New Era of Accounting-Transition to Ind as

1. INTRODUCTION

The Indian Accounting Standards (IND AS) are Accounting Standards, harmonized with IFRS (International Financial Reporting Standards)/IAS (International Accounting Standards) to make Financials Accounts and Reports of Indian Companies internationally accessible, acceptable, transparent and comparable.

Indian Companies have a far more global access as compared to earlier days and also because of leveraged policies of Indian Government toward the flow of FDI, a need was felt to introduce globally accepted Accounting Standards (IFRS). Most of the Countries in the world follow or adopt IFRS/IAS issued by International Accounting Standard Board (IASB). In India the Government has decided to converge and not to adopt IFRS. So, the converged IFRS named as IND AS has been notified by Government to implement it in phased manner by Indian Companies.

In this article we shall discuss the implementation of IND AS and its transitional impact on Indian Companies.

2. APPLICATIONS

The Ministry of Corporate affairs (MCA) has notified the Companies (Indian Accounting Standards) Rules, 2015 for implementation of IND AS on Indian Companies in phased manner. Initially in 2015, the applicability of IND AS was on voluntary basis for the accounting period beginning on or after 1^st April, 2015.

Mandatory Application

The Government has notified the mandatory application and preparation of financial statements of certain class of Indian companies, other than Banking Companies, Insurance Companies and NBFC’s, in the phased manner;

Notes:

a. Companies listed on SMEs Exchange are not required to apply IND AS.

b. Once IND AS becomes applicable it becomes applicable in all the subsequent financial statements even though it has been voluntary applied.

c. Net worth shall be checked for past three financial Year and it shall be calculated on standalone accounts of the company.

d. Companies not covered by the above roadmap shall continue to apply Accounting Standards notified in Companies (Accounting Standards) Rules, 2006.

a. IND AS will be applicable for both the consolidated and Individual Financial statements.

b. NBFCs having net worth below Rs. 250 crores shall not apply Ind AS.

c. Adoption of Ind AS is allowed only when required as per the roadmap. Voluntary adoption of Ind AS is not allowed

From the above, it seems that the Government of India is intentionally implementing IFRS converged Ind AS in the phased manner on Indian Corporates to bring the Financial Accounts and reports of the Indian corporates, its subsidiary, Associates and JV more transparent, comparable and globally acceptable. In so far as 39 Ind AS have been notified by the Ministry of Corporate Affairs in consultation with ICAI.

3. CHALLENGES AND OPPORTUNITY

There are a lot of challenges and opportunities in implementing Ind AS on Indian Corporates. There is a saying that “Challenges bring new opportunities” only the need is to understand the challenges and convert them into opportunities”.

The Challenges of implementing Ind AS before the Indian Corporates could be well understood and minimized by knowing the impact of implementing Ind AS.

	Challenges of Ind AS	Opportunity in Ind AS
1.	Shift from conventional cost method of Accounting to Fair Value Method of Accounting.	Fair Value Method of Accounting brings the transparency and true and fair presentation of financial transactions.
2.	Changes in the various laws like The Companies Act, SEBI Regulations, Taxation Laws Banking and Insurance Laws/ Regulations etc.	Better Comparability and enhanced linkage to International trade and Business. It makes Cross Border acquisition and Joint Venture possible.
3.	Lack of Expert and awareness about international practices.	New opportunities for Professionals and Business at large.
4.	Change of Management Reporting System and Internal Control.	Reduction in reporting Cost, especially, in case of multinational companies.
5.	Lack of awareness among users and stakeholders at Large.	New opportunities in service sector and professionals.

4. IMPACT OF IMPLEMENTATION OF IND AS ON INDIAN COMPANIES:

Implementation of Ind AS has changed the base and face of Financial Statements and Reports of Indian Corporates. It has changed not only the manner of presentation of Financials statements but also the principle of recognition and measurement of financial transactions and records. Therefore, we can say the conversion or transition to Ind AS is going to impact in both way qualitatively as well as quantitatively.

In this section we will discuss the impact of Ind AS on Indian Companies and their effect in comparing Indian Accounting Standards (IGAAP). Ind AS are different from existing Indian GAAP framework in three key aspects, i.e. measurement bases, substance over legal form and emphasis on the Balance sheet.

√ TRANSITIONAL PROVISIONS:

IND AS-101 (First Time adoption of Indian Accounting Standards)

