How to Use Technology to Make Tax Compliance Easier?

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Published Date:  03-01-2024   Author:   prarabdh-gupta
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Managing tax is one of the crucial elements for small and medium sized businesses that have limited resources. It is the era of technology, where we should focus on utilizing technological tools and software to efficiently manage the complexities of tax obligations. With the help of technology, you can automate your calculations, streamline data entry, and share real-time updates with you regarding tax regulations.

This technological implementation helps businesses reduce the risk of human error and save crucial time without requiring the hiring of any new employees. There are various types of platforms and tools that a business can adopt based on its needs and requirements, including cloud-based platforms, mobile applications, and other automated software. You can freely use them for effectively collecting and organizing financial information, creating e-invoices, filing returns, tracking expenses, and much more.

In this blog, we have mentioned all types of tools and platforms that ease tax compliance for small and medium businesses. Without any delay, let’s begin the article !!

Table of Contents

The Benefits of Cloud-based Tax Compliance Solutions for Small Businesses in India

Cloud-based tax compliance solutions are basically digital platforms that work as comprehensive and flexible tools for managing tax-related activities for businesses by utilizing cloud computing technology. These platforms help companies file ITR in a timely manner, perform data population, make e-invoices, and more.

Here, we’ve mentioned some of the amazing benefits of cloud-based tools and software for managing tax compliance for small businesses in India.

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1. Simplify Regulatory Compliance

Tax compliance regulations are complex and updated regularly. Hence, it becomes a little difficult for small businesses to operate smoothly within the government guidelines, as it takes up a whole team of tax consultants and CAs. Here, you can utilize cloud-based compliance solutions to make the entire process effortless. In fact, a single person can easily manage the entire tax compliance of a business with the help of this cloud-based platform because regulatory compliance with digital platforms becomes easier with the help of these cloud platforms.  

2. Increased Efficacy and Transparency 

Businesses generally have to maintain a lot of documentation and data, which takes up a lot of time and cost. These cloud platforms increase the efficiency of businesses by streamlining their workflows, reducing errors, and saving time and money. Moreover, these platforms also allow the companies to share transparent reports with their business customers or partners. Hence, it builds trust between the business and the customer.

3. Provides Accessibility and Flexibility

Cloud-based solutions help small businesses to access and manage compliance data from any location. The best thing about cloud computing technology is that you can access these tools and platforms from anywhere, just with the help of the internet. Therefore, it highly benefits small- or medium-sized businesses with remote or mobile workforces. Moreover, the cloud-based platforms are continually updated, which allows businesses to always access the latest compliance information.

4. Cloud Reduced Latency 

Latency refers to the response rate of platforms. It is one of the essential elements in managing tax compliance, especially for e-commerce stores. These stores require instantaneous calculations of sales tax to present the accurate price point to the customers, and delaying it will make your customers leave your platform. Here, these cloud-based platforms come into the best play and provide you with great latency. You will experience a fantastic response rate from the platform that will provide you with real-time information. 

5. Expert’s Support 

Using cloud-based tax management platforms will allow you to connect with their supporting experts. If you are stuck at any point in your compliance processes, a team of experts will always be there for you to help you. Plus, they also work every day to make the system faster, quicker, and more efficient. This free support helps smallmouth businesses to solve any problem at their fingertips.

Also Read: How E-Invoicing Is Shaping The Future Of Tax Compliance In India

The Benefits of Mobile Tax Compliance Apps for Small Businesses in India

Mobile tax compliance apps are specialized mobile applications that help you simplify and streamline the process of adhering to tax regulations. Such apps are specifically designed for small businesses with a simple user interface that tracks income and expenses, generates financial reports, and ensures compliance with recent tax laws. As the name suggests, mobile applications probably allow businesses to access tax information and conveniently perform management processes through a mobile device.

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Listed below are certain undue advantages of mobile tax compliance apps for businesses in India. 

1. Easy Streamline Entire Process 

Mobile tax compliance apps help small businesses to streamline their compliance processes and operations. With the help of a mobile application, you can view your tax information updates and make the necessary updates. Apart from just viewing, you can also perform some actions from these mobile applications from any location. These applications will also notify you of any high-priority tasks so that you can complete your compliance processes on time.

