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New compliance for directors – DIR-3 KYC

The Central Government of India decided to conduct KYC drive to bring down the shell companies. Ministry would be conducting KYC of all the directors of the companies as a part of updating its registry.

MCA (Ministry of Corporate Affairs) has amended and inserted a new rule, Rule 12A (Directors KYC) vide the Companies (Appointment and Qualification of Director) Rules, Fourth Amendment Rules, 2018 . The rule came into effect on July 10, 2018.

In a registered company or new company registration, every director who has been allotted Director Identification Number (DIN) on or before 31st March, 2018 and whose DIN is in ‘Approved’ status would be mandatorily required to file form DIR-3 KYC by August 31, 2018.

Directors of the company will be going through this KYC procedure annually.

Need for this amendment

  • Government is administering a drive to maximize corporate governance in order to get rid of shell companies, unprincipled and dishonest directors who are running benami companies (where actual owners and directors are not on the records or books). This KYC exercise is undertaken to sift that only genuine individuals are responsible for running the affairs of any company.
  • MCA would be conducting KYC of all the directors of the company as a part of updating its registry.

Who all are covered under this compliance?

  • All the individuals whether residents in India, non-residents or foreign nationals, who are directors / partners any companies / LLP are required to file KYC form.
  • The KYC details are to be mandatorily submitted by director of the company and by disqualified directors as well.

Directors are required to fill the DIR-3 KYC E- Form available on the MCA’s website.

Information Required 

  • It is mandatory for the Indian directors that all the data furnished in the DIR-3 KYC form is in accordance with the information registered with the Income Tax Department (in PAN)
  • The full name of applicant, as mentioned in attached documents, should be provided without using any abbreviations.
  • Using of prefix, Late is not required for a deceased person. The married women are also required to fill in their father’s name only.
  • It is obligatory for a foreign national with a DIN, to possess a passport. The passport number shall be duly filled in the form. For Indian nationals, having a passport isn’t compulsory, but in case the person has a passport then its details must be mentioned in the form.
  • Details of AADHAR should be in compliance with the details furnished in both PAN and DIN.
  • The applicant must provide personal working mobile number and e-mail id. An OTP shall be sent for the verification of both the contact details.
  • Present residential address should be the one mentioned in the documents attached for the address proof. The permanent address may or may not be the same.

Documents to attach with Form

  • Identity proof (PAN / Passport/ AADHAR Card): The document should declare applicant’s and his father’s name along with the photograph of the applicant and his date of birth.
  • Proof of present address: Passport/ AADHAR Card/ Voter Identity.

Signatures

  • The form has to be digitally signed by the applicant using digital signature.

Certification of DIR-3 KYC form

  • The form has to be certified subsequent to its verification, with the original documents, by a practicing CA/CS/CMA professional.

Fee for filing DIR -3 KYC form

  • No fees to fill form DIR-3 KYC provided the form is being filled within the specified time-frame.
  • The applicant will be filed with a fee of INR 5000 in case of delayed submission.

Consequences for not filing e-form DIR-3 KYC

  • After expiry of the due date by which the KYC form is to be filed, in case of non-compliance, the DIN shall be marked deactivated along with the reason “Non-filing of DIR-3 KYC” .However, the de-activated DIN shall be re-activated only after filing of E-form DIR-3 KYC.
  • Also late fee penalty of INR 5000 shall be levied on filing after the expiry of due date.

Make sure you file DIR-3 KYC before 31st August 2018. If you need any assistance to comply with this new rule reach out our experts.

GST Returns

Key outcomes of the 28th GST Council meet held on 21st July 2018

GST return filing process

  • Small taxpayers with less than INR 5 crores of turnover can opt to file GST return quarterly against earlier limit of INR 1.5 crores. Quarterly return filing will be similar to the monthly return. However, tax payment would still be monthly, through a challan. Only small taxpayers making B2C supply or making B2B and B2C supply can enroll for quarterly GST return filing. Small taxpayers involved in only B2B supply cannot file quarterly returns under this scheme.
  • Two simplified returns have been designed- “Sugam” and “Sahaj”, where in the first one, report only B2C supplies and the other report both B2B & B2C supplies, respectively.
  • The returns that have to be filed monthly, has also been simplified. The new return is simple with two main tables. One for reporting outward supplies and one for reporting inward supplies for availing input tax credit. The process would be based on Invoice “UPLOAD – LOCK – PAY TAX” for most tax payers.
  • A new facility is proposed by the GSTN wherein NIL return filers (no purchase and no sale) can file Return by just sending an SMS.

Composite dealers

  • Limit not exceeding 10% of the turnover of services rendered in the preceding financial year, or INR 5 lakhs, whichever is higher shall be fixed for opting into the composite scheme. Restaurant services are not be considered for this measure.
  • Threshold limit for opting for composition scheme to be raised to INR 1 crore from existing INR 1.5 crore.

