Activities to Be Performed after Incorporation Of Company

If you have recently incorporated your private limited company or under the process of incorporation then you must get yourself familiar to the new provisions of Companies act 2013.

The most important things that every promoter or director of a newly incorporated private limited company should know after getting certificate of incorporation or before getting into the process of incorporation.

Checking Company’s Master Data after Incorporation

Certificate of incorporation for a private limited company is the last step in the process of incorporation. Once you received the certificate of incorporation, it means, all legal formalities required for company registration are completed in India.

At Gapeseed Consulting, we have legal consultants like chartered accountants and Company Secratories who help us in the process of company incorporation and do all such things that are required to complete the registration process.

Now the question is how to cross check to know that the company is incorporated with correct details like authorized share capital, registered office, category, CIN, paid-up share capital, status and date of incorporation etc.

These are the most important thing that every company should keep it right.

We suggest you to check these details in company’s master data by visitingthe website of Ministry Of Corporate Affairs  after getting certificate of incorporation.

If you find any changes or incorrect details then immediately inform to your chartered accountant or Company Secretary  to take necessary actions for its correction.

You need to check following things in company’s master data;

  • Authorized share capital
  • Paid up share capital
  • Registered office address
  • Status i.e. Active or Inactive
  • Date of incorporation

File E-Form INC22 For Situation Of Registered Office

Situation of registered office has to be intimated within 30 days from the date of incorporation to the registrar of companies. This can also be filed at the time of incorporation along with other e-forms if registered office of the company is going to be the director’s residence or owned house.

If it’s not filed at the time of incorporation then within 30 days from the date of incorporation, then it is a Non-Compliance u/s 22 of the Companies Act,2013

As per section 12 of Companies act 2013, a company shall, on and from the 15th day of its incorporation and all times thereafter shall have a registered office. This means the company should enter into a rent or lease agreement within 15 days from the date of incorporation and within 30 days from the date of registration should file INC-22 with ROC.

Display Company’s Identity And Other Details

After incorporation, it’s the duty of the company to display following things outside the company’s registered office;

  1. Name of the company
  2. Registered office address of the company
  3. Corporate identity number or CIN
  4. Telephone number, email ID
  5. Website address and fax number if any

These details are also required to be printed in all business letters, bill-heads and in all other official publications.

Putting CIN or corporate identity number in all official publications is a new requirement in Companies act 2013. This provision was not there in old Companies act 1956.

In case of failure to quote CIN number, penalty of Rs. 1,000 per day shall be imposed on the defaulting company and on every officer in default for every day during which such default continues up to a maximum limit of Rs. 1,00,000.

If company has changed its name in last two years then it shall paint or affix or print, as the case may be, along with its name, the former name or names so changed in all official publication including letter head and bill-heads.

Appointment Of Company Auditor

As per section 139(6) of Companies Act 2013, company has to appoint its first auditor within 30 days from the date of incorporation in a board meeting. If board of directors are not able to appoint then it has to be appointed within 90 days in a general meeting of members.

First auditor as appointed is required to hold office till the conclusion of first annual general meeting. Companies Act 2013 does not require any form to be filed with ROC but this is a requirement of law and it has to be complied within time.

Open A Bank Account And Issue Shares To Subscribers

Companies Act 2013 requires the company to allot and deliver share certificates within 2 monthsfrom the date of incorporation to all subscribers of MOA. It’s also mentioned that each subscriber will deposit subscription money as specified in MOA to company’s bank account by cheque or through net banking.

We suggest to open a bank account with the help of MOA, AOA and certificate of incorporation and then takecheque from each subscriber and deposit it in company’s bank account.

File Audit Report, Financial Statements And Annual Report Before Due Date

A private limited company is required to file its balance sheet, profit and loss account, auditor’s report and annual return every financial year before the due date with the registrar of companies. Non compliance to this provision will attract additional fee in addition to the normal fee that are charged while filing the e-Form.

Now you know mandatory things that promoter or directors of a private limited company should remember after incorporation of a private limited company. In case of any doubt or clarification please contact us by using our comment form.

For more information about Activities to Be Performed after Incorporation Of Company, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

Also read this:

Outsourced Accounting Services ,
5 Steps for Setting up a Business in India,
Importance of Accounting for Startups ,
Simple Tips to Design a Salary Structure for an Employee, 
Online Tax Filing ,
Tax Accounting Services for start-ups and small businesses, 
Procedures and Documentation For Startups,
Payroll Services for Startups.

Importance of Accounting for Startups

Significance of Accounting for Startups

Accounting must be given prime importance in any business entity as it is most required, especially for controlling and for providing financial reports at the end of the year. Accounting will help a Startup to determine its productivity and its profit from the initial stages of the company. This provides entrepreneurs a method for maintaining accounting information. The accountant hired by the company will keep track of the money spent for business use as well as for personal use, this will help in strategizing on how the money can be saved. In the initial stages of a Startup, the company must hire consultants or interim CFOs to maintain simple accounts rather than spending more on in-house professional resource.

Benefits of Accounting for Startups in Initial Stage

Forecasting Financial Estimates

Every Startup needs to provide information regarding its financial estimates to banks, investors or lenders to obtain funds in return from them. Accounting helps the business to make a business plan which includes estimated monthly expenditure, economic forecast, projected rate of growth of the Startup. This information is really important for a Startup to lure more and more investors to invest in their idea. The investors also ensure that the entrepreneur has a reliable projection of its company’s financial expectations.