In Short	Provisions	Impact
Applicability	This Indian Accounting standard is applied in preparation of first Ind AS financial statements and its interim financial reports for part of the period covered by those financial statements.	An entity adopts Ind AS on its applicability first time with an explicit and unreserved statement of compliance with  Ind As. This is applicable to first time adopter transitioning to Ind AS.
Opening Ind AS Balance Sheet	An entity shall prepare opening Ind AS Balance sheet on  the date of transition of Ind ASs.	It provides a suitable starting point for Accounting in accordance with Indian Accounting Standards (Ind AS) for the Companies in which the Companies (Indian Accounting Standards) Rules, 2015 becomes applicable first time.
Accounting policies	An entity shall use the same accounting policies in its opening Ind AS Balance Sheet and throughout all periods presented in its first Ind AS financial statements. Those accounting policies shall comply with each Ind AS effective at the end of its first Ind AS reporting period.	The accounting policies that an entity uses in its opening Ind AS Balance Sheet may differ from those that it used for the same date using its previous GAAP. The resulting adjustments arise from events and transactions before the date of transition to Ind ASs. Therefore, an entity shall recognize those adjustments directly in retained earnings on  the date of transition to Ind AS in its opening Balance Sheet.
Recognition	An entity shall, in its opening Ind AS Balance Sheet:(a) recognize all assets and liabilities whose recognition is required by Ind AS; (b) not recognize items as assets or liabilities if Ind AS do not permit such recognition; (c) Reclassify items that it recognized in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind Ass.	This requires to recognize and reclassify items of assets, liabilities and equity as per Ind AS.A comprehensive analysis of existing assets, liabilities and equity is to be made in the financial statement prepared as per IGAAP to recognize and reclassify those items in opening Balance sheet as per Ind AS. It requires to prepare a reconciliation and disclosure of items recognized, derecognized and reclassified.
Measurements	Apply principles set out in Ind AS in measuring all recognized assets and liabilities.	Principles set out in Ind AS would be applied in measuring all recognized assets and liabilities except for the exceptions and exemptions provided for.
Designation of Financial Assets and Liability	Previously Recognized Financial Assets and Liability to be measured or recognized at Fair Value Through profit or Loss	The Entity need to disclose the Fair Value of Financial Assets or Liability at the designated date and the carrying amount and classification of the same in previous financial statements.
Use of Fair Value as deemed Cost	An Entity shall disclose the aggregate of Fair Values and adjustment to the Carrying Amount as per previous GAAP for each line items.	Of;a. Property, Plant and Equipment, an intangible assets or right-of –use assets; b. Investment in subsidiaries, Joint Venture and associates;
Presentation and Disclosures requirement	There is no exemption for presentation and disclosure requirement of other Ind AS and specifies the minimum requirement of presentation.	First Ind AS Financial Statements shall include at least;a. Three Balance Sheet; b. Two Statement of Profit and Loss; c. Two statement of Cash Flows; Two statement of changes in equity; and d. Related Notes e. Including Comparative information for all the statements presented.
Reconciliation and Explanations	An Entity shall explain how the transition from previous GAAP to Ind AS effected its reported Balance Sheet, Financial performance and Cash Flows	To Comply with this requirement, the entity shall prepare;a. Reconciliation of equity as per IGAAP and as per Ind AS on the date of transition as well as at the end of the latest period presented in the entity’s most recent financial statements. b. Reconciliation of comprehensive Income for the most recent annual financial statements. c. Disclosure of material adjustment to cash flows. d. Notes on First Time adoption of Ind AS.
Exceptions to the retrospective application of Ind ASs	An Entity Shall apply principles set out in Ind AS prospectively and not retrospectively while preparing its first Ind AS financial statements	In respect of some specified principles of;a. De-recognition of financial assets and financial liabilities; b. Hedge Accounting; c. Non-controlling Interest; d. Classification and measurement of financial assets; e. Impairment of Financial assets; f. Embedded Derivatives; g. Government Loans
Exemptions to the Applications of Principles set out in Ind ASs	An Entity may use exemptions in respect of principles set out in Ind AS in  its first Ind AS financial statements	In respect of one or more of the followings;a. Exemptions in respect of Business past Combinations; b. Share Based payment transactions; c. Insurance Contracts; d. Deemed Cost; e. Leases; f. Cumulative Translation Difference; g. Investment in Subsidiary, Joint Venture and Associates; h. Assets and Liabilities of Subsidiaries, Joint Venture and Associates. i. Compound Financial Instruments; j. Fair Value measurement of Financial Assets, Financial Liabilities at initial recognition; k. Decommissioning Liabilities included in cost of PPE; l. Financial Assets or intangible assets accounted for in accordance with Ind AS-115; m. Borrowing Costs; n. Joint Arrangements; o. Designation of Contracts to buy –sell non-financial items;

New Format of Financial Statements:

The Ministry of Corporate affairs has inserted Division-II in schedule-III of the Companies Act, 2013 vide notification dated 6^th April, 2016 which specifies minimum presentation and disclosure requirements in the financial statements of Companies complying with Ind AS.

Significant Requirement of Financial Statements complying with IND AS in comparison with financial statements prepared as per Accounting Standards (IGAAP).