GST registration

  • Taxpayers may opt for multiple registrations within a State / Union territory in respect of multiple places of business located within the same State / Union territory. Earlier it was restricted to multiple businesses in the separate States.
  • Now it becomes mandatory to register under GST for those E-commerce operators who are required to collect tax at source.
  • The threshold exemption limit for GST registration increased to INR 20 lakhs from INR 10 lakhs for 6 States -Taxpayers operating in Sikkim, Arunachal Pradesh, Himachal Pradesh, Uttarakhand, Assam & Meghalaya.
  • Registration to remain temporarily suspended for the time cancellation of registration is under process, so that the taxpayer is relieved of continued compliance burden under the law.

 Reverse charge mechanism

  • An amendment is proposed to levy GST on reverse charge mechanism on receipt of supplies from unregistered suppliers, to be applicable to only specified goods in case of certain notified classes of registered persons.

E-way bills compliance

  • As the RFID readers or tags will be introduced with Goods and Services Tax Network (GSTN) for transporters in the next 6 months, this is supposed to relieve the transporters from wait at check posts.
  • Standard operating procedure to be adopted to reduce harassment of transporters avoid unnecessary hardship at checkpoints and to give effect to a uniform.

GST migration re-opened

  • Those businesses that had VAT or Service Tax or Central Excise registration were required to migrate and obtain GSTIN by registering under GST. This migration was later closed.
  • The 28th GST Council has now approved the proposal to open the migration window for taxpayers, who received provisional IDs but could not complete the migration process.
  • Taxpayers who filed Part- A of form GST REG-26, but not Part- B need to approach the jurisdictional Central Tax / State Tax nodal officers with the necessary details on or before 31st August, 2018 to complete the procedure.
  • All such taxpayers who are now migrating will also be not levied a penalty for late filing GST return. However, such taxpayers will have to file GST return first along with the payment of late fee. On filing the GST return, the GSTN would provide credit by way of a reversal of the amount paid as late fees in the cash ledger under the tax head.

*To encourage the same the late fee payable for delayed filing of return in such cases is decided to be waived.

For exporters

  • Exemption on outward transportation of all goods by air and sea is extended by another year till 30th September, 2019.
  • Services provided in sectors like banking, IT have been provided relief by exempting services supplied by an establishment of a person in India to any establishment of that person outside India (related party).

Other key points

  • Currently, the fiber material is charged at a higher GST rate of 12% as compared to the final apparel that was made out of it attracted only 5%. Due to this, ITC on fiber material was not being able to be utilized. On account of the inverted duty structure that currently prevails in this industry, GST council has proposed for the provision of allowing refund of the accumulated ITC by giving prospective effect to its applicability from 27th July 2018.
  • Registered persons may issue consolidated credit / debit notes in respect of multiple invoices issued in a Financial Year.
  • Hotels to be taxed on actual tariff basis not on declared tariff.

Rate rationalized

  • Common-use foot wares having retail price up to INR 1,000 to be taxed at 5 % for those with price exceeding INR 1000, 18% GST rate will be applicable.
  • Ethanol oil for oil companies to be taxed at 5 per cent in place of 18 % earlier.
  • GST rates for all leather items reduced to 18 per cent from 28 %.
  • GST rates cut to 18% for special purpose vehicles, work truck, trailers.
  • Rates on scents, toilet spray now under 18 % slab.
  • GST on bamboo flooring put under 12 % category.
  • Handicraft items to now be taxed at 12 %.
  • GST on handbags, jewellery box, wooden box for paintings, artware of glass, stone endeavour, ornamental framed mirrors, handmade lamps etc. reduced to 12%.
  • GST on imported urea reduced to 5%.
  • Rates for 17 white goods including — Washing machine, Refrigerators, TV, Video games, Vacuum cleaners, Trailers, Juicer mixer, Grinders, Shavers & Hair driers, water cooler, water heaters, Lithium ion batteries, electric iron – reduced by 10 % from 28 % to 18 %.

Exempted items

  • Sanitary napkins that were earlier taxed at 12 % has been put under exempted category.
  • Marbles, stone and wood deities get exemption.
  • Rakhi and fortified milk are also exempted.

New GST rates

blog

Next Council meet is going to be held on 4th August 2018.For further updates stay tuned here!
For any query on this, reach our GST advisors.

Residential taxability of an individual

Residential status and taxability of an individual

The residential status under Income Tax law plays a vital role while considering taxation of certain incomes of an Individual. It is not related to citizenship of a country.

The residential status of a person is required to be determined for each assessment year in order to ascertain the scope of his total income. The residential status of a taxpayer is worked out on the basis of tenure of his physical stay in India during the Financial Year.

For tax purpose all tax payers are classified into two broad categories based on their period for which they were physically present in the country:
1. Resident
2. Non-resident(NR)

Residents are further classified into:
1. Resident and ordinarily resident (ROR)
2. Resident but not ordinarily resident (NOR)

An individual is said to be Resident in India in any previous year, if he satisfies any one the following conditions:
a) He has been in India for a period or periods amounting in all to a minimum of 182 days during the previous yearor
b) He has been in India for a total of 365 days or more during the 4 years immediately preceding the previous year and for at least 60 days during the previous year.

If any individual satisfies any of the one conditions mentioned above, he is a Resident of India. If none of the above mentioned criteria is fulfilled by an individual then he is categorized as Non-resident.

