itself is taxed under the 1961 Act.

Changes made by the Finance Act, 2026

The Finance Act, 2026 made changes that affect day-to-day business compliance, some in the new Act before it came into force and some in the 1961 Act for the last year under it. They include:

• Supply of manpower is expressly treated as “work”, so contractor rates of TDS apply to it.
• The due date for returns of businesses and professionals not requiring audit has moved from 31 July to 31 August: for AY 2026-27 (due 31 August 2026) through Section 139(1) of the 1961 Act, and from tax year 2026-27 in Section 263(1)(c) of the 2025 Act.
• A resident individual or HUF buying immovable property from a non-resident can deduct and deposit TDS without obtaining a TAN (tax deduction and collection account number), from 1 October 2026, using Form 141 and issuing Form 132.
• TCS on scrap, alcoholic liquor, tendu leaves and minerals such as coal, lignite and iron ore is 2% from 1 April 2026.

What to update now

1. If not already done, update section codes in your accounting software, TDS software and payment approval formats. Check that the second-quarter statements (due 31 October 2026) use Sections 392 to 394, and correct the first-quarter statements if they did not use the new sections.
2. Review purchase orders, invoice templates and payment formats that quote sections of the 1961 Act. Existing contracts do not need to be amended only because the new Act has come into force.
3. Tell vendors and employees about the new certificates: Form 131 instead of Form 16A and Form 130 instead of Form 16.
4. Plan the tax audit for tax year 2026-27 on Form 26, and keep FY 2025-26 on the old forms.
5. Reconcile your books with Form 168 from tax year 2026-27, as you did with Form 26AS and AIS.

The substance of a well-run compliance process does not change: accurate books, timely deductions and a reconciliation before every return. What needs attention is the set of references around it.

Before relying on this article: section, rule and form numbers are taken from the Income Tax Department's published material as of September 2026. Check the current text for your facts, and note that the Finance Act of each year may change rates and thresholds.

Sources

• CBDT press release: Income-tax Act, 2025 comes into force ↗
• FAQs on interplay and transition, Income Tax Department ↗
• Section 393: TDS tables, Income Tax Department ↗
• Section 394: TCS, Income Tax Department ↗
• Form 26 (tax audit report) FAQs, Income Tax Department ↗
• Form 138 (TDS statement for salary) FAQs, Income Tax Department ↗
• Forms 130 to 133 (TDS and TCS certificates), Income Tax Department ↗
• Form 168 FAQs, Income Tax Department ↗
• Guide to forms under the Income-tax Act, 2025, Income Tax Department ↗
• Section 427 ↗ and Section 428 ↗
• Memorandum to the Finance Bill, 2026, Ministry of Finance ↗
• CBDT Notification No. 121/2026 (Income-tax (Fifth Amendment) Rules, 2026), Income Tax Department ↗

Sections 15 and 16 of the Micro, Small and Medium Enterprises Development Act, 2006 (the MSMED Act) create a separate statutory framework for delayed payments to qualifying micro and small suppliers. The payment deadline can also affect the buyer's income-tax deduction. The first step, however, is to establish whether the supplier and transaction are covered.

Which suppliers are covered?

Businesses should maintain reliable information about suppliers claiming micro or small enterprise status, including their current classification, Udyam details, nature of activity and relevant registration records. The MSME limits effective from 1 April 2025 are:

The delayed-payment provisions in Chapter V of the MSMED Act concern micro and small enterprises, not medium enterprises. They apply to suppliers registered as micro or small enterprises carrying on manufacturing or services. Suppliers registered only as traders are generally treated as outside the rule.

Supplier eligibility can involve factual and legal questions, particularly around registration dates and the nature of the supplier's activity. Those questions should be checked, not assumed only because an invoice carries the words “MSME registered”.

How long does the buyer have to pay?

Section 15 distinguishes between transactions with and without a written agreement.

Where there is a written agreement

Payment should be made on or before the date agreed between the buyer and supplier. But the agreed period cannot exceed 45 days from the day of acceptance or deemed acceptance. A contractual 60-day or 90-day term therefore cannot extend the statutory ceiling beyond 45 days.

Where there is no written agreement

Payment must be made before the appointed day, which the Act ties to the day of acceptance or deemed acceptance. In effect, this is the 15-day limit.

Why the invoice date alone can be misleading

The Act works from the day of acceptance or deemed acceptance, not simply from whatever date appears on the supplier's invoice. Acceptance is the day of delivery, unless the buyer raises a written objection about the goods or services within 15 days. In that case, it is the day the objection is resolved.

For that reason, a reliable register of payments to micro and small suppliers should keep the delivery or service-completion date, written objections and how they were resolved, and not only the invoice date and payment date.

What happens when payment is late?