Determine Profitability

Accounting helps an entrepreneur to determine its profitability in the future. It helps in monitoring the progress of the company and also to make necessary amendments where necessary. Through accounting, entrepreneurs will get to know where they need to use their assets to generate profit. An entrepreneur also needs to provide financial information to its investors to ensure them that they will be paid in a timely manner. A monthly statement such as a balance sheet and an income statement shows how if a business is blooming or not, these statements helps in determining a business general profitability.

Budget Expenses

Accounting helps an entrepreneur in setting up a Budget for expenditure on various aspects affecting a Startup. Accounting helps in maintaining records of the cashflow in the business, capital is used in hiring of employees, advertising, purchasing of inventory, petty items. Budget helps an entrepreneur is reducing expenditure on not so essential items and by saving the capital for future purposes.

Payroll Accounting

Accounting for startups help an entrepreneur to record its employees’ compensation such as salaries, bonuses, commissions and any other means earned by an employee. It also maintains employees’ portion of Health insurance premium, Social security taxes, paid holidays. This creates a database for the company consisting of all of its employees. Entrepreneurs must consult accounting professionals during the incorporation of its business. This is a must for an entrepreneur as outsourcing will help a company to grow much faster with the help of a trained professional. Outsourcing helps in many ways such as:

Tax Specialization

Taxation is a main aspect where a Startup may face some difficulties beyond the areas of fund raising and finance. This is where trained professionals like Chartered Accountants play a crucial role in the growth of the Startup. A trained professional who knows the tax laws whether it may be direct tax, indirect tax or any other tax involved will smoothen the working of the business. Well managed and transparent taxation is one of the most required aspect in Accounting for Startups.

Focus on Business

An accountant helps an entrepreneur by letting them focus on their product rather than worrying about the finance. The entrepreneur can create partnerships, create relationships, market its product with the help of an accountant. It will provide valuable information to the business to make it grow and earn profits. An accountant will also help in covering the cost as well as reducing the expenses incurred by the company.

Secretarial Duties

A professional accountant can also perform duties of a company secretary as they are specialist in company law. They also see to it that the company is complying and adhering to the laws laid by the Company Act, 2013. Start-ups strictly need to follow these rules from the start as it may result in the dissolution of the company.

Valuable Business Partner

Outsourcing accounting gives a huge importance to start-ups as these outsourcing firms have wide range of expertise working under them. This support from such firms will be very valuable for the Startup as it has a lot more experience when it comes to raising funds, financial planning, financial reporting. It is better to get financial assistance from trained professionals at the early stages of a Startup as it makes the business develop and grow faster. Many entrepreneurs lack accounting skills and tend to make wrong decisions regarding accounting which acts as a negative aspect in accounting for startups.

For more information on Importance of Accounting  for Startups, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Private Limited Company and its Incorporation

WHAT IS A PRIVATE LIMITED COMPANY?

A private limited company is a type of privately held business entity registered under the Companies Act, 2013. In this type of business entity, the owners are liable to their shares. Private companies issue stock and have shareholders, they cannot trade on public exchanges and shares are not issued through an initial public offering (IPO). A private limited company must have at least one shareholder and can have a maximum of fifty shareholders. This makes the entity to stand between partnership and a public company. It is widely acceptable among entrepreneurs as it is more convenient to start a Private Limited Company.

INCORPORATION OF A PRIVATE LIMITED COMPANY

A Private Limited Company can be incorporated as per the procedure explained below :

Director Identification Number (DIN) & Digital Signature Certificate (DSC)

A person intending to become a director of a company requires a unique identification number which is issued by the Ministry of Corporate Affairs. This number then is used to record the details of the director of the company. The Digital Signature Certificate is the digitalised version of all the paper certificates. This certificate can be used to prove the director’s identity, access information and sign documents digitally.  Certain documents are required for DIR-3 application:

  1. Identity Proof: A copy of PAN card is mandatory whereas a copy of the Driver’s license is optional.
  2. Address Proof: A copy of the Passport / Election ID / AADHAR card / Driver’s License is sufficient.
  3. Passport Size photo
  4. Mobile Number
  5. Education Qualification
  6. Verification signed by the applicant.

Company Name Availability

The name of the company must not be pre-existing, applicants must first search for any existing Trademark and then decide on the company’s name. The Promoters of the company have to provide at least 6 names in the order of their preference to the Registrar of Companies for name availability.

Memorandum of Association (MOA) & Articles of Association (AOA)

When the name of the company has been approved by the Registrar of Companies then the Subscribers have to draft a MOA & AOA specifying their Names, Address, Occupation and the sign the subscription pages of the Memorandum and Articles of Association formed.

The Memorandum of Association is a document regarding the main objectives as well as the secondary objectives of a company. It covers all the necessary fundamental provisions of the company’s constitution.

Articles of Association is a contract based on mutual understanding between the company and its members defining their rights and duties.

Filing E-Forms with Registrar of Companies

After the drafting of Memorandum of Association and Articles of Association, an application has to be sent to the Registrar of Companies regarding the incorporation of the company. This Application must contain all the necessary documents of the Company and its Directors.

Verification of Documents

The company must pay the desired fees to the Registrar of Companies and must get Stamp Duty to get the documents verified.