*The 60-day period mentioned above (in point b) will be substituted for 182 days in case of the following persons:-

  • A citizen of India who leaves the country as a crew member of an Indian ship or for the purposes of employment outside India.
  • A Citizen of India or Person of Indian Origin who visits India in any previous year.

A resident individual will be treated as ROR in India during the year if he satisfies both the following conditions:
a) He is resident in India for at least 2 years out of 10 years immediately preceding the relevant financial year.
b) His stay in India is for 730 days or more during 7 years immediately preceding the relevant financial year.

A resident individual who does not satisfy any of the aforesaid conditions or satisfies only one of the aforesaid conditions will be treated as NOR.

Key points to consider while ascertaining residential status of an individual

  • Receipt of Income: If an amount is 1st received outside India and then subsequently remitted to India, it will be considered as Income received outside India just remittance of such income would not make it an income received in India.
  • Citizenship of a country and residential status: Residential status of an Individual is not nexus to his citizenship. An Indian citizen may be a resident of India or not. On other hand a person may not be citizen of India /foreign citizen but resident of India.
  • Calculation of period of stay: In calculation of period of stay for purpose of determining residential status, it is not compulsory that person had a continuous stay. Total number of days of stay in India during that financial year are to be considered.
  • Residential status for a particular year: Every year the residential status of the taxpayer is to be determined by applying the provisions of the Income-tax Law laid in this regard. So, it may happen that in one year the individual would be a resident and ordinarily resident and in the next year he may become non-resident or resident but not ordinarily resident and again in the next year his status may change or may remain same.

The following table highlights the tax incidence as per residential status:

Nature of income ROR NOR NR
Income which accrues or arises in India Taxable Taxable Taxable
Income which is deemed to accrue or arise in India Taxable Taxable Taxable
Income accrue or arise outside India but received in India Taxable Taxable Taxable
Income which is deemed to be received in India Taxable Taxable Taxable
Income accruing outside India from a business controlled from India or from a profession set up in India Taxable Taxable Not taxable
Income other than above (i.e., income which has no relation with India) Taxable Not taxable Not taxable

For assistance in determination of your residential status and computation of tax liability based on it, please contact AJSH & Co LLP. You can click here and reach our taxation experts for further queries.

SEZ in India

Establishing a unit in SEZ in India

India is among the foremost Asian countries who have considered the idea of setting up an Export Processing Zone (EPZ) model to promote country’s exports. To attract more foreign investment and provide an internationally competitive and hassle free environment for export promotion in India, Special Economic Zone (SEZ) was introduced. In the year 2000, with an inception of SEZ policy, India had begun to walk on the path of success.

Initially, the SEZ policy was included under foreign trade policy 2000. The policy was implemented through piecemeal and ad hoc amendments to different laws, besides executive orders. In order to overcome these drawbacks and to give a stable long term policy framework with minimum regulation, the Special Economic Zone Act, 2005 was introduced. The Act provided broad legal framework, covering all important legal and regulatory aspects of SEZ development as well as for units operating in SEZs.

SEZ is a specific duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. In other word, SEZ is a geographical region that has economic laws different from the country’s economic laws. SEZs have been established in several countries, including China, India, Jordan, Poland, Kazakhstan, Philippines and Russia.

Main objectives of establishing a SEZ

  • Generating additional economic activity
  • Promoting exports of goods and services
  • Promoting investments from domestic and foreign sources
  • Creation of employment opportunities
  • Development of infrastructure facilities
  • Exposure to technology and global market

Benefits and incentives of setting up a business unit in a SEZ

  • Tax benefits (tax holidays, income tax exemptions, etc.)
  • Liberal labor regulations
  • Exemption from excise and customs duty on procurement of capital assets, consumable stores, raw-materials from domestic market
  • Streamlined procedures for getting approvals (online / single window)
  • Liberal approach in foreign direct investments
  • Increased capital account convertibility
  • Relaxed export regulation
  • Full repatriation of profits
  • Non-applicability of related environmental laws

Setting up a unit in SEZ
A company planning to setup unit in a specific SEZ needs to apply with the respective Development Commissioner’s (DC) office of SEZ zone. To file an application, company needs to fill the Form-F, stipulated by SEZ rules. The applicants filing the form, needs to submit this form online through SEZ online system using module New Unit Application (NUA).

The steps for NUA are as summarized below:
1. Creating user ID: This is the initial stage for setting up a SEZ unit. For setting up a new unit in SEZ, the user, for the purpose of registration, shall login to SEZ online system and create a new user ID.

2. Raising NUA request: After registration, users are required to fill a “new user application” providing the necessary details which includes general details of company, details of directors, item / products, in which the company deals in, and other details like investments, equity, for-ex, applicant and marketing collaborations of the company.