Where payment is not made as required by Section 15, the buyer becomes liable for compound interest with monthly rests (interest is added to the amount due every month) at three times the bank rate notified by the RBI.

Where no written agreement governs the period, the interest mechanism runs from the appointed day. Where a written payment date applies, it runs from the date immediately following that agreed date, subject to Section 15's statutory ceiling. Because the RBI bank rate can change, interest worked out at today's rate is only an estimate where the rate changed during the delay.

The interest itself is not tax-deductible

The MSMED Act separately addresses the tax treatment of the statutory interest. Section 23 states that interest payable or paid by the buyer under the Act is not allowed as a deduction in computing income. That should be distinguished from the treatment of the underlying purchase or expense.

What happens to the underlying expense for income-tax purposes?

For financial year (FY) 2025-26, which is assessment year (AY) 2026-27, Section 43B(h) of the Income-tax Act, 1961 applies. Section 43B(h) provides that a sum payable to a micro or small enterprise beyond the time allowed under Section 15 of the MSMED Act is deductible on actual payment.

Unlike most other items covered by Section 43B, the usual relief for payment made before the income-tax return due date is expressly unavailable for clause (h). From tax year 2026-27, that is from 1 April 2026, the corresponding provision appears in Section 37(2)(g) of the Income-tax Act, 2025. The Income Tax Department's own MSME guide maps Section 43B(h) to Section 37(2)(g).

The core practical issue therefore remains the same: once the statutory MSMED payment period is breached, the timing of actual payment becomes important for the deduction.

Example 1: paid late, but before year-end

Assume a qualifying expense is otherwise deductible. The applicable MSMED payment deadline expires during March, but the buyer pays the supplier later in March before the financial year ends. The payment may still be late for MSMED Act purposes, and statutory interest may arise.

However, because actual payment occurred within that same financial year, the deduction does not necessarily move into a later year solely because the statutory payment period was breached. The payment-law consequence and the tax-year consequence should therefore be shown separately.

Example 2: payment crosses into the next year

Now assume the statutory deadline has already expired before 31 March, the amount remains unpaid at year-end and payment is finally made in April. Subject to the other conditions of the income-tax provision, the deduction moves to the year in which actual payment is made. Paying in April, even before the due date for the return, does not bring the deduction back into the earlier year.

Example 3: the invoice is still within its MSMED deadline on 31 March

Suppose goods are accepted on 20 March under a valid written payment period of 45 days. On 31 March, the statutory payment period has not yet expired. That invoice should not automatically be treated as already disallowed only because it is outstanding at year-end. Its final treatment depends on whether payment is later made within the Section 15 period that applies.

This is why “outstanding on 31 March” and “overdue under the MSMED Act” are not the same thing.

What should a business track?

A useful control over payments to micro and small suppliers should connect four sets of information:

Supplier status: classification and supporting registration details.

Acceptance: delivery or service completion, written objection and resolution where applicable.

Payment: statutory deadline, amount outstanding and actual payment date.

Tax: whether the payment period was breached and the year in which actual payment occurred.

For companies, Form MSME-1 (the half-yearly return of amounts due to micro and small enterprises) and financial-statement disclosure requirements should be assessed separately because their triggers are not identical to the income-tax disallowance test.

A note on the 2026 MSMED Amendment Act

The Micro, Small and Medium Enterprises Development (Amendment) Act, 2026 received Presidential assent on 13 August 2026.

S.O. 5575(E), dated 12 October 2026, brings amendment sections 2–7, 11 and 13–17 into force from 15 October 2026. Amendment section 12, which changes Facilitation Council composition, is scheduled for 15 December 2026. Sections 8–10 are not commenced by this notification.

The commenced changes cover classification and registration, TReDS settlement for Central Public Sector Enterprises and notified entities, Council establishment, disclosures and penalties. They do not replace the Section 15 payment periods or Section 16 interest calculation used here. The checker’s 15/45-day and monthly-compounding formulas are therefore unchanged; it does not assess the separate TReDS obligations.

In practice

The question for each payment to a micro or small supplier is not simply:

“Is the invoice older than 45 days?”

A better sequence is:

Supplier eligibility → Acceptance date → Written agreement → Statutory deadline → Actual payment → Interest → Deduction year.

Work through each invoice in that order. The MSME Payment Checker follows the same sequence.

Before relying on this article: it follows Sections 15, 16 and 23 of the MSMED Act, Section 43B(h) of the Income-tax Act, 1961 and Section 37(2)(g) of the Income-tax Act, 2025. Whether a supplier is covered, and the date of acceptance, depend on the facts of each invoice.

Sources

Official sources: commencement notification S.O. 5575(E) ↗ and MSMED Amendment Act, 2026 ↗.