Issue of Certificate of Incorporation

When all the documents are verified and duly approved by the Registrar of Companies, a digitalised ‘Certificate of Incorporation’ is mailed to the Directors of the company. Once the Incorporation Certificate is received , company can start with its operations .

ADVANTAGES OF A PRIVATE LIMITED COMPANY

Separate Legal Entity

A company is a legal entity and a juristic person under the law. The members (Shareholders/Directors) of a company have no liability to the creditors of the company. This form of organisation has wide legal capacity, acquire and hold property and also incur debts in its own name. As a juristic person, a company can sue in its own name and can be sued by others. A company’s common seal is considered as its signature but is not mandatory.

Limited Liability

Limited liability means the status of being legally responsible only to a limited amount of debts of a company. A company is a separate legal entity from its members. The liability for repayment of debts incurred by the company lies on the company itself and not on the owner. Unlike other business entities the liability of the members in respect of the company’s debts is limited.

Uninterrupted Existence

A private limited company has perpetual succession. A perpetual succession means the company has uninterrupted existence until it is legally dissolved or voluntarily. A company, being a separate legal person will continue to exist even if a member dies or ceases irrespective of the changes in the membership.

Easy Transferability

Shares of a Private Limited company which is limited by the number of shares can be transferred by a shareholder to any other person. The shares and other interest of any member in the company is dealt as a movable property and can be transferred in the manner provided by the Company. Shares can be transferred by filing and signing a share transfer form and handing it over to the buyer of the shares along with the share certificate. It is easier for a member to leave the membership of the company and also to transfer its share of ownership.

Owning Property

A company as a legal entity is capable of owning its funds and properties. No shareholder can make any claim upon the property of the company as the owner of the company and the company itself are two separate entities.

If you are looking for incorporating a private limited company or still perplexed as to what is most appropriate for your kind of business, feel free to get in touch with us. You can visit us for consultation and speak to our CS to ascertain the right direction.

For more information on Incorporation of a Private LTD company , feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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Tax Reforms – Budget 2017

As the Finance Minister of India , Mr. Arun Jaitley, got up to deliver the Union Budget for the Financial Year 2017-2018, every Business Man in the country was waiting  for the Tax Reforms. The Direct Tax Reforms given in the budget dated 1st Feb’2017 will be applicable in the F.Y. 2017-18 or A.Y 2018-19.  Some crucial and evident changes have been made by the Government for the Small and Medium Scale Business in the budget.

As per the Narendra Modi Government, the Tax Revenue of the central Government from Direct Tax Collection has gone up by 17% in F.Y. 2015-16 as compared to F.Y. 2014-15, and the rate of growth in advance tax in personal income tax domains for the F.Y. 2016-17 has increased by 34.81% till 20th Jan’2017 as compared to F.Y 2015-16.

We have decoded the key changes proposed in the Union Budget announced by the Finance Minister on February 1, 2017.

  1. Tax slabs

It has been proposed to reduce the tax rate for taxable income less than Rs 500,000 from current 10% to 5% benefiting Individuals (resident/ non-resident) below the age of 60 years and Individuals (resident/ non-resident) above the age of 60 years and below the age of 80 years.

  1. Rebate under section 87A

Rebate under section 87A of the Income-tax Act, 1961 (“the Act”) is proposed to be reduced from Rs 5,000 to Rs 2,500. It has also been proposed to restrict such rebate to resident individuals whose total income does not exceed Rs 350,000 (earlier Rs 500,000). Considering the above amendments, the net benefit arising to an individual with taxable income of Rs 350,000 and Rs 500,000 is Rs 2,575 and Rs 7,725 respectively.

TaxReforms1

  1. Partial exemption for pension

The existing provision of section 10(12A) of the Act provides that payment from National Pension System (“NPS”) trust to an employee on closure of his account or opting out shall be exempt up to 40% of total amount payable to him. In order to provide relief to an employee who is a subscriber of NPS, it is proposed to provide exemption for partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made thereunder.

ALSO READ: Union Budget 2017: Railways get Rs 55000-crore boost, will have better safety, no fare hikes

  1. Rationalization of deduction under section 80CCD for self-employed individual

In order to bring about parity between an individual who is an employee and an individual who is self-employed, it is proposed to amend section 80CCD of the Act so as to increase the upper limit of 10% of Gross Total Income (“GTI”) to 20% in case of individual who is self-employed. Accordingly, for a self-employed individual, contributions to NPS to the extent of 20 percent of his/ her GTI will now be allowed.

  1. Withholding tax obligation for individual not liable to tax audit

As per the existing provision of the Act, withholding tax obligation on rent payments arises only in case of individuals or HUF who are liable to tax audit.  It is proposed that individual or HUF not liable for tax audit will now be required to withhold tax at the rate of 5%, if the rent exceeds Rs 50,000 per month or part of month on payment of rent.

Also Tax deduction and collection Account Number (“TAN”) will not be required to be obtained.
Further, tax would be required to be withheld only once during the previous year in the last installment payable for the year.

In addition to the above, it is proposed that under section 206AA of the Act, maximum deduction shall not exceed the rent payable for the last month of the previous year/ last month of tenancy.