Requirement	Previous GAAP	INDIAS
Applicability	Companies not required to comply with IND AS shall prepare its financial statements as per the requirement of  Part-I of the Schedule-III of the Companies Act, 2013.	Companies Preparing Financial Statements in compliance with the Companies (Indian Accounting Standard) Rules, 2015 shall prepare its financial statements as per the requirement of Part-II of the Schedule-III of the Companies Act, 2013.
Components of Financial Statements	> Balance Sheet> Statement of Profit & Loss > Statement of Cash Flow > Notes to Accounts, comprising a summary of significant accounting policies and other explanatory information.	> Balance Sheet> Statement of Profit & Loss along with Statement of Comprehensive Income. > Statement of Change in Equity (SOCE) > Statement of Cash Flow > Notes to Accounts, comprising a summary of significant accounting policies and other explanatory information.
Statement of Comprehensive Income	In IGAAP , there is no concept of other Comprehensive Income but the concept of Exceptional items and Extraordinary Items.	In Ind AS and the applicable Schedule of Financials the concept of Exceptional items and Extraordinary items have been dispensed with and New concept of other Comprehensive Income have been introduced. This will include;a. Items that will not be reclassified to profit and Loss Account. b. Items that will be reclassified to Profit and Loss Account.
Statement of Change in Equity	In IGAAP and applicable standards and schedule, there is no concept of Statement of change in Equity.	In Ind AS and applicable schedule, there is requirement of preparing a Statement of Change in Equity by way of Note to the Balance Sheet. It does have two sections;a. Equity Share Capital; b. Other Equity; It will be further sub classified for i. Share Application Money Pending allotment. ii. Equity Component of Compound Financial Instruments. iii. Reserves and Surplus iv. Items of Other Comprehensive Income v. Money Received against share and warrants. A Reconciliation of each item in the beginning and end of the period is to be disclosed.
Consolidated Financial Statements	“Minority interests” in the Balance sheet within equity shall be presented separately from the equity of the owners of the parent.	Non-controlling interests’ in the Balance Sheet and in the Statement of Changes in Equity,within equity, shall be presented separately from the equity of the ‘owners of the parent’.
Property, Plant and Equipment’s	Classifications are as below:Tangible assets Classification shall be given as: (i) Land; (ii) Buildings; (iii) Plant and Equipment; (iv) Furniture and Fixtures; (v) Vehicles; (vi) Office equipment; (vii) Others (specify nature) Intangible Assets included Goodwill.	Classification shall be given as:(i) Land (ii) Buildings (iii) Plant and Equipment (iv) Furniture and Fixtures (v) Vehicles (vi) Office equipment (vii) Bearer Plants (viii) Others (specify nature) Goodwill is shown separately on the face of the Balance Sheet and remaining shall be shown as Other.
Investments Classification	Under each classification of investments details shall be given of names of bodies corporate indicating separately whether such bodies are> Subsidiaries > Associates > Joint ventures > Controlled special purpose entities The following shall also be disclosed. (a) The basis of valuation of individual investment (b) Aggregate amount of quoted investments and market value thereof (c) Aggregate amount of unquoted investments (d) Aggregate provision made for diminution in value of investments	Under each classification ofinvestments details shall be given of names of bodies that are > Subsidiaries > Associates > Joint ventures > Structured entities The following shall also be disclosed. (a) Aggregate amount of quoted investments and market value thereof (b) Aggregate amount of unquoted investments (c) Aggregate amount of impairment in value of investments Note: Under Classifications of Investments details, the term Structured entities has been used instead of controlled special purpose entities. Investment are impaired rather than making Provision of diminishing in the value of Investment.
Non-Current Loans and Advances	Long-term loans and advances shall be classified as:(a) Capital Advances; (b) Security Deposits; (c) Loans and advances to related parties (giving details thereof); (d) Other loans and advances	Loans shall be classified as-a) Security Deposits; (b) Loans to related parties (c) Other loans (specify nature). Note: Capital Advances have to be separately disclosed under other non-current assets.
Bank Deposits	Bank depositsBank deposits with more than 12-month maturity to be classified under Other bank balances	Bank depositsBank deposits with more than 12 months maturity to be classified under Other Financial Assets.
Investment Property	Investment property to be disclosed as part of Investment	Investment Property is disclosed as separate line item on the face of balance sheet.Also the following disclosure needs to be given A reconciliation of the gross and net carrying amounts of each class of property at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments.  Therelated depreciation and impairment losses or reversals shall be disclosed separately.
Trade Receivables	Trade ReceivablesAggregate amount of Trade receivable outstanding for a period exceeding six months from the date they are due for payment should be separately disclosed	Trade ReceivablesNo Such Requirements
Reserve and Surplus/Other Equity	Reserve and Surplus/Other Equity(i)Reserves and Surplus shall be classified as: (a) Capital Reserves; (b) Capital Redemption Reserve; (c) Securities Premium Reserve; (d) Debenture Redemption Reserve; (e) Revaluation Reserve; (f) Share Options Outstanding Account; (g) Other Reserves-(specify the nature and purpose of each reserve and the amount in respect thereof); (h) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations and appropriations such as dividend, bonus shares and transfer to/ from reserves, etc.;	Reserve and Surplus/Other Equity(i) ‘Other Reserves’ shall be classified in the notes as- (a)Capital Redemption Reserve; (b) Debenture Redemption Reserve; (c) Share Options Outstanding Account; and (d) Others– (specify the nature and purpose of each reserve and the amount in respect thereof); (Additions and deductions since last balance sheet to be shown under each of the specified heads) Note: Retained Earnings represents surplus i.e. balance of the relevant column in the Statement of Changes in Equity(SOCE). Instead of Reserve and Surplus term, the term other equity is to be used.
Contingent Liabilities	Contingent liabilities Includes all Guarantees	Contingent liabilities pertaining to guarantees excluding financial guarantees.
Revenue	In respect of a company other than a finance company revenue from operations shall disclose separately in the notes revenue from-(a) Sale of products; (b) Sale of services; (c) Other operating revenues; Less: (d) Excise duty	Revenue from operations shalldisclose separately in the notes (a) sale of products (including Excise Duty); (b) sale of services (c) other operating revenues
Dividend	Under IGAAP and applicable standards declaration of dividend is an adjustable event and related liability is to be recognized in the financials.	Under Ind AS The amount of dividends proposedto be distributed to equity and preference shareholders for the period and the related amount per share shall be disclosed separately. Arrears of fixed cumulative dividends on irredeemable preference shares shall also be disclosed separately. Note: It is to be disclosed by way of separate notes to the financials rather than to be recognized in the financial.
Materiality	A Company shall disclose by way of notes additional information any item of expenditure and income which exceeds one per cent of the revenue from operations or Rs. 1,00,000 whichever is higher.	A Company shall disclose by way of notes additional information any item of expenditure and income which exceeds one per cent of the revenue from operations or Rs. 10,00,000 whichever is higher.Also disclosure is to be made of all material items i.e. the items if they  could, individually or collectively, influence the economic decisions that users make on the Financial Statements