• Udyam Registration portal, Ministry of MSME ↗
• Income-tax Act, 2025, as amended by the Finance Act, 2026, Income Tax Department ↗
• Section 43B of the Income-tax Act, 1961, including clause (h), Income Tax Department ↗
• Micro, Small and Medium Enterprises Development Act, 2006 (Sections 15, 16 and 23), Ministry of MSME ↗

The Institute of Cost Accountants of India (ICMAI) currently publishes a consolidated 2025 edition of the rules together with its technical guidance and FAQs.

What each one is

Cost records are the detailed records used to identify and analyse the cost of producing goods or providing services. Depending on the business, they may include information relating to materials, employee costs, utilities, production quantities, capacity, overheads, cost of sales and margins. Companies covered by the rules keep these records with the particulars set out in Form CRA-1.

Cost audit is the separate statutory examination of those cost records by an eligible Cost Accountant in practice. A company therefore should not ask only:

“Do we need a cost audit?”

It should first ask:

“Are we required to maintain cost records?”

Step 1: Is the activity covered?

Rule 3 lists the goods and services covered, in two tables.

Table A: regulated sectors, such as telecommunications, electricity, petroleum products, drugs and pharmaceuticals, fertilisers, and sugar and industrial alcohol.

Table B: non-regulated sectors, covering specified manufacturing and service activities including iron and steel, cement, chemicals, textiles, electrical and mechanical machinery, health services and several other categories.

The exact statutory description and applicable tariff heading matter. A broad description such as “manufacturing company” is not enough by itself.

Step 2: Does the ₹35 crore cost-record threshold apply?

For an otherwise covered company, cost records become relevant where overall turnover from all products and services in the previous financial year is ₹35 crore or more, the Rule 3 threshold. Micro and small enterprises are excluded from the rules. The MSME classification effective from 1 April 2025 uses the following limits:

Both the investment and turnover conditions for a category have to be considered, and export turnover is excluded for MSME classification purposes. A medium enterprise is not excluded only because it still falls within the wider MSME definition.

Step 3: Does cost audit also apply?

Cost audit operates at higher thresholds.

These tests apply as well as the basic Rule 3 test of whether the company is covered.

Example: cement manufacturer

Assume a company manufactures cement, has overall turnover of ₹60 crore and cement turnover of ₹40 crore in the preceding financial year. Assume also that it is not a micro or small enterprise. Cement is a Table B activity. The company meets the ₹35 crore cost-record threshold, so cost records are relevant. But Table B cost audit requires overall turnover of ₹100 crore or more. At ₹60 crore, that condition is not met.

Result: cost records apply, but cost audit does not apply on these figures.

What if a company has both Table A and Table B products?

ICMAI's current FAQ explains that the covered-turnover figure is the aggregate turnover of all products and services for which cost records are required under Rule 3, including products from both Table A and Table B. It is not necessary for the turnover of each table to reach ₹25 crore or ₹35 crore on its own.

ICMAI gives the example of ₹20 crore of Table A products and ₹20 crore of Table B products, with overall turnover of ₹101 crore. Aggregate covered turnover is ₹40 crore, and the FAQ concludes that products under both tables are covered by cost audit. Consider another example:

Aggregate Rule 3-covered turnover is ₹40 crore. Under the ICMAI interpretation, the company meets the ₹100 crore overall threshold and the ₹35 crore aggregate covered-turnover threshold. Subject to the remaining conditions and exemptions, cost audit extends to the relevant Table A and Table B products. That is why a multi-product company should reconcile its Rule 3-covered turnover before determining audit applicability.

Cost-audit exemptions also need to be considered

Rule 4 contains specific exemptions from cost audit, including qualifying export circumstances, Special Economic Zone (SEZ) operations and captive electricity generation. These should not automatically be applied across an entire company without examining the underlying facts.

For example, ICMAI guidance distinguishes a qualifying captive generating plant from situations where electricity is also sold outside. It also recognises that SEZ and non-SEZ operations may need different treatment. The important point is that an exemption from cost audit does not automatically remove the requirement to keep cost records.

What happens when cost audit applies?

A company covered by cost audit has to complete the steps below, using Forms CRA-2, CRA-3 and CRA-4, within the time limits shown.

The Ministry of Corporate Affairs (MCA) revised Forms CRA-2 and CRA-4 through the 2025 amendment, applicable from 14 July 2025. The cost audit and cost records rules article sets out the same steps with the dates for a 31 March year-end, who can be the cost auditor and the fines for not complying.

Cost records should not begin with the audit

A business that waits until the cost auditor is appointed to organise its cost data is usually starting too late. Useful cost records require regular capture and reconciliation of operating information such as material consumption and losses, production and capacity, employee and utility costs, inventory movements, overhead allocation, and product-level cost and margins.

When maintained properly, the same records can support pricing, profitability analysis, waste reduction and management decisions as well as statutory compliance.