  1. Shifting base year from 1981 to 2001 for computation of capital gains:

Existing provisions gave the assesse an option to consider Fair Market Value (“FMV”) as on April 1, 1981 for capital assets acquired before the said date. It has been proposed to shift the base to April 1, 2001. Accordingly assesses have an option to consider cost or FMV as on April 1, 2001 as their cost in respect of assets acquired on or before April 1, 2001.

Further, for the purpose of computing indexed cost of acquisition, 2001 shall be considered as the base year.

  1. Reduction of holding period for computation of capital gains for immovable property:

It is proposed to amend section 2(42A) of the Act to reduce the holding period from existing 36 months to 24 months in case of immovable property being land and building or both to quality as long term capital asset.

  1. Expansion of scope of long term bonds under section 54EC

It is proposed to provide exemption under section 54EC of the Act on investment of long term capital gains in any bond redeemable after three years that shall be notified by the central government. This will be in addition to investments in NHAI bonds and RECL bonds where exemption was allowed on investment up to Rs 5,000,000.

  1. Measures for promoting digital payments in case of presumptive business income cases

In order to promote digital transactions and to encourage small unorganized business to accept digital payments, it is proposed to amend section 44AD of the Act to reduce the existing rate of deemed total income of 8% to 6% in respect of turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year. However, the existing rate of deemed profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in any other mode.

For more information on Tax Reforms, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

 

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One Person Company and its Incorporation

ONE PERSON COMPANY

One Person Company (OPC) is a form of business entity that is owned and managed by a single entrepreneur. This concept was introduced in India through the Companies Act, 2013 supporting entrepreneurs who are capable of starting a venture by creating a single person economic entity. A One Person Company is also a separate legal entity from its members just like a Private Limited Company or a Limited Liability Company. In this type of business entity, only one person is required who can be the Director and as well as the shareholder of the company. This venture of One Person Company is still in its emerging stages which makes it much more difficult for entrepreneurs to adopt, it is mainly suitable for people starting an unregistered Proprietorship. The entrepreneur can set up their company without sharing their profits as One Person Company does not need a middleman to target the markets.

Features of One Person Company (OPC)

One Shareholder

One Person Company is a business entity which is owned and managed by a single person. The Company Incorporation Rule states that only a resident and also a citizen of India can form a One Person Company. The entrepreneur hold all the shares of the company as it has only one member. The people who are Foreign citizens and are Non-Resident citizens cannot indulge in the formation of a One Person Company. A shareholder can only have shares in a single One Person Company and not in various companies.

Director

A One Person Company can be managed by a Single Person. In this type of business entity, the Sole Shareholder can become the Sole Director of the business. A One Person Company can have a maximum number of 15 directors even if it may be having a Sole Shareholder.

Nominee

This states that the Shareholder of the company has to nominate a person who in the event of death or inability to continue the work in the company will come forward to take the charge of the One Person Company. The present shareholder will issue a written consent in the name of the nominee, the nominee must also be a resident and a citizen of Indian. The person nominated must not have any other One Person Company under control.

Incorporation of a One Person Company (OPC) in India

A One person Company can be incorporated as per the procedure explained below :

Director Identification Number (DIN) & Digital Signature Certificate (DSC)

A person intending to become a director of a company requires a unique identification number which is issued by the Ministry of Corporate Affairs. This number then is used to record the details of the director of the company. The Digital Signature Certificate is the digitalised version of all the paper certificates. This certificate can be used to prove the director’s identity, access information and sign documents digitally. Certain documents are required for DIR-3 application:

1. Identity Proof: A copy of PAN card is mandatory whereas a copy of the Driver’s license is optional.

2. Address Proof: A copy of the Passport / Election ID / AADHAR card / Driver’s License is sufficient.

3. Passport Size photo

4. Mobile Number

5. Education Qualification

6. Verification signed by the applicant.

Company Name Availability

The name of the company must not be pre-existing, applicants must first search for any existing Trademark and then decide on the company’s name. The Promoter of the company have to provide at least 6 names in the order of their preference to the Registrar of Companies for name availability.

Memorandum of Association (MOA) & Articles of Association (AOA)

When the name of the company has been approved by the Registrar of Companies then the Subscriber have to draft a MOA & AOA specifying their Names, Address, Occupation and the sign the subscription pages of the Memorandum and Articles of Association formed.

The Memorandum of Association is a document regarding the main objectives as well as the secondary objectives of a company. It covers all the necessary fundamental provisions of the company’s constitution.

Articles of Association is a contract based on mutual understanding between the company and its members defining their rights and duties.

Filing E-Forms with Registrar of Companies

After the drafting of Memorandum of Association and Articles of Association, an application has to be sent to the Registrar of Companies regarding the incorporation of the company. This Application must contain all the necessary documents of the Company and its Directors.

Verification of Documents

The company must pay the desired fees to the Registrar of Companies and must get Stamp Duty to get the documents verified.

Issue of Certificate of Incorporation

When all the documents are verified and duly approved by the Registrar of Companies, a digitalised ‘Certificate of Incorporation’ is mailed to the Directors of the company. Once the Incorporation Certificate is received, company can start with its operations.

Post Incorporation

After the Incorporation of a One Person company some necessary formalities are required immediately, such formalities are:

 Opening a Current Bank account in the name of the Company

 The Company must apply for the Shop Act License

 The Shareholder must be issued a Share certificate by the Company

 The subscription money must be payed through the Current Bank account

of the Company

BENEFITS

1. A One Person Company is a separate business entity and have Limited liability to its members.

2. This type of Company helps an entrepreneur to establish its own business without depending upon a second person.

3. A Legal Auditor is not required in this business unlike any other business enterprise.

4. A One Person Company being a separate legal entity can own property in the Company’s name and the shareholder cannot make any claim upon the property.

