Accounting & Compliance
Glossary for Indian Startups

GSTR-2B is an auto-drafted purchase return statement generated by the GST portal each month, showing supplies reported by your vendors against your GSTIN. Reconciliation is the process of matching the Input Tax Credit (ITC) claimed in your books against what vendors have reported in their GSTR-1/2B. Mismatches — missing vendor returns, wrong GSTINs, differing amounts — cause ITC rejection during assessment. Unlike month-end batch processes, Kosha runs GSTR-2B reconciliation continuously, flagging mismatches as vendor invoices arrive so you reclaim ITC before filing.

Input Tax Credit (ITC) is the GST you paid on business purchases that you can deduct from the GST you collect on sales. ITC is claimed in GSTR-3B and must match the vendor-reported supplies in their GSTR-1/2B. Common reasons for ITC rejection: vendor hasn't filed returns, mismatched GSTIN, or expired invoices. Kosha's continuous reconciliation pre-validates ITC eligibility against GSTR-2B data and flags potential leakage before you file.

Section 194J of the Income Tax Act requires TDS deduction on payments for professional or technical services. Rate: 10% for individuals/HUF, 2% for companies. Covers fees to CAs, lawyers, consultants, software service providers, and technical contractors. Kosha auto-identifies 194J-applicable transactions from your vendor payments, withholds the correct amount, and generates pre-filled Form 26Q data for your CA.

Section 194C applies to payments made to contractors for carrying out work (including supply of labour). Rate: 1% for individuals/HUF, 2% for others. Covers advertising contracts, catering, carriage of goods, and manufacturing contracts. Distinguishing 194C from 194J is a common audit pitfall. Kosha classifies contractor payments by section and withholds correctly.

Section 194H requires TDS on commission and brokerage payments at 5%. Covers payments to agents, distributors, brokers, and intermediaries. Excludes transactions covered under 194C (contracts) and salary. Correct classification matters — misclassifying commission as a contract payment can lead to short-deduction notices.

Schedule III of the Companies Act, 2013 prescribes the format for presenting financial statements — Balance Sheet, Statement of P&L, and Cash Flow Statement — for Indian companies. It replaced the old Schedule VI format and introduced stricter disclosure requirements for Share Capital, Reserves, and Contingent Liabilities. Compliance is mandatory for all Pvt Ltd companies. Kosha generates Schedule III reports directly from the live statutory ledger.

Rule 11(g) of the Companies (Accounts) Rules, 2014 mandates that companies using accounting software maintain a complete audit trail of every financial transaction. The audit trail must be timestamped, unalterable, and available for inspection by auditors and regulators. Non-compliance can result in penalties and qualification of the audit report. Kosha's ledger is MCA rule 11(g) compliant by default — every entry is SHA-256 signed and hash-chained.

Rule 37A of the CGST Rules requires a buyer to reverse Input Tax Credit if the corresponding supplier fails to deposit that tax to the government — commonly triggered when a vendor invoice remains unpaid or unreported beyond 180 days from the invoice date. The credit must be reversed by the due date for filing GSTR-3B, with interest applicable if missed, and can be reclaimed once the supplier files. Most accounting software doesn't track the 180-day clock automatically. Kosha monitors every purchase invoice against this deadline and flags reversals before they become an assessment finding.

Section 80-IAC of the Income Tax Act allows an eligible startup a 100% deduction on profits from an eligible business for 3 consecutive years out of the first 10 years since incorporation. Eligibility requires DPIIT recognition, incorporation as a Pvt Ltd or LLP between 1 April 2016 and 31 March 2025, and annual turnover under ₹100 Crore in every year since incorporation — plus separate Inter-Ministerial Board approval. Many eligible startups miss the window because eligibility isn't tracked against live financials. Kosha computes 80-IAC eligibility from your actual P&L, updated automatically as your books close.

Under Reverse Charge Mechanism (RCM), the recipient of goods or services is liable to pay GST directly (instead of the supplier charging it). Common scenarios: purchases from unregistered dealers, import of services, GTA (Goods Transport Agency), legal services, and director remuneration. RCM requires self-invoicing and correct reporting in GSTR-3B — errors here are a common audit finding. Kosha auto-detects RCM transactions from your purchase data.