In practice

A company approaching ₹35 crore turnover should not wait for the audit threshold before examining cost-record applicability. The correct sequence is:

Entity and MSME status → Covered activity → Overall turnover → Aggregate covered turnover → Cost-audit threshold → Exemptions.

That sequence avoids the common mistake of treating cost records and cost audit as the same requirement.

Before relying on this article: it follows Section 148 of the Companies Act, 2013, the Companies (Cost Records and Audit) Rules, 2014 as amended, and the consolidated rules and FAQs published by ICMAI. Whether a company is covered depends on its products, turnover and status, so check the current rules for your facts.

Sources

• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs (as amended; published in the Gazette of India)
• Udyam Registration portal, Ministry of MSME ↗

The Companies Act may use figures from the company's audited financial statements. MSME classification uses both investment and turnover and excludes export turnover for its turnover test. So a business should not maintain one number called “turnover” and apply every statutory threshold to it.

₹1 crore: start with income-tax audit

From tax year 2026-27, tax audit is governed by Section 63 of the Income-tax Act, 2025. For a person carrying on business, the ordinary threshold is turnover or gross receipts exceeding ₹1 crore. However, that threshold increases to ₹10 crore where both of the following are satisfied:

• Cash receipts do not exceed 5% of total receipts.
• Cash payments do not exceed 5% of total payments.

A non-account-payee cheque or bank draft is treated as cash for this test.

Example

A business has turnover of ₹1.5 crore. Cash receipts are 3% of total receipts and cash payments are 4% of total payments. Both cash conditions are met, so the enhanced ₹10 crore threshold applies and turnover of ₹1.5 crore does not by itself require a tax audit. If cash payments instead rise to 7%, the relaxation fails even though cash receipts remain below 5%. The standard ₹1 crore test then applies.

Professionals have a separate threshold: gross receipts exceeding ₹50 lakh under Section 63. For tax year 2026-27, the Income Tax Department also confirms that the audit report under the new Act is the single Form 26, in place of Forms 3CA, 3CB and 3CD.

₹5 crore: two GST requirements use two different tests

₹5 crore is important under GST, but not for one single reason.

E-invoicing

E-invoicing applicability uses a historical turnover test. The notified threshold is based on aggregate turnover exceeding ₹5 crore in a relevant preceding financial year from financial year (FY) 2017-18 onwards, subject to the notified categories and exemptions. That means current turnover alone is not enough.

A business that crossed the threshold in an earlier relevant year can remain within the e-invoicing framework even if its turnover later falls.

Example

Suppose aggregate turnover was ₹6 crore in FY 2023-24 but has fallen to ₹3 crore. The earlier threshold crossing remains relevant because the e-invoicing test looks at qualifying historical turnover, not just the current year. For this reason, keep each earlier year's turnover on record instead of overwriting it with the latest figure.

GSTR-9C

GSTR-9C, the reconciliation statement filed with the GST annual return, also uses ₹5 crore, but differently. Rule 80 of the Central Goods and Services Tax (CGST) Rules requires the self-certified reconciliation statement where aggregate turnover during the financial year being reported exceeds ₹5 crore, subject to the annual-return provisions.

The Central Board of Indirect Taxes and Customs (CBIC) confirms that the current GSTR-9C framework is self-certified and uses the turnover of the relevant financial year. So:

E-invoicing: historical qualifying turnover matters.

GSTR-9C: turnover of the financial year being reported matters.

Using the same ₹5 crore figure without identifying the relevant period can produce the wrong result.

₹10 crore: three different compliance questions can arise

₹10 crore is another example of one amount appearing in unrelated statutory tests.

1. Tax audit

For a qualifying business where both cash tests stay within 5%, Section 63 uses the enhanced ₹10 crore threshold. The statutory wording is “exceeds ₹10 crore”.

2. 30-day e-invoice reporting restriction

From 1 April 2025, businesses with aggregate annual turnover (AATO) of ₹10 crore and above are restricted from reporting covered e-invoices more than 30 days after the invoice date. The Invoice Registration Portal (IRP) confirms that the restriction also applies to covered credit notes and debit notes. Notice the boundary difference:

The enhanced tax audit threshold says “exceeds ₹10 crore”. The IRP restriction says “₹10 crore and above”. The exact wording of each limit matters.

3. TDS on purchase of goods

Under the Income-tax Act, 2025, TDS on purchase of goods appears in Section 393. The buyer qualification uses preceding-year business turnover exceeding ₹10 crore. But that alone does not mean TDS applies to every purchase.

Purchases from the relevant resident seller must also exceed ₹50 lakh during the year. The standard rate is 0.1% on the amount exceeding ₹50 lakh, subject to the statutory provisions and exceptions.

₹35 crore: companies should start asking a different question

For companies engaged in activities covered by the Companies (Cost Records and Audit) Rules, ₹35 crore is relevant to maintenance of cost records. But turnover alone does not determine the result.