For more information on Incorporation, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

 

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Limited Liability Partnership and its Incorporation

Limited Liability Partnership and its Incorporation (LLP)

It is an association of 2 or more persons who have set up this business structure for carrying on a lawful business with a view to profit, with the partners having a limited state of liability. LLPs are governed under the Limited liability Partnership Act, 2008. It can be said that LLP is a combination of Partnership and Private Limited Company as it encompasses features of both. Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

How to Incorporate a New Limited Liability Partnership

A Limited Liability Partnership may be incorporated as per the procedure explained below :

Registration

Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services . Fill in the registration form then select your user name and password. Therein, upload digital signature certificate.

Designated Partners Identification Number (DPIN)

All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN)”.

Digital Signature Certificate

Partners/Designated partners whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorised certifying agency.

Name reservation

Log on to the LLP portal. After login, click “E-Forms” link. Open Form-1 for reservation of name and fill in the details. Choose the name of the proposed LLP (upto 6 choices can be indicated). After this attach the digital signatures and submit the e-form and pay the necessary fee.

Details of minimum two designated partners of the proposed LLP, (at least one of them must be a resident of India) is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.

Incorporation of LLP

Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”.
Pay the prescribed registration fee as per the slab given in LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP. Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP . On submission of complete documents, the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act can register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.

Incorporation documents must be filed with the following attachments.

1. Copy of authorisation where the partner is a limited liability partnership, or company, or a limited liability partnership incorporated outside India or a company incorporated outside India.
2. Proof of address of registered office of limited liability partnership.
3. Details in respect of names of partners/witnesses and their signatures.
4. Attachments in respect of details of individuals/bodies corporate where the number exceeds five.
5. Optional attachments as may be required.

LLP agreement must be filed in (E-Form 3) with the Registrar within 30 days of incorporation.
The LLP Agreement must be stamped in accordance with the stamp Act.

CHARACTERSTICS

Separate legal entity : Like a company LLP also has a separate legal entity. So the partners and the LLP are distinct from each other.

No requirement of minimum capital : In case of companies there should be a minimum amount of capital that should be brought by the members or owners who want to form it. But to start an LLP there is no requirement of minimum capital.

Minimum number of members : To start a limited liability partnership at least two members are required initially. However, there is no mentioned limit on the maximum number of partners.

No requirement of compulsory audit : All the companiesare required to get their accounts audited. But in case of LLP, there is no such mandatory requirement.

BENEFITS

• It is flexible to organise the internal structure of an LLP
• There is no maximum limit for the no. of partners in LLP
• Raising and utilisation of funds depends on the partners will
• LLP is exempted of Dividend Distribution Tax (DDT)
• The partners have limited liability
• There is no requirement of minimum capital
• One can easily become a Partner or leave the LLP
• An LLP can easily attract finance from PE Investors, financial institutions, etc.

DEMERITS

• Any act of the Partner without the other partner , may blind the LLP
• LLP cannot raise money from public, unlike a company.
• Angel investor or venture capital firm does not prefer LLP

Related Posts: One Person Company and its Incorporation, Private Limited Company and its IncorporationBasics of Incorporating a Startup

E-FORM INC-32

EVERYTHING ABOUT E-FORM INC-32

The Ministry of Corporate Affairs has introduced E – Form INC-32 under SPICe (Simplified Proforma for Incorporating Company Electronically) scheme vide MCA’s notification dated 01/10/2016 notifying Companies fourth amendment Rules,2016. This is a very significant initiative for technological advancement. The basic aim is to simplify the incorporation of a company by filling up an e-form INC-32.

EarlierMCA had come with the integrated process of incorporation by filing E-form INC-29. This was a major reform brought by MCA for incorporation of a company which required filing of only one E-form i.e. INC-29 as against the 5 forms filed earlier. As the entire process is in single form, correct filing would mean approval in 48 hours.

For further simplification, MCA has facilitated the process of incorporation by introducing SPICe E-form INC-32 which provides the same facilities as were provided in Form INC-29 with facilitating the process by introducing filing of Memorandum and Article of Association electronically. As against the earlier process, it has the potential to save lots of time and energy, if properly implemented. However, further clarification with regard to incorporation under SPICe is to be provided by Ministry of Corporate Affairs.

THE FORM CAN BE FILED EVEN AFTER INC-1
As against the facility provided by the e-form INC-29, e-form INC 32 has the facility to fill the form of incorporation of a company even after filing for the INC-1. That is, even if you’ve already filed the INC-1, you can apply for the name of the company INC-32.

IN DEPTH INFORMATION AS COMPARED TO INC-29
The five purposes for company registration, which are application for DIN allotment, reservation of name, incorporation and even PAN and TAN, are fulfilled by both INC-32 and INC-29, but INC-32 has in depth information as compared to INC-29 with an additional introduction of filing of MOA and AOA of the company electronically.

ELECTRONIC FILING OF MOA AND AOA
Now under SPICe, Memorandum and Articles of Association should be filed electronically, simplifying the whole process. In E-form INC-33 a copy paste of the objects of the company has to be done and in E-Form INC-34 a choice has to be made amongst the pre-drafted clauses of Articles of Association.
This has made the task of drafting Memorandum and Article of Association much easier for professionals.