2. Document Capture and Management 

Today is the time of mobiles, as there are 1.2 Billion mobile users in India, as per a report shared by Livemint. People are widely using mobile phones to perform any of their functions, as they bring tasks to their fingertips. Therefore, users are becoming more friendly with the use of mobile phones. For instance, while managing tax compliance regulations, employees generally share documents through WhatsApp or Emails. Similarly, tax compliance mobile apps allow you to upload the required receipts, invoices, and other relevant documents directly with the help of your cell phone. It makes your compliance management process smoother.  

3. Easy Integration with Accounting Software 

Mobile compliance apps can easily be integrated with your accounting software. These compliance apps set up a flow of financial data between several platforms and save time for your business. Moreover, it also reduces the risk of human errors, as you don’t have to manually maintain the data. Therefore, this integrated process will let you make instant tax-related calculations, deductions, claim credits, and more. You can make informed decisions in real-time. 

4. High Security 

Mobile compliance apps provide the highest possible security to small businesses, as they have enabled privacy filing. While filing your returns, you don’t even share your crucial financial information with the portals like Google or Facebook. It keeps your financial information safe and secure because your mobile phones have 256-bit encryption. Therefore, your company’s financial information is much more secure in utilizing compliance mobile apps.  

5. Quicker Supervisory Response Time 

A manager is always appointed over the juniors or freshers to supervise all the tasks getting done in an accurate manner. Similarly, small businesses appoint an experienced CA or tax consultant over the tax management team to supervise their work and performance. These mobile compliance apps make it easier for the appointed managers to have checks on the working employees. Simplifying it, you can directly open a mobile app on your phone and check what’s going on while sitting at your desk or from anywhere. Additionally, push notifications make supervision even easier for you.

Also Read: How To Make Your Business GST Compliant With CaptainBiz App

The Benefits of Automated Tax Compliance Tools for Small Businesses in India

Automated tax compliance tools are the software that helps businesses streamline and simplify their tax management processes. As the name suggests, this software utilizes automation to manage compliances like calculations, reporting, and filing. You can easily integrate this software with your accounting systems to automatically record and categorize financial data and reduce the possibility of human errors.

There are various other benefits of leveraging automated software for your business. We’ve mentioned some of the benefits below. 

1. Reduced Cost and Save Time 

Using automated tax compliance tools, a technology-based solution will allow you to manage your business taxes. You don’t need to hire any specialized audit team to maintain and file your taxes. Hence, it reduces your hiring cost and completes the work in a very minimal time. With the help of this automated software, you don’t have to manually complete various tasks like data entry, calculations, and form preparations. Moreover, these systems also get real-time updates and keep your businesses informed about new laws. 

2. Scalable 

As the business grows, so do its tax liabilities and management complexities. For instance, when you rent an office for your business, its tax liabilities increase, which was not previously there. Similarly, companies see various growth phases in their growing journey and make their taxes more complex with time. Here, these automated tools always help you simplify your tax processes regardless of how big they are. You will be able to manage your taxes and compliances on automation, with almost no errors. Therefore, this software allows your business to scale as much as you want without worrying about tax processes and systems. 

3. Efficient and Accurate Results 

Managing tax requires accuracy in matching your accounts and alignment with the legalities. In simple words, first, you have to prepare your company’s accounts without leaving any potential error. Next, you’re required to ensure that you have accurately considered all the legal compliances. You can not afford to make errors in these tax reports and files, as you can be penalized for it. For example, if you have to pay rental property tax and your accountant mistakenly forgot to mention it in your accounts, then it will be considered an offense, and you have to pay the legal penalty for it. Here, automated software makes your tax management processes much more accurate and efficient, and machines usually don’t make mistakes. 

4. Fast Services 

Automated tax tools or software can help you quickly manage your tax documentation and file your taxes. You can quickly and accurately fill your taxes through the e-filing process. In fact, they will allow you to get the returns faster and make tax payments on time. Therefore, this automated software will help you manage your taxation documents and return filing at a faster rate. 

5. Integrate with Other Software 

The best thing about these automated tax software is that you can easily integrate them with your accounting or other software. This system consistently utilizes financial and tax data and eliminates the need for manual data entry and reconciliation. It saves a lot of time and energy for the business. Moreover, it establishes a streamlined data flow within your financial system and gives you fantastic tax results.