The company must also consider its entity status, whether it is a micro or small enterprise, whether its goods or services fall within Table A or Table B, and the relevant Rule 3 conditions.

Whether cost records and cost audit apply therefore needs a check of its own. The Cost Audit Applicability Checker works through it, and the cost audit and cost records page sets out who is covered, the limits, the forms and the dates.

The Institute of Cost Accountants of India (ICMAI) currently publishes both the consolidated 2025 rules and detailed FAQs for these assessments.

MSME turnover is another figure again

The MSME classification limits from 1 April 2025 are set out below.

Both limits must be met. A company may therefore have one turnover figure relevant to GST and a different figure relevant to MSME classification.

Build a turnover map, not just a sales report

A growing business should be able to identify at least:

Income-tax turnover for the relevant tax year.

GST aggregate turnover on the PAN-wide basis prescribed by GST law.

Historical GST turnover for e-invoicing.

Company-law turnover from the relevant audited financial statements.

MSME turnover after the applicable export adjustment.

Covered-product turnover where cost-record rules are relevant.

That distinction becomes increasingly important as the business moves through multiple statutory thresholds.

Use projections carefully

Expected turnover is valuable for planning. If a business is likely to cross ₹5 crore or ₹10 crore during the year, management can prepare systems, invoicing processes and controls before a compliance requirement becomes operational. But projected figures should never replace historical statutory data.

For example, an expected fall in turnover does not undo an earlier year in which the e-invoicing limit was crossed, and current-year GST turnover cannot simply be substituted for a preceding-year income-tax condition.

In practice

The useful question is not:

“What compliances apply at ₹5 crore?”

The better questions are:

Which law? Which definition of turnover? Which financial year? Does the limit say “exceeds” or “and above”? Are there secondary conditions or exemptions?

Once those questions are separated, turnover becomes a useful compliance-planning tool rather than just a year-end accounting number.

Before relying on this article: it follows Section 63 and Section 393 of the Income-tax Act, 2025; the GST e-invoicing notifications and IRP advisories; Section 44 of the CGST Act and Rule 80 of the CGST Rules; the Companies (Cost Records and Audit) Rules, 2014; and the current MSME classification. Limits and exemptions are changed by notification, so check the current text for your facts.

Sources

• Income-tax Act, 2025, as amended by the Finance Act, 2026, Income Tax Department ↗
• Notification 10/2023-Central Tax: e-invoicing above ₹5 crore, GST Council ↗
• Rule 80 of the CGST Rules: annual return, CBIC ↗
• Section 63 of the Income-tax Act, 2025: tax audit, Income Tax Department ↗
• Companies (Cost Records and Audit) Rules, 2014, Ministry of Corporate Affairs (as amended; published in the Gazette of India)
• Udyam Registration portal, Ministry of MSME ↗

A business can report a profit and still struggle to pay suppliers, payroll or taxes on time.

Profit measures whether income exceeds expenses for a period. Cash measures whether money is actually available when an obligation falls due. The two are connected, but they do not move in the same week, or even in the same month.

A sale made today may be profitable, but the customer may pay after 30 or 60 days. Meanwhile, material purchases, wages, rent, GST payments and loan instalments may need to be paid earlier.

That is why a bank balance alone is not a cash-flow plan. A short rolling forecast gives management time to act before a gap becomes urgent.

Start with an eight-week view

An eight-week cash forecast is a simple working schedule. It should be updated every week using actual bank balances, confirmed customer receipts, receipts that can reasonably be expected from a customer's payment history, and known payment commitments.

Keep four lines visible:

• Opening available cash
• Expected receipts from customers and other sources, such as a loan disbursement
• Planned payments
• Closing available cash

The focus is timing. A forecast should not assume that every invoice raised will be collected in the same week.

A fictional example

Assume a business starts the forecast period with ₹6,50,000 in available cash and wants to keep at least ₹1,50,000 on hand at all times.

Over the eight weeks, receipts total ₹26,70,000 and payments ₹27,30,000, and cash ends only ₹60,000 below where it started. The business is not running out of money. But the forecast shows a shortfall in Week 3 and a balance below the ₹1,50,000 minimum in Weeks 3 and 4. A month-end balance alone would not show the Week 3 shortfall.

That early warning creates options:

• Follow up on a customer receipt before it becomes overdue.
• Reschedule a non-essential purchase.
• Discuss a supplier payment plan before the due date, within the agreed credit period and any legal time limit, such as the 45-day rule for micro and small suppliers.
• Use a sanctioned working-capital facility deliberately rather than as an emergency.
• Delay a discretionary outflow after management review.

Without the forecast, the business discovers the problem only when a payment cannot be made.

Separate expected receipts from hopeful receipts

A useful forecast does not treat every outstanding invoice as cash.