DIGITAL SIGNATURES OF SUBSCRIBERS AND WITNESS
With the introduction of the new electronic Memorandum and Article of Association of the company, there is no need of signatures of subscribers and witness. Only the digital signatures of subscribers and witness on the E-Form INC-33 and E-form INC-34 would be enough for the specific purpose!

SHORTCOMINGS OF INC 32

  • Obtaining digital signatures is a costly affair.
  • The maximum limit for initial subscribers is 7, exceeding to which, the normal procedure of incorporation must be followed.
  • One single name can be proposed in the form as there is no provision for entering multiple names.

Further to this if you seek any further clarity, feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.

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One India one Tax- GST

GST is Goods and services tax which will substitute the old tax regime, where the ultimate tax burden and its cascading results will be lessened, with a concept of ONE INDIA ONE TAX.

Under this model there will be a single indirect tax, i.e GST which will substitute various indirect taxes levied on goods and services from manufacture till consumption.

Under this tax regime the concept of origin based taxation has changed to consumption based taxation (or destination principle).

Federal structure of GST

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Taxes will be subsumed as:

CGST – Central excise duty, Additional excise duty, service tax, CVD, Spl. Add. Duty @ 4%, surcharges and cess levied by central govt. Rates will be same across India.

SGST – Sales tax/VAT, Entertainment tax, luxury tax, taxes on lottery, betting & gambling, octori& entry tax, purchase tax, Surcharges &cess levied by state govt. Rates may vary for different states.

IGST – Taxes will be levied on interstate trade and taxes levied in the case of import. It will be sum total of CGST & SGST.

Legal Implications

  • The government of India is committed to replace all the indirect taxes levied in India with one tax GST, other than alcohol for human consumption.
  • Provisions will be made for removal of 650 check posts and 11 local taxes across India.
  • GST will be levied on sale of newspapers and advertisements.
  • Stamp duties imposed on legal documents by states will continue to be levied.
  • Petroleum and petroleum products may be subject to GST.
  • The list of exempted goods and services would be kept to minimum, it would be harmonised for the centre and state as far as possible.
  • GST is value addition at each level in the supply chain which will be applicable to both goods and services.
  • Where credit will be allowed for tax paid on input used in manufacture or for using any input service.
  • The Centre GST and State GST will be levied would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits.
  • Input or input services for personal consumption will continue to be GST regime.
  • An additional 1% tax will be levied by the centre which will be redirected to origin states for a period of 2 yrs or more as may be proposed by the central govt.

 

GST Impact on Sectors/Companies in a Nutshell

  • Banks – Current Tax Rate is 15%. After GST it is 18%. Negative
  • Consumer Staples – Current Tax Rate is 22%. After GST it is 18%. Positive for Asian Paints, Dabur, HUL, Emami; Negative for ITC, UBL
  • Consumer Discretionary – Current Tax Rate is 15%. After GST it is 18%. Negative for Jubilant Foods, Cafe Coffee Day, Restaurant businesses
  • Media & Entertainment – Current Tax Rate 15% + 7% State Entertainment tax. After GST it is 18%. Positive for Dish TV, Videocon D2H, BIG TV
  • Telecom – Current Tax Rate is 15%. After GST it is 18%. May see marginal dip in consumption
  • Auto & Auto Ancillary – Current Tax Rate is 27%. After GST it is 18%. Positive for M&M, Maruti, Bajaj Auto, Eicher Motors, Ashok Leyland
  • Metals – Current Tax Rate is 18%. After GST it is 18%. No significant impact.
  • Cement – Current Tax Rate is 27%. After GST it is 18%. Positive for UltraTech, Shree Cement, Ambuja Cement
  • Pharma – Current Tax Rate is 15%. After GST it is 18%. Negative for Pharmaceutical co.s
  • Real Estate – Current Stamp Duty is 15%. After GST it is 16%. No significant impact.
  • Logistics – No change in Tax Rate after GST. Positive for Container Corp, GATI, etc.

 

Scheme of levy

The Levy in the common parlance means charge or imposition or collection of tax by authority. For the purpose of collection of tax, the authority should have the power of collection of tax.

  • Section 7 of Model GST Act 2016, sets out that CGST/SGST and IGST shall be levied on all intra-state sales and interstate supplies of goods and/or services.
  • The Assessee who has an aggregate income of Rs. 50 lakh are eligible for composition levy, where amount of tax payable is 1% of the turnover during the year where the assesse shall not be entitled to claim any input tax credit.
  • Under the GST regime the threshold limit for SME’s is proposed to be around Rs. 25 Lakh. The lowering of the threshold would bring many SME’s under the Tax bracket.
  • GST Model law has also brought supply of goods or services without consideration, under the tax bracket, by imposing tax on value derived under Rule 4 of valuation rules.
  • Under section 43C(4) of Model GST Law, states that every e-commerce operator shall furnish a statement
    electronically, providing the details of the amount collected on behalf of each supplier in respect of all supplies of goods and/or services effected through the operator.
  • Imported goods would be liable to custom duty along with IGST (equivalent to IGST on similar goods in India).