How do you use technology to generate and file your GST returns?

Below, we’ve mentioned a complete step-by-step process to generate and file your GST returns using technology. 

Step 1: Select Your Required GST Software 

First, you have to opt for a cloud-based compliance platform, mobile compliance apps, or automated tools and software. To manage your business’s taxation process. They leverage Artificial Intelligence (AI) and Machine Learning (ML), allowing your businesses to automate data extraction, validation, and computation processes. 

Step 2: Automated Data Extractions 

The tax compliance tools and softwares will automatically extract the required data from your invoices, purchase receipts, and other financial records to prepare your GST returns. It is a streamlined process, which means you don’t have to waste your time manually filling out all the details or hire a dedicated team of tax consultants or CAs to prepare your GST returns. 

Step 3: Real-Time Compliance Updates 

These tax compliance software and tools are directly connected to the internet, which keeps your system updated to the newly issued GST rules and regulations. Hence, their algorithms also change with time to ensure the timely filing of returns while also coping with the changing tax laws. Moreover, it is a complete software-based process that eliminates any possible error and, in fact, increases the efficiency of your tax management process. 

Step 3: Keep Your Claims On Point 

The GST software can help you remind you of the GST liabilities, input tax credits, tax payables, possible deductions, and more. It will make sure that you’ve seamlessly maintained the correct GST reports and files. Plus, when you integrate your GST software with your accounting software, ERP systems, and financial tools, it will allow you to get your ready-to-file GST reports in your hands. You just have to recheck all the mentioned details and proceed with your returns filing. 

Step 4: Generate GSTR-1 and GSTR-3B 

This software can easily generate the GSTR-1 by using the details of your outward supplies. You have to make sure that your software allows for the supplies classification, which includes taxable, exempt, and top-rated supplies. Next, you should generate GSTR-3B, which showcases your tax liabilities and input tax credits for the required period. Recheck all the information mentioned in these generated GST returns before proceeding them further.

Step 5: Utilize Electronic GST Filing 

You can file your GST returns online by utilizing the electronic GST filing method. Make sure that your GST returns are approved by your company’s senior Tax Consultant or CA. To file your returns online, you have to visit the GST portal and upload your returns there with the help of your dashboard using your GSTN number. The system will fetch some of your details because of your GST software and tools. Electronic filing will give you more accurate and quicker results. 

Step 6: Keep Acknowledgement and Records

Once you successfully file your returns, you must keep acknowledgement receipts provided by GSTN. It will act as proof of billing of your GST returns that might be needed during the audit. Keep your filed GST returns records in your software and tools for better accessibility. These software and platforms will allow you to access any of the details in just one click at the time of audit.

How to Use Technology to Keep Track of Your Tax Records?

As per the latest technology for managing tax compliance in companies, there are typically three types of tax management software and tools: Cloud-based Tax Compliance Solutions, Mobile Tax Compliance Apps, and Automated Tax Compliance Tools. These tax management tools and software help micro and small businesses to keep track of their tax records. 

1. Income Tax Preparation 

This software can help businesses prepare taxes utilizing their user-friendly approach-based systems. They include all of your income sources, like wages, investments, and additional earnings. Moreover, these software or platforms also include all the required deductions and claims. All these technological tools and software are connected to the internet, which allows them to access real-time tax laws and regulations. Therefore, these tools and software can easily access all your information, including bills, invoices, etc., to prepare GST returns for your business.   

2. Instant Tax Calculations 

All tax compliance tools and software have an accessible feature that provides real-time insights into your crucial financial information. You can check your transactions, income, deductions, or anything else in just one click. It will help your business to make the right financial decisions. Moreover, it also allows companies to forecast future consequences of their taxes by taking any possible step. Therefore, you can not only make better financial decisions but also make better strategic planning for handling your taxation process. 

3. E-billing and E-invoicing 

Tax compliance platforms and software can also help you prepare e-bills and e-invoices for your micro and small businesses. With the help of these compliance tools, you will create invoices and bills by following ongoing regulatory requirements and standards. Moreover, the technological implementation also reduces the risk of human errors. Instead, the seamless data transfer automation between different tools and software makes the process easier. 