Classify customer receipts into three groups:

This distinction is especially important for businesses that sell on credit. Revenue may appear in the monthly accounts, but cash depends on collection discipline.

List payments by their real due date

The payments side should include more than supplier bills.

Track:

• Salaries and contract labour
• Material purchases and freight
• Rent, utilities and recurring software costs
• GST, TDS, advance tax and other statutory payments
• Loan instalments, interest and bank charges
• Customer refunds, replacements or returns
• Planned capital expenditure
• Owner drawings or partner withdrawals, where applicable

A tax amount may be recorded in the books before it is payable. The forecast should show the actual expected payment date so that a provision in the books is not mistaken for cash leaving the bank that week.

Connect cash flow with costing and margin

Cash pressure is often treated only as a collection problem. Sometimes the underlying issue is product economics.

If a business is selling more but cash remains tight, review:

• Whether each product contributes enough after its variable costs, such as material, processing, packing, freight, commissions and payment charges.
• Whether customers are taking longer to pay than suppliers allow.
• Whether inventory is increasing faster than sales.
• Whether discounts are being given without checking the minimum acceptable price.
• Whether a growing product line requires more working capital before collections arrive.

A cash forecast tells management when money will be short. A cost sheet and contribution analysis help explain whether the business model can support the cash cycle.

A practical weekly routine

• Update the bank balance. Note separately any collections received but not yet deposited or cleared, so the same receipt is not counted twice.
• Replace estimates with actual receipts and payments from the previous week.
• Review the next eight weeks, not only the current month.
• Record the customer, invoice and expected collection date for large receipts.
• Separate committed payments from discretionary spending.
• Flag the lowest projected cash point and any week below the minimum balance.
• Assign collection follow-up to a named person.
• Discuss the weeks where cash may fall short, and why, before approving new purchases or discounts.
• Compare forecast cash with actual cash and note the reason for material variances.

The aim is earlier decisions, not a perfect forecast.

Before relying on this article: the example is original and uses fictional data; it is not a client case study. The figures show timing and decision-making only. Cash-flow forecasts, statutory payment dates and financing decisions must be checked against the business's current records, commitments and the law that applies.

For many businesses, the difficulty is not the number in GSTR-2B. It is explaining why that number does not agree with the purchase register, the input tax credit ledger or the amount proposed in the return. A late reconciliation turns ordinary supplier follow-up into a time-sensitive problem.

A simple monthly process brings the differences into view early.

Start with four records

Keep these records available for the same tax period:

• Purchase register or accounting export
• GSTR-2B downloaded from the GST portal
• Invoice Management System (IMS) status and action taken
• Reconciliation working sheet

The working sheet should carry, at minimum:

• Supplier GSTIN (GST identification number) and name
• Invoice number and date
• Taxable value and tax amounts
• Whether the invoice appears in GSTR-2B
• IMS action taken and date
• Reason for any difference
• Action owner and expected closure date

The aim is not just to arrive at a total. It is to identify each exception clearly enough for a person to act on it.

The most common differences

Invoice is in the books but not in GSTR-2B

This may happen because the supplier has not filed the relevant statement, has filed it late, or has reported a document with an error.

The accounts team should retain the purchase document and evidence of receipt. The purchasing or finance team may need to contact the supplier, confirm the document details and track the follow-up to closure.

Invoice is in GSTR-2B but not in the books

This is where the Invoice Management System needs attention.

Where no action is taken on a record before GSTR-2B is generated, the IMS advisory of GSTN (the GST Network, which runs the GST portal) treats it as deemed accepted, that is, accepted by default. This can result in an invoice appearing in GSTR-2B before anyone in the business has reviewed or recorded it. Its appearance does not, by itself, establish ITC eligibility; the underlying transaction and statutory conditions still need review.

Before treating an invoice as an accounting omission or an eligible credit, review the invoice in IMS and take the appropriate action under the current portal process. The reconciliation sheet should record the IMS status, the accounting conclusion and the follow-up owner.

IMS makes reconciliation more than a comparison between a purchase register and GSTR-2B. It adds an operational review step: identify the document, confirm whether the supply belongs to the business, decide the appropriate action and retain support for that decision.

GSTIN, invoice number or tax amount differs

Small data-entry errors can create large reconciliation workloads. A supplier may have used an incorrect GSTIN, entered an invoice number differently or reported the wrong taxable value.

Keep the difference at document level. A supplier-wise total may reveal that something is wrong; it usually will not tell you what needs correction.

Credit notes, debit notes and amendments

Credit notes can affect the tax position and should not be mixed with ordinary purchase invoices. Maintain a separate exception category for credit notes, debit notes and amended documents.

A fictional reconciliation example

Assume a business has ITC of ₹4,80,000 in its purchase register. Its GSTR-2B shows ₹4,58,000.