3. Submitting Form- F and other documents: Further in this procedure, applicants need to upload the below listed documents with a filled Form – F, as mentioned in “Add Documents” field. These enlisted documents have to be submitted physically in DC’s office:

  • Copy of incorporation certificate, Articles and Memorandum of Association of the company
  • Demand draft of INR 5000/- in favor of “The Pay & Accounts Officer,< payable location>”
  • Copy of company’s profile, directors’ profile and project report
  • Copy of board resolution
  • List of imported and indigenous capital goods
  • Form 18 and 32 filed with ROC
  • Copy of residential proof and identity proof of directors
  • Income tax returns of last 3 years
  • Copy of audited financials
  • Copy of IEC of the company
  • Copy of PAN of the company
  • Copy of term sheet for incubation premises
  • Copy of term sheet for main premises
  • Letter for marketing / buyback plan
  • List of directors with their details
  • Letter mentioning website and e-mail address
  • Undertaking for pollution control
  • Affidavit

Along with these documents, applicant needs to submit Form – F containing the details of NUA.

4. Rectification of deficiencies: If the DC does not get satisfied with the submitted documents, he may raise a demand for additional documents. In case, the request is sent back by DC office and the demand is raised from DC office, applicant shall submit the documents within the stipulated

5. Approval of request: After verification of all the documents submitted and other requirements fulfilled by applicant, DC is authorized to approve the request of NUA. Further the approval, an e-mail will be sent to applicant on the registered e-mail describing the supplementary

6. Payment of registration fee: After approval from DC office, a link for payment of registration fee will be enabled; enquiring a few details for payment. On payment of fee, NSDL Database Management Ltd. (NDML) representative will verify receipt of payment and will authorize the payment upon verification of valid payment entry in SEZ online system. Upon authorization of payment, applicant can create administrator and operational users IDs.

7. Submission of lease deed details to DC’s office for approval: After acceptance of letter of approval, the unit is expected to enter into a lease agreement with the developer of the SEZ in which it is commencing business. After entering into the agreement, the unit will have to enter the lease deed details in the SEZ online system and submit it online to the DC’s office. The unit shall also have to submit a copy of the lease deed to the DC’s office in physical form.

8. Intimation of date of commencement: As soon as the unit commences production, the date of commencement of production has to be intimated to the DC’s office. The unit shall online intimate the date of incorporation through SEZ system. In addition, the DC may also require the unit to submit supporting documents in physical form.

For the Fact: As of March 2018, 223 SEZs are in operation and a massive 419 SEZs have been approved.

Deciding on which SEZ is best for your business, it can be a difficult and stress-inducing process. We at AJSH & Co LLP can guide you in setting up a SEZ unit in India as per your business requirements. To know more about this, click here.

tax

Filing tax return for a deceased person

It is a misconception that person’s tax liabilities end with his life. Filing an income tax return (ITR) is mandatory if your income is taxable. But, it’s not only the living who are required to pay their taxes. ITR for deceased person also needs to be filed in case where a person dies and had taxable income. It is common that after the death of the taxpayer, family members often concentrate only on the debts, investments, savings accounts, insurance and transfer of estates of the deceased and ignore the taxation aspect.

On the death of the assesse, the income from his / her assets and the tax liability is transferred to his / her legal heirs. So, it becomes liability of legal heirs / representative to file the return on his behalf and such heirs can pay taxes in their representative capacity. The return needs to be filed for the income earned by person passed away during that financial year up to the time of his/her death.

Procedure of filing ITR as representative of deceased assessee
Get the legal heir certificate: To register as legal heir, any of the following documents are accepted as legal heir certificates:

  • Legal heir certificate issued by a court.
  • Legal heir certificate issued by local revenue authorities.
  • Surviving family member certificate issued by local revenue authorities.
  • The registered WILL.
  • The family pension certificate, issued by State/Central Govt.

Register on income tax website as legal heir: According to section 159 of Income Tax Act 1961, the legal heir or representative is deemed the assessee. Registration as a legal heir is must for e-filing of return on behalf of deceased person. Legal heir needs to register online by submitting his details with the details of deceased. He is required to upload legal heir certificate along with other documents like copy of Death Certificate, copy of the PAN Card of the deceased, self-attested PAN copy of the Legal heir.

Computation of income of the deceased: The total earnings of the deceased during the year have to be bifurcated into two parts – Income earned while he was alive and income earned after the date of his death. Income earned during the period of April 1 to the date of death shall be considered as deceased person’s own and legal heir is supposed to file return for this income in name of deceased assessee. Income earned after the date of death till the end of the financial from the inherited asset shall be considered as legal heir’s income and he would be liable to pay tax on this income.

Filing ITR of the decease: After successful registration, the legal heir has to file the return on behalf of the deceased for income earned from the 1st April of the financial year till the date of death. The legal heir needs to log in to E-filing portal for online filing of the tax return using his own. Then the legal representative should furnish the details of the deceased like his name, PAN, date of birth, Date of death etc. Also, he need to provide the scanned copy his PAN, the death certificate, PAN copy of deceased.