 

Utilisation of Input credit

Chapter-V states that Every taxable person shall, subject to such conditions and restrictions as may be prescribed in this behalf, be entitled to take credit of input tax and may deduct the amount of admissible credit in respect of a tax period from the output tax for the same period and pay the remaining amount, if any, to the credit of the appropriate Government (i.e. Central Government in case of the IGST and the CGST, and the State Government in case of the SGST) within such time and in such manner, as may be prescribed.

Manner of taking credit of IGST/CGST/SGST:

  • IGST paid on interstate purchase shall first be utilised towards payment of IGST then (if amount remaining) towards payment of CGST and SGST, respectively.
  • CGST paid on purchase shall first be utilised towards payment of CGST then (if amount remaining) towards payment of IGST.
  • SGST paid on purchase shall first be utilised towards payment of SGST then (if amount remaining) towards payment of IGST.
  • ITC of CGST cannot be utilised towards payment of SGST.
  • ITC of SGST cannot be utilised towards payment of CGST.
  • There shall be two type of electronic ledgers for every registered taxable person:-
    • Electronic Cash Ledger

 

Electronic Credit Ledger

  • Every deposit made towards tax, interest, penalty, fee or any other amount shall be credited to his Electronic Cash Ledger.
  • Input Tax Credit as self-assessed in the return shall be credited to his Electronic Credit Ledger. The amount available in this ledger may be used for making any payment towards tax payable under GST Law.

 

Procedural Aspects

New Applicant can apply for Registration:
At the GST Common Portal directly ; or
At the GST Common Portal through the Facilitation Center (FC)

As per the following process:

Constitution of Business –

Partnership Deed in case of Partnership Firm ;

Registration Certificate in case of other businesses like Society, Trust etc. which are not captured in PAN.
In case of Companies, GSTN would strive for online verification of Company Identification Number (CIN) from MCA21. Constitution of business / applicant as per PAN would be taken except for businesses such as Society, Trust etc. which are not captured in PAN. Partnership Deed would be required to be submitted in case of Partnership Firms.

Details of the Principal Place of business –

In case of Own premises – any document in support of the ownership of the premises like Latest Tax Paid Receipt or Municipal Khata copy or Electricity Bill copy.

In case of Rented or Leased premises – a copy of the valid Rent / Lease Agreement with any document in support of the ownership of the premises of the Lessor like Latest Tax Paid Receipt or Municipal Khata copy or Electricity Bill copy

In case of premises obtained from others, other than by way of Lease or Rent – a copy of the Consent Letter with any document in support of the ownership of the premises of the Consenter like Municipal Khata copy or Electricity Bill copy

Customer ID or account ID of the owner of the property in the record of electricity providing company, wherever available should be sought for address verification
This is required as an evidence to show possession of business premises. If the documentary evidence in Rent Agreement or Consent letter shows that the Lessor is different from that shown in the document produced in support of the ownership of the property, then the case must be flagged as a “RiskCase”, warranting a post registration visit for verification. GST Law Drafting Committee may add penalty provision for providing wrong lease details.

Details of Bank Account(S) Opening page of the Bank Passbook held in the name of the Proprietor / Business Concern – containing the Account No., Name of the Account Holder, MICR and IFS Codes and Branch details This is required for all the bank accounts through which the taxpayer would be conducting business.

Details of Authorised Signatory For each Authorized Signatory:

Letter of Authorisation or copy of Resolution of the Managing Committee or Board of Directors to that effect This is required to verify whether the person signing as Authorised Signatory is duly empowered to do so.

Benefits of GST

  • This structure would overall reduce the combined rate of taxation and the cascading burden on the economy.
  • This would increase the productivity and performance in the economy.
  • Indian truck system will work effectively with removal of 650 check posts and 11 local taxes.
  • Reduction of cost to the company for extra working capital.
  • Reduction in typicality of existing tax structure in India.
  • A transparent and simple tax regime of ONE TAX ONE INDIA.

 

Limitations under GST Model

  • When the aviation industry was witnessing the much awaited growth with increasing domestic traffic, the GST implementation might slower the rate at which the industry is expecting growth as flying will become expensive.
  • India, on one hand, has the lowest insurance penetration in the world (less than 5% of Indian population & half of the global average) and on the other GST will further make the insurance products dearer.
  • The Banking & Financial Sector (including Insurance as statedabove) might take a hit as currently the effective tax rate in the sector is 14 per cent, which is levied only on fee component (and not interest) of the transaction. Under GST, effective tax rate on fee-based transactions is expected to increase to 18-20%.
  • Petroleum products form a majority import value in the Indian ecosystem. However, key petroleum products like crude, natural gas, high-speed diesel and ATF have been kept out of GST.

 

Conclusion

A seamless implementation of GST may boost growth of the overall economy to a level that the above stated pitfalls might be merely seem as part and parcel of the India growth story. When most of the sectors grow simultaneously, it might increase jobs and disposable income of individuals to an extent that the dearness brought by GST gets offset. Analysts are already predicting 10% GDP growth for the Indian Economy with GST coming into effect.

Read more about Registration of GST and about the GST’s 8 Council meet here.

Further to this if you seek any further clarity, feel free to write to us on, info@gapeseedconsulting.com or you can also call us at +91-9599444639.

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How to apply for TDS Refund?

TDS is deducted by the client at the time of payments and is deposited with the Income Tax Department as tax deducted on behalf of the person/entity to whom the payment is being made.