GSTR-1 is the monthly or quarterly return detailing outward supplies (sales) that a registered taxpayer must file on the GST portal. It contains invoice-level data for B2B transactions and consolidated data for B2C sales. Vendor-reported GSTR-1 data forms the basis of the buyer's GSTR-2B. Accuracy in GSTR-1 directly impacts your customers' ITC claims. Kosha validates GSTR-1 data against your ledger before filing.

Form 26Q is the quarterly statement of TDS deducted on payments other than salary (covered by Form 24Q). It must be filed by the 31st of the month following each quarter — June, September, December, March. Contains deductee-wise details of TDS deducted and deposited. Late filing attracts ₹200/day penalty. Kosha generates pre-filled 26Q data from your classified vendor payments.

DPIIT (Department for Promotion of Industry and Internal Trade) recognition certifies a company as a startup under the Startup India initiative. Benefits include 80-IAC tax exemption, fast-track patent examination, and access to government funds. Eligibility: incorporated less than 10 years, turnover under ₹100Cr, working towards innovation. Kosha tracks DPIIT eligibility from your live books.

Continuous close is the practice of completing closing activities — transaction classification, reconciliation, journal adjustments — throughout the accounting period rather than in a frantic week after month-end. The goal is a materially accurate trial balance at any point in time. Modern ERPs enable this by automating reconciliation and providing real-time flux visibility. Kosha's ledger was designed for continuous close from day one.

Flux analysis compares actual financial results against budget, prior period, or forecast to identify significant variances — both favorable and unfavorable. It is the primary tool finance teams use to validate the ledger before signing off on a period. Common checks: revenue shift between months, unexpected expense spikes, deferred revenue movements. Kosha surfaces flux analysis continuously, not just at close.

Bank reconciliation is the process of matching transactions recorded in your books against bank statement entries to identify discrepancies — missing deposits, duplicate entries, incorrect amounts, uncleared cheques. Under Indian accounting standards, monthly reconciliation is mandatory for statutory audit. Kosha automates bank reconciliation via the Account Aggregator framework, matching live bank feeds against your GL.

The General Ledger (GL) is the complete record of all financial transactions, maintained using double-entry accounting where every debit has a corresponding credit. The GL is the single source of truth for financial reporting — every P&L line and Balance Sheet item traces back to GL entries. Unlike spreadsheet workarounds, a statutory ledger enforces balance rules, tracks audit lineage, and produces verifiable financials. Kosha is built as a continuous double-entry ledger.

Multi-entity consolidation is the process of combining financial statements from multiple legal entities (subsidiaries, holding companies, group entities) into a single set of group financial statements. Requires elimination of inter-company transactions, currency translation, and minority interest adjustments. For Indian groups with holding-subsidiary structures, consolidation is mandatory under Ind AS 110. Kosha consolidates subsidiaries into a single close.

An audit trail is a chronological record of every change made to financial data — who made it, when, what was changed, and the previous value. For electronic books of accounts, Indian regulations (Rule 11(g)) require the audit trail to be unalterable and time-stamped. A proper audit trail enables auditors to trace any P&L line back to its source transaction. Kosha's hash-chain audit trail is MCA-compliant and available to your CA through a view-only portal.

Runway is the number of months a startup can continue operating at its current burn rate before running out of cash. Calculated as: Cash on Hand ÷ Monthly Net Burn (expenses minus revenue). Most VCs expect 12-18 months of runway after a fundraise. Kosha tracks runway from your live ledger — not spreadsheets — and models what-if scenarios for hiring and revenue changes.

Burn rate measures how quickly a startup spends its cash reserves. Gross burn = total monthly expenses. Net burn = total expenses minus revenue. For Indian startups, burn rate analysis must account for GST outflow (which is timing-dependent), TDS deposits, and statutory dues — items often missed in spreadsheet models. Kosha calculates burn from actual ledger data, not budget estimates.

Ind AS (Indian Accounting Standards) are accounting standards converged with IFRS, mandatory for certain classes of companies under the Companies Act. Applicability thresholds: listed companies, companies with net worth above ₹250Cr, or holding companies of such entities. Ind AS differs from IGAAP (old Indian GAAP) in several areas including revenue recognition (Ind AS 115) and financial instruments (Ind AS 109).