Conclusively, it can be said that first attempt of preparation of Financial Statements complying with Ind AS requires expert knowledge of all notified Indian Accounting Standards, notified schedules, professional judgments and notes requiring disclosure thereof in first time preparation of Financial statements. It is the starting point of New era of Accounting and presentation and disclosure of financial transactions which requires a fair transition from historical cost method of accounting to the fair value of accounting.

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Mandatory Compliances for a Private Limited Company in India

Although Private Limited Company is the most popular form of starting a business, there are various compliances which are required to be followed once your business is incorporated.
Managing the day to day operations of your business along with complying the corporate laws can be little taxing for any entrepreneur. Hence, it is essential to take help of a professional and also understand such legal requirements to ensure timely fulfilment of compliances, without any levy of interest or penalty.


Recently, Government strike off more than 2 Lakh companies and disqualified more than 3 Lakh directors for non-compliance of various provisions of Companies Act, 2013. Such type of historic action came at the time when government came to know about the various techniques used by corporate entity to evade taxes.

Company law provides legal compliance that are required to be followed by every company like reporting of financial results, reporting of changes in management, maintenance of statuary registers, auditing of accounts etc.

All the compliances provided under the Company Law may be divided in 2 parts for making it easy to understand Mandatory Compliances and Event Based Compliances.
We have elaborated below such compliances which a private limited company has to mandatorily ensure:

Mandatory Compliances
1. Company Name Board
Every Company shall paint or affix the name and address of registered office and keep the same painted/affixed, outside every office or place in which its business is carried on, in legible letters.

2. Letter Head of Company
Every Company shall get its name, address of registered office, CIN, telephone and email printed on all business letters, billheads, letter papers.
Notices and other official publications.

3. First Board Meeting
First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company. Notice of BM must be send to every director at least 7 days before the meeting.

4. Subsequent Board Meetings
Minimum 4 Board Meetings to be held every year with not more than 120 days gap between two meetings. In case of small company, it is sufficient to conduct only two Board Meetings.

5. Issuing of Share Certificate
The Company is required to issue Share Certificates to the subscribers of memorandum within 60 days of Incorporation of Company.

6. Filing of Disclosure of interest by Directors
Every director at:
‐ First meeting in which he participates as director; or
‐ First meeting of Board in every FY; or
‐ Whenever there is change in disclosures
shall disclose in Form MBP‐1 (along with list of relatives and concern of relatives in the Company as per RPT definition), his concern or interest in any company, body corporate, firm or other association of individuals (including shareholding interest).
Form MBP‐1 shall be kept in the records of the company.

7. Resident Director
Every Company is required to appoint at least one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

8. Alteration in MOA and AOA
Every alteration of Articles and Memorandum shall be filed with Registrar together with copy of altered Articles, notice of meeting and SR within 30 days of passing Special Resolution. Every alteration made in MOA and AOA shall be noted in every copy thereof.

9. Registers
Every Company shall keep and maintain following Registers in the specified format:
‐ Register of Members MGT-1
‐ Register of other Security Holders residing outside India MGT-3
– Register of Transfer and Transmission of Shares SH-6
– Register of Charge CHS-7
‐ Index of the Registers

10. Other Registers
Every Company shall keep at its Registered Office, a Register of Directors and KMP in the prescribed format containing prescribed particulars.

11. Resolution
‐ Copy of every resolution (with explanatory statement, if any) or Agreement for the specified matters to be filed with ROC in Form MGT‐14 within 30 days.
‐ Articles of Company shall have copy of resolution effecting amendment in AOA and Agreements referred in Section 117(3) of the Act

12. Minutes of Meeting
‐ Minutes of every general meeting, Creditors, Board and Committee shall be prepared and kept within 30 days of conclusion of every meeting concerned.
‐ All appointments in the meeting shall be included in the minutes.
– Minutes of each meeting shall be entered into Minutes Book along with date of such entry.

13. Appointment of Director
Every person to be appointed as Director shall provide his consent in Form DIR‐2 and such consent shall be filed by the Company with ROC in Form DIR‐12, within 30 Days of appointment.

14. Provisions related to DIN
Every individual intending to be appointed as director shall make an electronic application in Form DIR-3 to Central Government for allotment of DIN.

15. Qualification of Director
‐ Qualification for appointment of director
‐ Declaration from Director at the time of appointment or reappointment in Form DIR‐8
‐ Annual disclosure from Director to be taken

16. Number of Directorship
‐ No person shall be a director in more than 20 companies
‐ Maximum number of public companies can be 10 (Director in Section-8 Co. and Dormant Director not to be included)

17. Resignation by Director
‐ Director shall intimate his resignation to the Company, which the Company shall file with ROC in Form DIR‐12 in 30 days
‐ Company shall put resignation details on its website and in its Directors’ Report.