Most of the service providers do not object to TDS deductions, as it is allowed to be claimed as a credit after filing the Income Tax return. The only condition to this is that the balance amount after filing the income tax return is required be to taxable and TDS refundable.

Let us now understand the Procedure for applying for TDS Refund

TDS Refund is not a preformat based application. A taxpayer becomes eligible for TDS refund once s/he files his income tax return and in that, they should be able to detail out the calculation of his payable income tax and also the total TDS which is been deducted over the period for which income tax return is filed.

Once the books are updated and the above details are refurbished, any accounting software will automatically reflect the refundable amount of TDS and the same will be refunded in a certain period of time.

On filing the income tax return, when a tax payer mentions about any dues in the form of TDS refund, the income tax officer takes time to sanction the refund. However, the refund comes with an additional interest of 6% per annum in the cases where payable refund is more than 10% of the total tax payable in the same financial year.

An intimation is sent to the tax payer under section 143(1) with the refund with the details of the computation of interest. The tax payer can connect with the income tax officer in case of dissatisfaction with the interest paid.

Previously some cases were noticed where some agencies asked the taxpayers for their bank details on approval of income tax refunds. Such cases were reported as scam and the Income Tax department alarmed the tax payers to not indulge into such emails or phone calls. The Income Tax department maintains that once a refund is approved, it is automatically credited to the provided bank details.

Some of the discrepancies occur due to the mistakes in return filing, the bank account closure, a wrong branch or may be typo error in your IFSC details etc., are the only reasons for delay.

Learn how to check the TDS Refund Status?

One can easily check the TDS refund status online with the help of the PAN number and the year for which the return is sought. Banks like SBI also provide status of TDS refund thru email and a toll free number.

Other significant points regarding TDS Refund include:

  • 1. You need to file income tax return to assess the refund.
  • 2. You can expect a TDS refund as soon as you file your ITR.
  • 3. Deductions made as TDS reflect in Form 16 and 16A.
  • 4. Consolidated TDS deductions reflect in Form 26AS.
  • 5. Incase, you fear that deducted TDS amount can surpass the taxable amount that year, s/he can file Form 13 in advance for Nil/Lower Deduction of TDS.

Further more, you can get in touch with us to understand the TDS Refund status and also for other Taxation related and Accounting related services. Feel free to connect to us at, info@gapeseedconsulting.com or call +91-9599444630

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Save Tax through the following Tax Exemptions

Did you know that it is possible to save your income tax out flow by far a large amount?

Do you want to know about Tax Planning through Tax Exemptions?

Did you know that we can help you with this year’s Tax Filing? Are you wondering about redeeming some of the previous year’s tax which you filed and weren’t aware of exemptions.

Then this is the post for you. Read further to understand how you can save tax through following tax exemptions. All this is possible legally under the Indian Income Tax Act which allows certain deductions which can be claimed to save tax at the time of filing of Income Tax Return by all classes of taxpayers . All you need to do is a proper tax planning which would allow certain deductions from your gross total income and income tax would be levied on the balance income as per the income tax slabs. Here are certain year-end tax tips to get smarter with tax management.

  • House Rent Allowance (HRA): It is the best tax saving tool which a taxpayer can use. Under this you can save upto 50% of your salary if you are staying in a metropolitan city like Mumbai, Delhi, Chennai or Kolkata else 40% if you reside in non-metro. Apart from this if actual rent paid is lower than 10% of your basic salary received then there is no exemption. Be aware that you cannot claim any exemption under this section if you love in your own home or of you are not paying rent to anyone.
  • Medical Reimbursement: If your employers provide you medical reimbursement facility for your medical expenses you can get tax exemption. No income tax on medical reimbursement is levied up to Rs. 15000 provided all bills for the same are produced by the employee to the employee. This also includes premiums that your company might be paying for your health insurance schemes and on treatments of any critical diseases. It is to be noted that no income tax on medical reimbursement is levied upto Rs. 15000, the amount received as medical allowance would be fully taxable.
  • Deductions on Section 80C, 80CCC: Under Section 80C a deduction of Rs.1,50,000 can be claimed from the total income you earn. In simple terms you can save up to Rs. 1,50,000 from your total taxable income under this section. Please note this deduction is allowed to an individual or a HUF. Under Section 80CCC it provides deduction to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer. The plan must be for receiving pension from a fund referred to in Section 10(23AAB).
  • Leave Travel Allowance (LTA): It is the most common element of compensation which the employers use to remunerate employees due to the tax benefits attached to it. An LTA is the remuneration paid by an employer for Employee’s travel in the country, when s/he is on leave with the family or alone. LTA amount is tax free. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, provides for the exemption and outlines the conditions subject to which LTA is exempt. Please note that The total cost of the holidays is not covered, only the travelling cost is covered.
  • Spend more: Increasing expenses, such as paying off bills or other debts or paying out bonuses to employees, it will help increase your deduction for the current year. If you’ve delayed major purchases for your business, you should go ahead and buy it. Not only can you find great deals as businesses try to clear out inventory, you’ll have more deductions. In general capital improvements and new equipment should be capitalized and depreciated over 5, 7 or 10 year period.To know more about tax planning, tax exemptions and to get smarter with tax management for this financial year, drop us a line here and we will be happy to provide you our Tax planning services .  You can also write us at info@gapeseedconsulting.com  or, call us for Tax Advice at, +91-9599444639.

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