4. Automated Data Entry

The automated tax compliance tools and software get integrated with the other financial software of the business, like accounting software. It extracts all the essential financial information from diverse sources like bank statements, receipts, bills, etc. This creates a whole automated system in a business and reduces the chances of human errors. Hence, these compliance tools and software enhance the efficiency and accuracy of your financial and tax records. 

5. Income and Expenses Tracking 

You can easily monitor and record your business income and expenses with the help of these tools and software. They can categorize your business income and expenses and apply all the necessary claims and deductions. Hence, it helps small businesses to create accurate financial reports.

Conclusion 

This is an era of technology, where you are required to properly utilize varied tools and software to beat your competitors in the business. They are the most beneficial for micro and small businesses, as they generally don’t have many resources as compared to giant companies. Similarly, taxes are one of the most crucial elements of business that you can easily tackle with the help of tax compliance tools and software. We hope this guide helps you understand the importance of using technology in managing taxes for businesses.

Also Read: Know Everything About GST Billing Software

Frequently Asked Questions (FAQs)

Q1. What role does technology play in tax compliance? 

Technology can help define and underpin new digital tax functions and allow businesses to take part in the global digital economy. It can help companies to manage their big tax data efficiently and get efficient compliance. Plus, you will also get the insights to make strategic business decisions.

Q2. What is the potential use of technology in compliance? 

Technology allows companies to have greater visibility into their compliance status. For example, an automated tax compliance tool can help businesses identify any potential issues. Plus, it will allow you some time to take the required corrective actions within the required time.

Q3. Why should a small business utilize cloud computing? 

Cloud computing technology allows businesses to store and access data and other resources over the internet rather than a physical server or computer. It provides companies with required flexibility, scalability, and security to grow. Plus, it also saves so much money for companies, especially for small businesses.

Q4. Why is tax compliance important for a business? 

Tax compliance can be referred to as the extent to which the taxpayer complies or fails to comply with predefined rules of their country. It is essential for any solo taxpayer or a business to comply with all the tax rules and regulations. Otherwise, you will be led to face various financial consequences. Moreover, it also distorts the reputation of your business in the market.

Q5. Why is the technology needed in GST? 

GST is a little complex structure and has various online formalities. However, if you utilize the technological software, filing GST and returns will become easier. They can help you file GST returns, manage invoices, and track GST credits. Plus, technology will also help you to easily comply with all the official laws and regulations.

Q6. What is GST technology? 

GST (Goods and Services Tax) is a giant indirect taxation structure. It has various online processes which have changed the traditional taxation system. This system is specifically designed to support and enhance the technological aspect of a country.

Q7. Is the cloud good for small businesses? 

Cloud computing is one of the easiest and most flexible forms of servers. You can effortlessly upload, access, or download any essential data or documentation even through your mobile phone. Therefore, cloud computing frees you from any limitations to sticking to the company’s software. Instead, you can freely work even when you’re away from your desk.

Q8. What role does technology play in tax collection? 

Tax administration has heavily invested in technology and digitized the tax collection process. In digital format, authorities can collect more taxes and keep all the essential information at their fingertips. Moreover, it is also beneficial for small businesses, as they can easily manage their company’s taxes through efficient software without any need for additional hiring.

Q9. How does technology influence various dimensions of the taxation process? 

The government is widely utilizing technology in order to assess submitted source data, generate e-audits, and allow them to match data from different sources. When the government itself is using technology, then it will directly impact the taxpayers across the country to utilize technological tools and software for efficient taxation processes and management.

Q10. What are the economic advantages of the cloud? 

Cloud computing technology frees businesses from creating and maintaining any physical infrastructure and gives them free space. Here, businesses can freely scale their resources depending upon their demand. Therefore, cloud computing ensures optimum utilization, minimal waste, and maximum efficiency for your business. 

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Prarabdh Gupta

Prarabdh Gupta is a finance content writer with 4+ Years of Industry experience in simplifying complex finance terms. He crafts captivating and engaging content around mutual funds, insurance, banking, real estate, taxation, and financial planning. He has completed his graduation from Jiwaji University, Gwalior.

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