Key points to consider while filing ITR of a deceased assessee

  • The ITR of the deceased should be filed in the same format and time as for all other tax payers.
  • The tax must be payable on income earned from starting of the financial year (April 1) till the date of death.
  • The legal representative gets the benefits of all the rebates and deductions that the deceased would have been eligible for.
  • Any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;
  • Property of the deceased person inherited to his legal heir shall not be reported in the Income-tax return of the deceased person, because this transaction is not carried out as transfer for the capital gain purpose.
  • Money or property received by legal heirs by way of inheritance shall not be reported in income-tax return because Section 56(2)(x) does not apply to money or property received by way of inheritance.
  • Income earned after the date of death, from any inherited property shall be considered as legal heir’s own income and is to be reported in his tax returns.
  • If the total income of a legal heir, including the income of deceased person from the date of death, exceeds INR 50 lakhs, the heir shall be required to provide details of all Assets and Liabilities held by him at the end of the financial year in Schedule AL. These details shall include all assets and liabilities including the assets acquired by way of inheritance.
  • Proceeds from the sale of property by legal heir he received by the way of inheritance  shall be taxable as capital gain in hands of a legal heir and is required to be reported under scheduled capital gains in ITR forms.

Extent of liability of a legal representative: The liability of the legal heir would be limited to the extent of assets of the deceased which are or might come into his possession.  The money to recompense the taxes does not go out of the legal heir’s pocket.

Claiming refund on behalf of deceased assessee: Where there is any refund of a tax has to be claimed in the Income-tax return a deceased assessee, the refund can be received by the legal heir just like he/she can file ITR on behalf of the deceased assessee. Usually, the refund is directly credited to the bank account. If the deceased tax payer holds a joint account with the legal heir, then it becomes convenient to receive the amount. In case of absence of a joint account, the account can be operated by the nominee who is appointed by the deceased. In the absence of a nominee, the legal heir can operate the account.

Tax compliances that legal representative need to be adhere to while filing his own ITR
Carry forward and Set off of Deceased Person’s Business loss: When a legal heir takes over in the business of his predecessor by inheritance, he is entitled to carry forward the loss incurred by the previous owner. However, the total period of carrying forward cannot exceed 8 assessment years immediately succeeding the assessment year for which the loss was first computed.

Tax on inherited property: The tax on inheritance, called ‘Estate Duty’ was abolished in 1985 and so, there is no tax on inheritance in India. Transfer of capital asset under inheritance will is not taxable in hands of deceased as well.

Though no tax shall arise either in hands of a legal heir or deceased at the time of inheritance, yet capital gain tax liability arises in hands of a legal heir in case of subsequent sale of the inherited property. For calculation of capital gain on proceeds from sale of inherited property, the actual cost of acquisition is taken as the same at which the property was acquired by the previous owner. While determining the period of holding of, the period of holding of inherited assets by the deceased shall also to be taken into consideration.

Surrender of the PAN card: Legal heir is advisable to surrender the PAN card of the person who is no more, after submission of his last income-tax return and payment of tax dues or receipt of a refund if any.

We cannot compensate for the loss of your loved ones, but can definitely help you in the complex process of filing his / her tax returns .For further assistance click here.

 

llp registration in Delhi India

A hybrid corporate entity-Limited Lability Partnership

Limited Liability Partnership (LLP) is a new corporate structure introduced in India in April 2009, through the LLP Act of 2008. Aimed at small and medium sized businesses; a LLP is hybrid form
which integrates many of the benefits of limited corporations and the traditional partnership firms. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, and also allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as a partnership firm. Low registration fee and easy maintenance make LLP a preferred category of entity for many of the small and medium businesses in India.

Features
Most enticing features of a LLP are:

  • Simplicity and ease of formation and registration
  • No prescribed minimum capital requirement for each partner
  • Liability of each partner is limited to the contribution mention in agreement
  • Cost of formation is limited
  • Least regulatory compliances
  • Separate legal entity

The minimum number of partners required to incorporate an LLP is two. There is no constraint on the maximum number of partners in LLP in India. Among the partners, there should be minimum two designated partners with proper Designated Partner Identification Numbers (DPINs), and at least one of them should be resident in India. The rights and duties of designated partners are governed by the LLP agreement.

Documents Required
To register a LLP in India, the following documents are required:

  • PAN of the partners
  • Address proof of the partners
  • Utility bill of the proposed registered office of the LLP
  • No-Objection certificate from the landlord
  • A copy of rent agreement between the LLP and the landlord

PAN of the partners and their address proof are required to start the LLP formation procedure. The documents pertaining to the registered office of the LLP can be submitted after obtaining name approval for the LLP from the Registrar of Companies (ROC).

Following is step wise registration process for incorporation of Limited Liability Partnership (LLP):
Director Identification Number (DIN): Every individual intending to be appointed as designated partner of proposed limited liability partnership has to apply for allotment of DIN. Earlier partners had to apply for DPIN. Ministry of Corporate Affairs (MCA) has vide its notification amended the limited liability partnership rules, 2009. Now instead of DPIN, every partner who will be appointed as a designated partner has to apply for DIN. The application for allotment of DIN has to be made in Form DIR- 3. You have to attach the scanned copy of documents (usually Aadhaar and PAN) to the form. The form must be signed by a Chartered Accountant, Company Secretary, Cost Accountant or Advocate.