Starting from the purchase register, an invoice booked but absent from GSTR-2B is a deduction. An invoice appearing in GSTR-2B but absent from the books is an addition. A good reconciliation shows both directions rather than listing every difference as an addition.

The net difference between the purchase register and GSTR-2B is ₹22,000. The four exceptions behind it total ₹38,000 in absolute terms. The net figure tells the business very little about the work to be done, which is why the working sheet should show both the net difference and each exception requiring action.

Assign ownership

A reconciliation works when each exception has an owner.

• Accounts team: booking status, ledgers and supporting documents
• Procurement team: supplier communication and commercial confirmation
• GST reviewer: IMS action, return impact, documentary support and final review
• Management: unresolved supplier issues affecting cash flow or vendor decisions

An exception open for several months needs escalation to management.

Section 16(4) generally links the ITC claim time limit to 30 November following the end of the relevant financial year, or the date of filing the annual return, whichever is earlier. An exception that remains unresolved as this window approaches needs priority review, supplier follow-up and a documented decision. Applicability should always be checked against the current law and the facts of the transaction.

Use the process to improve purchasing discipline

Repeated differences from the same supplier are a business-control issue, not just a return-preparation issue.

Track supplier-wise exception trends. If a vendor repeatedly reports late, uses incorrect details or delays corrections, the business can raise it during vendor review, payment processing or renewal discussions.

The reconciliation can also reveal internal gaps: invoices received by operations but not sent to accounts, branch-level purchase records not reaching the central team, or missing proof of receipt.

A practical monthly checklist

• Download GSTR-2B for the period.
• Review relevant invoices in IMS.
• Freeze the purchase register used for reconciliation.
• Match documents, not just totals.
• Classify every difference with the correct direction.
• Assign an owner and closure date.
• Keep supplier follow-up evidence.
• Escalate long-outstanding exceptions, especially those approaching the Section 16(4) time limit.
• Report recurring exceptions to management.

A clean reconciliation gives management a clearer view of the cash tied up in input tax credit, supplier discipline and the reliability of purchase records.

Before relying on this article: the example is original and uses fictional data; it is not a client case study. The amounts show the direction and method of the reconciliation only. GST treatment, IMS actions and ITC eligibility must be checked against the current law, portal guidance and your own documents.

Sources

• Section 16 of the CGST Act: conditions for taking input tax credit, CBIC ↗
• Advisory on the Invoice Management System, GST Network ↗

A difference can be routine. It can also point to an unrecorded receipt, an incorrect report by a deductor, a duplicate AIS entry or a TDS credit that needs further review. A document-level reconciliation separates these possibilities.

This article covers returns for financial year (FY) 2025-26, which is assessment year (AY) 2026-27. They are still governed by the Income-tax Act, 1961 and the Income-tax Rules, 1962. From tax year 2026-27, the Income-tax Act, 2025 and the Income-tax Rules, 2026 apply, with renumbered provisions and forms. The reconciliation discipline is the same; the references will change.

Start by recognising the three different bases

The three records do not always measure income on the same basis.

Your books usually record income by the accounting method the business follows. Form 26AS reflects tax deducted and reported by deductors. For professional fees under Section 194J, deduction is generally linked to the time of credit or payment, whichever is earlier. AIS is broader: it reflects information reported by deductors, banks, financial institutions and other reporting entities, across several information categories.

This creates ordinary timing differences. A March invoice may appear in the books even though the client credits, pays and reports TDS in the next financial year. Equally, a payment received during the year may produce a Form 26AS entry for income the books recorded in an earlier year.

Do not force these records into one total without first identifying the basis and period of each entry.

Keep four records together

For the relevant financial year, keep:

• Ledger and income schedules from the books
• Form 26AS
• AIS and Taxpayer Information Summary (TIS)
• A reconciliation working sheet with source documents

At document level, the working sheet should capture:

• Client or reporting entity name and PAN (Permanent Account Number), where available
• Invoice or receipt reference and date
• Taxable value and GST, if any
• Date of income recognition in the books
• Date of credit or payment
• TDS amount and Form 26AS reference
• AIS information category and reported value
• Difference reason, action owner and closure status

A fictional example: books to Form 26AS

Assume a consulting practice has professional income of ₹24,00,000 in its books for the year.

The net difference is ₹1,50,000. The three items behind it total ₹2,30,000 in absolute terms, and each calls for a different response.

The ₹1,20,000 is a timing difference: the income belongs to this year, and the TDS will appear in next year's annual information statement (Form 168 from tax year 2026-27). The ₹40,000 is the reverse: income already offered last year, with TDS appearing now. The ₹70,000 needs follow-up: a client who did not deduct, did not report, or reported late. If tax was deducted but does not appear in Form 26AS, obtain the deductor's confirmation and follow up for correction of the TDS statement.