18. Return of Director and KMP
Return of Directors and KMP to be filed with ROC in Form DIR 12, within 30 days of appointment or change.

19. Meeting, at shorter notice
‐ Meeting can be convened on a shorter notice for urgent matters
‐ Consent from not less than 95% of members entitled to vote thereat

20. Quorum
‐ Quorum shall be one‐third or two directors, whichever is higher
‐ Directors participating through Video Conferencing shall be counted for the purpose of quorum

21. First Auditor
First Auditor of the company shall be appointed by the BOD within 30 days of Incorporation who shall hold the office till the conclusion of 1st AGM. In case of First Auditor, filing of ADT-1 is not mandatory.
22. Subsequent Auditor
The BOD shall appoint the auditor in first AGM of company who shall hold the office till the conclusion of 6th AGM and shall inform the same to ROC by filing ADT-1. The responsibility to file Form ADT 1 is that of the company and not of the auditor within 15 days from the date of appointment.

23. Ratification of Auditor
Shareholders will ratify the appointment of Auditor in every AGM but there is no need to file ADT-1 for ratification.

24. Casual Vacancy of Auditor
If Casual Vacancy is arising due to the resignation of auditor, it shall be filled within 30 days of BOD meeting, subject to approval in General Meeting (AGM or EGM). Any auditor appointed in a Casual Vacancy shall hold office until the conclusion of the next Annual General Meeting.

25. ADT-3
The auditor shall file with the company a resignation letter stating the reason for resigning and file Form ADT-3 with the registrar within 30 days from the date of resignation. Filing form ADT-3 is the responsibility of the auditor and can only be filed if ADT-1 of the relevant auditor was filed.

26. Annual General Meeting
Every Company is required to hold an Annual General Meeting on or before 30th September every year during business hours (9 am to 6pm), on a day that is not a public holiday and either at the registered office of the Company or within the city, town or village where the registered office is situated. A 21 clear days’ notice is required to be given for the same.

27. Filing of Financial Statements
Every Company is required to file its Financial Statements within 30 days of its Annual General Meeting with Registrar of Company in E-Form AOC-4. The same shall be digitally signed by one director and certified by CA/CS/Cost Accountant in Practice.

28. Filing of Annual Return
Every company is required to file its Annual Return with Registrar of Companies within 60 days of Annual General Meeting in E-Form MGT-7. A company having turnover of INR 50 Crore or more shall be certified by a Practicing CS in Form MGT-8.

29. Regularisation of Additional Director
If company wants to appoint additional director as director, then it shall regularize the person as director in General Meeting by passing Shareholder Resolution. File form DIR-12 for Change in Designation of Director along with ordinary resolution within 30 days of AGM.

30. Directors’ Report
Directors’ Report is to be filed covering all the information required for Small Company under Section 134 within 30 days of AGM along with Form AOC-4. It should be signed by the “Chairperson” authorized by the Board, where he is not so authorized by at least 2 Directors.

31. Filing of Financial Statements of a Foreign Co.
Every Foreign Company is required to file Annual accounts (consolidated financial statements/ global accounts) along with the list of all principal places of business in India within 6 months of close of the Financial Year.

32. Filing of Annual Return of a Foreign Co.
Every foreign company shall prepare and file annual return of the company in e-Form FC-4 within 60 days from the close of financial year.

Event Based Compliances
These are triggered based on happening of certain events. There is paperwork that needs to be done for the same and there are various deadlines for these tasks. In case of non-compliance or even a missed deadline there can be penalties, additional fees or a compounding of offence, etc. Hence, it is necessary that the happening of such events be tracked and compliances met with on time.

Particulars
Form No.
Time Limit
§ Change in Directors or KMP
DIR-12
Within 30 Days of such change
§ Increase in Authorized Share capital
SH-7
Within 30 days of passing OR
§ Increase in Paid up share capital (Issue of security)
PAS-3
Within fifteen days from the date of the allotment
§ Change in registered office
INC-22
Within fifteen days from the date of such change
§ Change in secured borrowing (Creation, modification and satisfaction of charge)
CHG-1
All types of Charges within 30 days of its creation
§ Change of name of company
INC-24
Within 60 days from the date of applying reservation of name in INC-1
§ Conversion of company
INC-27
–
§ Filing of resolution and agreements
MGT-14
Within 30 days from date of passing resolution
§ Removal of Director before Expiry
ADT-2
Within 30 days from date of passing SR
§ Application for KYC of Directors
DIR-3 KYC
On or before 30
th
April of immediate next Financial Year (Annual Compliance)
§ Report for Disqualification of the Director
DIR-9
To be filed by company within 30 days of such disqualification

Other relevant compliances
♦ Form INC-22A – ACTIVE Company Tagging
All companies registered before 31st December 2017 are required to file e-Form ACTIVE (Active Company Tagging Identities and Verification) – INC-22A on or before 25th April 2019. Failure to file e-Form Active will lead to a penalty of Rs. 10,000.