Digital Signature Certificate (DSC): Designated partner of proposed LLP, whose signatures are to be affixed on the e-forms has to obtain Digital Signature Certificate (DSC) from any authorized certifying agency. Also, they should obtain either class 2 or class 3 category of DSC. This is because all the documents for LLP are filed online and are required to be digitally signed.

You can click here & let our expert help you procure DIN.

Reservation of Name: Once two DINs are available, fill Form 1 for the reservation of name of proposed LLP. But before quoting the name in the form, it is recommended that you use the free name search facility available on MCA portal. The system will provide the list of closely resembling names of existing companies/LLPs based on the search criteria filled up. This will help you in choosing names not similar to already existing names. You need to provide six names in the order of preference in Form 1.

Once, the application for reservation of name is submitted to the MCA, it will be processed by the ROC in the State of Incorporation. The registrar will approve the name only if the name is not undesirable in the opinion of the Central Government and does not resemble any existing partnership firm or an LLP or a body corporate or a trademark.

Incorporation of LLP: Once the name approval application is accepted by the MCA and name approval letter is issued to the proposed Partners you have to apply for incorporation of the LLP through Form-2. All the details in the form must be filled correctly like – total number of partners and designated partners, amount of partner’s contribution, etc. You have to pay the prescribed registration fee based on the contribution of partners in the proposed LLP.

The form must be digitally signed by a person named in the incorporation document as a designated partner having DIN. Also, it has to be digitally signed by an advocate / Company Secretary / Chartered Accountant / Cost Accountant in practice. On the submission of the form, if the registrar is satisfied, they will register the proposed LLP. It takes 15-20 days for the registration of LLP subject to government processing time and submission of necessary documents.

File Limited Liability Partnership Agreement: LLP agreement governs the mutual rights and duties amongst the partners and also between the LLP and its partners. It has to be carefully drafted as per the rules and provisions given in the Indian LLP Act of 2008. LLP agreement must be filed in form 3 online on MCA Portal. Agreement may be conveniently submitted online to the MCA, within thirty days from the date of registration of the proposed LLP. The LLP Agreement has to be printed on stamp paper. The value of stamp paper is different for every state.

To get your business registered as a Limited Liability Partnership, please get in touch with us. Also, for assistance in setting up business in India, company formation in India, income tax return filling, bookkeeping, accounting, GST and auditing. Click here.

liaison-office-in-india

Establishing a liaison office in India

Prospective companies and investors looking to enter India must precisely consider the options available for investment and avenues for establishing a business presence in the country.up to explore the Indian markets and understand the business and investment climate, as it does not allow the companies to do business but just to be in the market and understand the Indian market or carry out the research and development activities or to understand the problem of existing clients of the company and serve them better. As compared to other business structures, liaison offices permit foreign companies to build a light footprint in India keeping their financial, legal, and administrative commitments low.

General features of liaison office

  • Name of Indian liaison office shall be same as parent company.
  • Governing body for a liaison office License is Reserve Bank of India.
  • It is suitable for foreign Companies looking to setup a temporary office in India to liaison its existing business with Indian clients.
  • A Liaison office does not have any ownership; it is just extension of the exiting company in the foreign country.
  • Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India.
  • License for a liaison office is given for three years and shall be renewed every 3 years.

Activities allowed to liaison office in India

  • Representing in India the parent company / group companies.
  • Promoting export / import from / to India.
  • Promoting technical /financial collaborations between parent / group companies and companies in India.
  • Collecting information about possible market opportunities, source of supply, providing information about the parent company and its products to the prospective Indian customers or vice versa to its vendor.
  • Acting as a communication channel between the parent company and Indian companies.

Restrictions on activities of a liaison office

  • A Liaison Office is not permitted to undertake any commercial / trading / Industrial activity, directly or indirectly and therefore cannot earn any income in India.
  • A liaison office can neither borrow, nor lend money.
  • It cannot acquire, Hold, (otherwise than by way of lease for a period not exceeding five years) transfer or dispose of any immovable property in India, without prior approval of RBI.

Regulators

  • The Foreign Exchange Management Act (FEMA) governs the application and approval process for the setting up of a liaison or branch office in India.
  • Under the Act, foreign enterprises obtain permissions from the Reserve Bank of India’s (RBI) Foreign Exchange Department to establish a liaison office in the India.
  • Foreign insurance companies can set up liaison offices in India after obtaining approval from the Insurance Regulatory and Development Authority (IRDA).
  • Foreign banks can establish liaison offices in India only if they get approval from the Department of Banking Regulation (DBR), RBI.
  • The applications from such entities are to be submitted through Form FNC Annex-1 (Application for Establishment of Branch / liaison Office in India).

Investment route
The applications from these entities will be considered by the RBI through two routes:

  • RBI route – Where principal business of the foreign entity falls under sectors where 100 percent FDI is permissible under the automatic route.
  • Government route – Where principal business of the foreign entity falls under the sectors where 100 percent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from non-government organizations are considered by the RBI in consultation with the Ministry of Finance, Government of India.

The approval process generally takes 20 to 24 weeks and permission to operate a liaison office is granted for a three-year period, which can be extended at a later date (maximum three year extension).