None of these items, on its own, means income is missing from the return.

A separate reconciliation: Form 26AS to AIS

For professional fees, much of the AIS information comes from the same TDS statements that feed Form 26AS. Differences between AIS and the books therefore usually arise from other information categories, and are best reconciled starting from the TDS-reported figure.

The AIS entries total ₹24,80,000, which is ₹80,000 more than the books. That net figure hides ₹2,30,000 of entries that appear only in AIS, offset by the ₹1,50,000 difference explained above. Of the ₹2,30,000, only the ₹25,000 of savings bank interest, which was never entered in the books, is income to be offered. The ₹1,20,000 is a duplicate (a different receipt from the March invoices in the first table) and the ₹85,000 belongs to another year. Treating the full ₹80,000 as additional income would overstate the return; ignoring it would miss the interest.

Reported values also need checking. The agreement or contract may show GST separately from the value of services. In that case, Circular No. 23/2017 dated 19 July 2017 of the CBDT (Central Board of Direct Taxes) clarifies that TDS is generally deducted on the amount excluding GST. Information flowing into AIS from other reporting streams may use a different value. Separate the taxable value and GST component before treating any AIS difference as income.

Use AIS feedback where the information needs correction

AIS is not only a viewing statement. The portal provides a feedback facility against individual information entries.

After checking the underlying documents, submit feedback against an AIS item where appropriate. The available options can include:

• Information is correct
• Information is not fully correct
• Information relates to other PAN/year
• Information is duplicate
• Information is denied

In the example above, the ₹1,20,000 entry calls for “Information is duplicate” and the ₹85,000 entry for “Information relates to other PAN/year”. Select the option that matches the facts, enter the corrected information or explanation where the portal requests it, and retain a copy of the submission with the supporting documents. Review the resulting status and its effect on TIS before finalising the return.

Feedback does not replace a correction by the reporting entity where one is required. If the issue is a TDS reporting error, follow up with the deductor as well.

Check the year in which TDS credit is claimed

Tax credit is not simply a cash-receipt exercise.

Rule 37BA provides that credit for TDS is to be given for the assessment year for which the related income is assessable. It also provides for credit to be given to another person where the income is assessable in that person's hands in specified circumstances.

The ₹40,000 row in the first table is exactly this situation: TDS appears in this year's Form 26AS, but the income was offered in the previous year. A credit should be matched to the year in which the related income is offered, subject to the applicable law and facts. Review the TDS entry, invoice date and payment date together, and do not claim or carry forward a credit only because it appears in one statement.

From tax year 2026-27: the same reconciliation, new references

The Income-tax Act, 2025 came into force on 1 April 2026, and the first tax year under it is 2026-27 (1 April 2026 to 31 March 2027). Returns for FY 2025-26 are still filed for AY 2026-27 under the 1961 Act and Rules. From tax year 2026-27, the steps in this article stay the same, but the statements, sections and rules have new numbers.

For payments that straddle the change, the Income Tax Department's transition FAQs look at the credit or payment, whichever is earlier. Where it happened before 1 April 2026, the 1961 Act applies. Where it happened on or after that date, the 2025 Act applies. A March 2026 invoice credited in March and paid in April is therefore dealt with under the 1961 Act, even though the TDS may be reported later.

In practice, keep a column in your working sheet for the governing Act of each entry. If not already done, update the section codes in your accounting and TDS software, and check that the quarterly statements for tax year 2026-27 use the new sections.

A practical review sequence

• Confirm which Act and rules govern the year being filed.
• Freeze the income schedule from the books.
• Match Form 26AS entries to client-wise income and TDS records.
• Separate timing differences from clients that did not deduct or report.
• Identify Form 26AS credits that relate to income of another year.
• Review every AIS entry not already explained by the books or Form 26AS.
• Separate taxable value and GST where relevant.
• Submit AIS feedback for incorrect, duplicate or unrelated information.
• Follow up with deductors for TDS-statement corrections where needed.
• Review the year of assessability and TDS credit under Rule 37BA.
• Keep the reconciliation, feedback acknowledgements and source records with the return working papers.

A well-prepared reconciliation gives the business a cleaner income trail, supports tax-credit claims and highlights client reporting issues before they become difficult to resolve.

Before relying on this article: the examples are original and use fictional data; they are not a client case study. The amounts show the direction and method of the reconciliation only. Income recognition, TDS credit, GST treatment, AIS feedback and return reporting must be checked against the current law, portal guidance and your own documents.

Sources

• FAQs on interplay and transition, Income Tax Department ↗
• Form 168 FAQs, Income Tax Department ↗
• Section 393: TDS tables, Income Tax Department ↗
• Section 390, Income Tax Department ↗
• Rule 203, Income Tax Department ↗
• Forms 130 to 133 (TDS and TCS certificates), Income Tax Department ↗