Requirements for Filing ACTIVE Form
(a) DIN of all the directors shall be active while filing form INC-22A
(b) Form ADT-1 for appointment of auditor should have already been filed.
(c) Annual filing (Form AOC-4 and MGT-7) of the company shall be complete till F.Y. 17-18.
(d) Email ID which will be verified by OTP
(e) Photograph of Registered office showing external building and inside office also showing therein at least one Director KMP who has affixed his/her DSC to this form

♦ Declaration of Commencement of Business 

Every company is now required to file e Form INC 20A with Registrar of Companies within 180 days of its Incorporation for commencement of its business with effect from 2nd November, 2018.
(a) a declaration is filed by a director within a period of 180 days of the date of incorporation of the company in form INC-20 A and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12 in Form INC-22.

♦ Company (SBO i.e, Significant Beneficial Ownership) Rules 2019
1. BEN-1
Every individual who is SBO to file to company within 90 days from 8.2.2019 to make a declaration for SBO.
For any change in SBO, within 30 days of acquiring or change therein.
2. BEN-2
Company to file within 30 days of receipt of BEN 1 to ROC.
3. BEN-3
Register of SBO.
4. BEN-4
Every reporting company shall give notice in BEN 4 in all cases where its member (other than an individual), holds not less than 10% of its; –
(a) shares, or
(b) voting rights, or
(c) right to receive or participate in the dividend or any other distribution payable in a FY

♦ MSME Rules
MSME Form 1 to be filed half-yearly by Specified Companies by 31st October / 30th
April every year. Below companies and details are to be provided therein:
All companies who get supplies of goods or services from micro and small enterprises and whose payments to them exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of the Act, shall submit a half yearly return to MCA stating the following:
a) The amount of payments due; and
b) The reasons for delay
Notes:

• 1st Return is to be filed within 30 days of deployment of Form on MCA Portal
• Medium Enterprises are not covered under the notification
• Only manufacturers and services providers covered

♦ Deposit Rules
DPT-3 is to be filed annually by every company other than Government Company for:

• Deposit or
• Particulars of Transaction not considered as Deposit or
• Both

To be filed annually by 30th June and furnish information as on 31st March of that year duly audited by auditor of the company.
Note: One-time Return shall be filed by every company other than Government company of outstanding receipt of money or loan by a company but not considered as deposits, in terms of rule 2(1)(c) from 1st April, 2014 to the date of publication of this notification (22.1.19), within 90 days from the date of said publication of this notification (22.1.19).

Conclusion
Clearly, running a business especially in the form of a private limited company is not something to be undertaken lightly, and requires both an ongoing investment of much time and effort, and significant knowledge of many financial and regulatory technicalities.
Compliance is a business asset that, if used in the right way, can bring companies competitive advantage, customer trust and ultimately return on investment. Compliance is not only ‘doing the right thing’, or ‘ticking a box’ but it is the way of working, part of the business, investor confidence, transparent and open culture. Remember, cost of non-compliance is always more than cost of compliance. There are established and competent professionals in the market today ready and willing to help you at every stage of the business cycle, not only in incorporation but with all the compliance and regulatory requirements through the long life of your organization.

Foreign company registration | Company formation in India

India-USA sign Inter-Governmental Agreement for Exchange of Country-by-Country Reports

India and the United States of America have signed an Inter-Governmental Agreement for Exchange of Country-by-Country (CbC) Reports on March 27, 2019. The Agreement was signed by Shri P.C.Mody, Chairman, Central Board of Direct Taxes and Mr. Kenneth I. Juster, Ambassador of the United States of America to India on behalf of the two countries. This Agreement for Exchange of CbC Reports, alongwith the Bilateral Competent Authority Arrangement between the two Competent Authorities, will enable both the countries to automatically exchange CbC Reports filed by the ultimate parent entities of Multinational Enterprises (“MNEs”) in the respective jurisdictions, pertaining to the years commencing on or after 1 January, 2016. It would also obviate the need for Indian subsidiary companies of US MNEs to do local filing of the CbC Reports, thereby reducing the compliance burden.

CBIC clears air on sales promotion offers under GST
The Central Board of Indirect Taxes and Customs (CBIC) has issued a useful circular clarifying various doubts regarding sales promotion schemes under goods and services tax (GST) regime.
Another circular from its customs wing talks of introduction of next generation reform named ´Turant Customs´ —a comprehensive package of various elements that would be implemented from time to time in the next few months.

The Director General of Foreign Trade (DGFT) has discontinued issue of physical copies of advance authorisations and EPCG (Export Promotion Capital Goods) authorisations.
The Jawaharlal Nehru Customs House (JNCH) at Nhava Sheva has rationalised the procedures for reimport of exported goods.
The Ministry of Textiles has announced an improved scheme called Scheme for Rebate of State and Central Taxes and Levies (RoSCTL) on export of garments and made ups.

Deposit shall bear 8% interest rate: FinMin
The Ministry of Finance has notified the deposits made under the Special Deposit Scheme for non-government Provident, Superannuation and gratuity funds, w.e.f 01-04-2019 to 30-06-2019, shall bear interest at 8% rate. This rate will be in force w.e.f. 1st April, 2019.

18% GST notified on inputs supplied by an unregistered person to a promoter
CBIC vide its notification no 08/2019 IT (Rate), 08/2019 CT (Rate) and 08/2019 UT (Rate) dated March 29, 2019, has notified that 18 % GST shall be paid on any goods (other than cement & capital goods) supplied by an unregistered person to a promoter on RCM basis. This notification shall come into force, w.e.f., April 1, 2019.