Condition for setting up liaison office
An enterprise must also meet the following conditions before qualifying for the establishment of a liaison office:

  • Must have a three-year record of profitable operations in the home country; and,
  • Must have a minimum net worth of US$50,000 verified by the most recent audited balance sheet or account statement.

If a company does not meet these requirements, but is a subsidiary of a company that does, the parent company may submit a Letter of Comfort on the subsidiary’s behalf, as per Annex-2.

Documents required to begin the process of setting up a liaison office, a certificate of incorporation, Memorandum and Articles of Association (MOA and AOA), and a copy of the parent company’s latest audited balance sheet.

A liaison office must also obtain a Permanent Account Number (PAN) from the income tax department and a Unique Identification Number (UIN) from the RBI. The application for registration should be forwarded to the RBI by a designated AD Category – I Bank.

Within 30 days of establishment, a liaison office must register with the Registrar of Companies (RoC) through the Ministry of Corporate Affair’s online portal. The following documents are required for the same:

A notarized and apostilled copy of a liaison office charter or Memorandum and Articles of Association in English.

  • Full address of the enterprise’s principal place of operation outside of India.
  • Name and address of a liaison office in India.
  • List of directors.
  • Name and address of the company’s official representative based in India (the person authorized to accept delivery of notices and documents served to the company).

Compliance and conversion to another business structure

  • Each year, a liaison office must file an Annual Activity Certificate(AAC), prepared by a chartered accountant, to the RBI verifying the office’s activities are within its charter (Annex-3).
  • An AAC should also be filed with the Directorate General of Income Tax within 60 days of the close of the financial year.
  • If a liaison office wants to open more than one bank account in India, it has to obtain prior permission of the RBI through its AD Category – I bank justifying the reason for the additional account.
  • A liaison office can also be upgraded into a branch office (BO) structure once its bank account is re-designated as a BO account. The entity will not require a new PAN.

If you require any assistance in setting up a liaison office in India, please contact AJSH & Co LLP. If you have any query regarding this, please click here.

Tax adviser in India

Tax breaks not to be missed

Investing a little time and thought into process of filing Income tax return (ITR) can allow you to claim deductions you might have missed, while submitting your investment declarations.

  • Savings account interest: Your savings account is credited every quarter with interest on amount it holds at the end of quarter, this amount earned by you as interest is considered as part of your total income. However, the income tax (I-T) department, under Section 80TTA, allows exemption of up to INR 10,000 on this interest. Interest earned on post office savings will also be treated similarly.
  • Rent exemption without HRA: Many taxpayers make payment towards house rent but can’t claim deductions if your salary package does not include house rent allowance (HRA) as its component. Under Section 80GG, you can avail of the exemption benefit for the rent, provided you are not eligible for any housing benefit. You will not stand eligible for this break if you, your spouse or child owns the house you accommodate in. The exemption is limited to the least of: actual rent paid less 10% of total income; or INR 5,000 per month; or 25% of total income.
  • Exemptions for specified illnesses: Treatment of critical diseases like cancer, kidney failure or AIDS involves huge expenses, the income tax rules allow relief under Section 80DDB to tax-payers suffering from such diseases. Taxpayers can claim deductions if he / she suffers from any of the ailments viz.  ataxia, full-blown AIDS, malignant cancers, dementia cholera, hemiballismus, thalassaemia, chronic kidney failure, parkinson’s disease, haemophilia, motor neuron disease, dystonia, aphasia.
    They can claim a tax deduction of up to INR 40,000. If taxpayers is a senior citizen, the deduction can go up to INR 60,000 and the relief is enhanced to INR 80000, if the afflicted taxpayer happens to be a super senior citizen. However, if the expenses incurred on treatment of these critical ailments have been reimbursed by employers or through insurance policies, the taxpayers will not qualify for the deduction. If the reimbursement is partial, they will be eligible for the tax exemption on the balance amount.
  • Ancillary charges on home loan: Home loan borrowers just know that the chief benefits of this loan are the tax benefits it offers on the principal repayment (Section 80C) and interest paid (Section 24). However, very few know that also the processing fee paid is treated as interest and can be claimed as deduction under Section 24. The processing fees and other ancillary charges are considered as interest and qualify as exemptions.
  • Loans for down payments of house: Home loan-seekers often borrow from friends and relatives to arrange for the down payment. They either do not pay any interest on these loans or if they do, fail to claim deductions under Section 24, despite being eligible. Section 24 also covers interest paid on any loan taken for the purchase, renovation or reconstruction of a house. To claim exemptions, one should draw up a written loan agreement with the lender. The interest earned by the lender will be taxed as his income.
  • Deduction for disabilities: If a Person suffers from 40% disability (as certified by a medical authority), he/she can claim a deduction of up to INR 75,000 under Section 80U. Expenses incurred in respect of a disabled dependent will fetch a deduction of INR 75,000 under Section 80DD. In both cases, if the disability is more than 80%, the permissible amount for deduction is INR 1.25 lakh. This is a flat deduction.
  • Income of disabled child: If you make investments in the name of your spouse or minor child, the income earned from these investments is clubbed with your income under Section 64 and taxed as per the slab applicable to you. However, in case the child is disabled, income from investments made in his / her name will not be clubbed with the income of parents. The latter can use this provision to invest in taxable instruments like FDs and debt funds.
  • Setting off losses: If your investments resulted in losses during the previous financial year, you can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. Long term capital losses can only be set off against taxable long
    term capital gains.
  • Benefits for donations made: In most cases, deductions under Section 80G on donations made do not reflect in Form 16. So, you have to keep in mind that this exemption can be claimed while filing returns. Depending on where you have made contribution, you can claim a deduction of 50-100% of the donation made .But total deduction cannot exceed 10% of your total income. Cash donations are eligible for deduction if the amount exceeds INR 2,000