Norms for e-way bills relaxed
The government relaxed the norms for e-way bills. Rules regarding validity have been changed, while a facility has been provided for auto-calculating the route distance. Under the goods and services tax (GST) regime, an e-way bill has to be generated if goods worth over Rs. 50,000 are transported.

Currently, an e-way bill valid for upto 24 hours for a distance of 100km, depending on the size of the vehicle. However, if the vehicle does not cover 100 km within 24hours, another bill has to be generated. For every 100 km travelled, the bill is valid for one additional day.
This has created problems. For instance, if a truck gets stuck in traffic or breaks down and is unable to cover 100km, another bill is required to be generated. Now, the government has enabled extension of the validity when goods are in transit.

Realtors get tax options for houses under construction
The new rate structure reduces the rate on affordable housing from 8 per cent with inputtax credit to 1 per cent without input-tax credit, and for other houses from 12 per cent with input-tax credit to 5 per cent without inputtax credit.

Houses costing less than Rs. 45 lakh, with space of 60 square metres in metros and 90 square metres in non-metro locations, would be termed affordable, the Council decided in a meeting in February.
Buyers would expect overall reduction in prices and may want to understand the basis of revised pricing. Industry would need to be cautious of anti-profiteering provisions and do a detailed analysis for the ongoing projects.

Builders would need to calculate and assess both the options on a project by project basis to decide what suits better. A single developer building multiple projects has been allowed to avail different rate structures for different projects.
For those under construction project owners who opt the old rate structure, the input-tax credit can be set off against tax liability in the normal sense.

Tax Refund in the Works for Exports to US
The government is considering a scheme to refund taxes imposed on India’s exports to the US that will suffer loss of competitiveness once the concessional duties enjoyed under the Generalised System of Preferences (GSP) are withdrawn.

A Rebate of State Levies (ROSL) kind of scheme, which would refund unrebated taxes that are included in the price of goods, would incentivise exporters and ensure India’s shipments do not drop. The unrebated taxes would be refunded through the drawback route.
“Leather, textiles, some lines of organic chemicals, and nuclear reactors and boilers are some sectors that are likely to face a disadvantage. The government may consider ROSL for these sectors,” an official in the know of the development said.

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Angel Tax Breather: Scheme to Accredit Investors in Works

India is eyeing a new framework for recognising investors so that they won’t be subject to the so-called angel tax provisions on their funding of startups. The Department for Promotion of Industry and Internal Trade (DPIIT) is looking to put in place such a regime so that investors will be able to fund startups without any limit.
“We are examining if a mechanism can be created for accrediting investors,” said a government official aware of the matter, details of which are being discussed.
The DPIIT will hold discussions with stakeholders on the proposed framework, which will help startups raise funds from accredited investors without any hitch. The accreditation regime is being envisaged as a simple procedure, said the person cited above.
The idea behind the move is that if a startup receives funding from a genuine, recognised investor then there is no fear of money laundering and hence the investment should not be scrutinised or face the so-called angel tax.

GST exemption limit for SMEs to be effective from April 1
The government notified April 1 as the date for the implementation of doubling of GST exemption limit to Rs 40 lakh, which will benefit small and medium enterprises.
Besides, the effective date for availing higher turnover cap of Rs 1.5 crore for availing composition scheme by traders has also been fixed as April 1.
Also, service providers and suppliers of both goods and services with a turnover of up to Rs 50 lakh would be eligible to opt for the GST composition scheme and pay a tax of 6 per cent from the beginning of next fiscal.
These decisions were taken by the GST Council, chaired by Finance Minister Arun Jaitley and comprising his state counterparts, on January 10. These decisions would come into effect from April 1, a finance ministry statement said.

FM: Ease of Doing Biz via Tax Reforms to Continue, Focus on lower tax rate and wider tax base
The Finance Minister, Shri Jaitley said that the process of reforms in case of direct and indirect taxes will continue in order to facilitate and further expedite the process of ease of doing business in the country. He said that Insolvency and Bankruptcy Code (IBC) has brought a change in the credit culture in the country and is helping the Banking Sector in making fast recoveries. The Finance Minister said that GST is now on the track and is in process of fast settling down. The Finance Minster said that the thrust of the Government is to lower the tax rate and widen the tax base and keep the revenue collections moving-up. He said that the indirect tax collections will further increase in future.
India continues to be the sweet spot as far as the Foreign Direct Investment is concerned and is the fastest growing economy in the world. He concluded that the Government is committed to keep this growth momentum high and inclusive to ensure that the benefits of growth reaches to all sections of the society especially to the vulnerable and weaker sections.

CBDT finalizes bilateral agreement on exchange of CbC reports between India and USA
The absence of an agreement between India and USA till now entailed a possibility of local filing of CbC Reports in India. However, a Bilateral Competent Authority Arrangement, along with an underlying Inter-Governmental Agreement, for exchange of CbC Reports between India and the USA has now been finalized and will be signed on or before 31st March, 2019. This would enable both the countries to exchange CbC Reports filed by the ultimate parent entities of International Groups in the respective jurisdictions, pertaining to the financial years commencing on or after 1 st January, 2016. As a result, Indian constituent entities of international groups headquartered in USA, who have already filed CbC Reports in the USA, would not be required to do local filing of the CbC Reports of their international groups in India.