 

If you require any assistance in filing your personal income tax returns, corporate tax returns, income tax assessments, response to income tax notices, please contact AJSH & Co LLP. If you have any query regarding this Visit: www.ajsh.in .

 

know-about-malaysia-company-formation

Section 8 Company Formation

In India, a non-profit organization can be registered as a Trust, by making a Trust deed or as a Section 8 Company, under the Companies Act, 2013. According Indian Companies Act, 2013, a section-8 company can be established for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object, provided the profits, if any, or other income is applied for promoting only the objectives of the company and no dividend is paid to its members.

Procedure for formation of section 8 company is listed below:
1. Digital Signature Certificate (DSC) & Directors Identification Number (DIN): The only secure and authentic way that a document can be submitted electronically is DSC. All filings of e-forms on MCA Portal are required to be filed with the use of DSC of the authorized signatory. Further, DIN for all the proposed Directors of the Company must be obtained. For obtaining DIN an application in Form No. DIR – 3 should be filed on MCA Portal with documents attested by a practicing professional.

2. Name approval: By submitting an application in Form – INC 1, applicant can obtain approval for selected names from the Registrar of Companies (RoC). The Applicant can give maximum six names in order of preference. The name once approved by the authority is valid for sixty days. The name once approved by the authority is valid for 3 months. Name approval generally takes 1-2 business days.

3. Main instrument: After obtaining name approval, constitutional documents i.e. Memorandum of Association (MOA) and Articles of Association (AOA) is to be drafted and subsequently filed with the RoC along with the forms and other necessary documents stated below:

  • Affidavits
  • Consent Letters
  • Certificate of Compliance from a practicing professionals
  • Subscription pages of MOA & AOA– Both documents shall be signed by each subscriber who shall mention his name, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation, if any. The witness shall be a practicing professional
  1. Issuance of license with registration fee: For Section 8 company license, promoter has to file E-Form INC 12 accompanied by:
  • MOA and AOA
  • A declaration confirming the application by a practicing Company Secretary
  • Names, addresses, occupation and descriptions of the promoters as well as Board Members
  • A statement showing details of assets & liabilities as on date with the application
  • Estimated future annual income and expenditure, specifying the source of income and object of expenditure
  • A statement giving brief description of work, if any, already done by the association
  • A statement specifying briefly the grounds on which the application is made
  • A declaration in prescribed form on non – judicial stamp paper by each person making an application
  • A letter of authority with payment of prescribed fee
  1. Other requirement: Following forms are to be filed with the RoC after issuance of license:
  • Form INC – 7 for declaration of compliance with the requirements of the Act on application for registration of a company;
  • Form INC – 22 for notice of situation of registered office;
  • Form DIR – 12 for appointment of directors of the company; and
  • Subscribers and proposed directors may delegate their authority to a person(s) to carry out appropriate change(s) as suggested by the RoC in any of the incorporation papers that have been filed.

6. Clarifications / additional Information required by ROC: Documents submitted for the purpose of incorporation are thoroughly reviewed by the RoC. RoC may require certain clarifications, if required. The person authorized shall present clarifications with Roc as needed.

7. Certificate of Incorporation: After providing clarifications, the Certificate of Incorporation is issued by the RoC along with a unique Company Identification Number (CIN) and the Company is deemed to be incorporated from the date of certificate issued. Consecutively, company may apply for other tax and regulatory registration as may be required to run the business smoothly like PAN, TAN, Bank account, etc.

8. Subscription money: A new bank account solely at the name of the company newly incorporated shall be opened by the Board of Directors and the Subscribers. Further to that, they shall deposit their subscription money in bank account to help the company raise initial capital to start its business.

Minimum Requirements for Section 8 Company:
1. At least 2 shareholder and 2 Director (both can be the same person)
2. At least one Director shall be resident in India
3. No Minimum capital required
4. PAN is a mandatory requirement in case of Indian nationals
5. Identity Proof (Voter ID/Aadhar Card/Driving License/Passport); Passport is mandatory requirement for proof of identity in case of foreign nationals
6. Proof of Residence
7. Registered utility proof that is any office address proof
8. Any documents establishing the ownership such as sale deed / house tax receipt along with no objection certificate, in case the premises are owned by a Director and Promoters

We, a Chartered Accountant firm, serve a number of clients who need assistance for various regulatory compliances including setting up business in India, company formation in India, income tax return filling, bookkeeping, accounting, GST and auditing. If you require any guidance for the any professional service, please contact AJSH & Co LLP.

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