FPI Quarterly Inflows Set for Highest Level Since 2017
Inflows from foreign portfolio investors (FPIs) in the January-March period are on track to be the highest in a quarter in two years, spurred mainly by the Bharatiya Janata Party-led coalition’s improved chances of returning to power. Adding to this is a rise in flows into emerging markets thanks to a dovish US Federal Reserve.
Though a large part of the inflows have come through exchange traded funds (ETFs) — considered relatively fickle — and block transactions on the bourses, active money has also started coming into local markets, said experts. Money managers believe that foreign flows will continue to be strong in the coming two months in the runup to the general election, which may drive the benchmarks to record highs.
FPIs have pumped in Rs. 30,500 crore since January, including provisional data for Wednesday, which is the highest in a quarter since the January-March period of 2017, when it amounted to Rs. 44,200 crore.

I-T Exemption Limit on Gratuity Doubled to Rs. 20L
The labour ministry has decided that the income tax exemption limit on gratuity has been increased to Rs. 20 lakh from the existing Rs. 10 lakh, a move that will benefit employees who are not covered by the Payment of Gratuity Act, 1972. “The ministry of finance has enhanced the income tax exemption for gratuity under Section 10 (10) (iii) of the Income Tax Act, 1961 to Rs. 20 lakh,” a labour ministry statement said.

Labour minister Santosh Kumar Gangwar said this would benefit those employees of public sector undertakings (PSUs) and other employees not covered by the Payment of Gratuity Act, 1972, and has thanked finance minister Arun Jaitley for enhancing the exemption limit.

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Over 7,000 cash-starved start-ups may benefit from angel tax relief

A series of changes made to the so-called angel tax by the government could give wing to 7,000 cash-starved start-ups, sources in the Department for Promotion of Industry and Internal Trade (DPIIT) said.

According to industry observers, an investment of around $12 billion might come from 2,000 angel investors and hundreds of smaller backers of start-ups by the end of the year. Of this, about $7 billion will come in the form of corporate investment.

After facing sustained pressure over the past three years from start-ups and venture capital funds over the tax, the government on Tuesday introduced changes in tax norms, giving in to most of the demands raised by the sector.

Providing a wider set of exemptions from the angel tax, the Centre allowed start-ups which have raised capital up to Rs 25 crore to claim tax benefits, as distinct from the earlier Rs 10 crore. It also gave a slew of waivers and a tweak in definition industry demanded.

MCA’s new e-form ‘Active’ need to be filled by all cos. incorporated on or before Dec. 31, 2017
The Ministry of Corporate Affairs (MCA) has further amended the Companies (Incorporation) Rules, 2014 wherein new e-form Active has been introduced for activation of company. The e Form ACTIVE need to be filed by all Cos. Incorporated on or before Dec 31, 2017. Last date of filing form is 25.04.2019. If a Cos files ACTIVE form on or after 26.04.2019 such Company shall be marked ‘ACTIVE Compliant’ only after payment of fee of Rs. 10,000.

Now, FPI can invest and trade in derivative contracts approved by SEBI
The Govt. notified the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident Outside India) Regulations, 2017 wherein new clause has been inserted which explicated that a Foreign Portfolio Investor or NRI or an Overseas Citizen of India may trade and invest in all exchange traded derivative contracts approved by SEBI from time to time subject to the limits prescribed by SEBI board.

India and Brunei sign Tax Information Exchange Agreement
A Tax Information Exchange Agreement (TIEA) has been signed between the Governments of India and Brunei Darussalam on February 28, 2019 at New Delhi. The Agreement will enhance mutual co-operation between India and Brunei Darussalam by providing an effective framework of exchange of information.

The Agreement enables exchange of information, including banking and ownership information between the two countries for tax purposes. It is based on international standards of tax transparency and exchange of information and enables sharing of information on request as well as on automatic basis. The Agreement also provides for mutual assistance in collection of tax revenue claims between both countries.

Ind AS: Amendments proposed to meaning of ‘materiality’ & ‘business’
The Institute of Chartered Accountants of India (ICAI) has proposed to amend the meaning of ‘material’ wherever it is used in the Indian Accounting Standards (Ind AS). ICAI has also proposed amendment to the definition of ‘business’ in case of business combination under Ind AS 103, Business Combinations. These amendments are proposed after the International Accounting Standards Board made them to IFRS.

According to the newly proposed definition of material, an information shall be considered as material if it is expected reasonably that omitting, misstating or obscuring such information could influence the decisions of primary users of general purpose financial statements which are made on the basis of those financial statements which provide financial information about a specific reporting entity. So, this definition clarifies that an entity should assess materiality only from perspective of primary users of its general purpose financial statements and only on the basis of its financial statements.

MCA extends last date of filing initial return in MSME Form I
The MSME Form-I has not been deployed yet on MCA portal, in order to avoid inconvenience to stakeholders, MCA has clarified that period of thirty days for filing initial return in MSME form –I shall be reckoned from the date of the said form is deployed on MCA 21 Portal. On 22.01.2019, the MCA had issued Specified Companies (Furnishing of information about payment to micro and small enterprises suppliers) Order, 2019.

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Options for foreign companies setting up business in India

As a market, India has always been attractive to foreign companies because of the rapidly growing market. But in terms of actually taking steps to register a company in India, many foreign companies shelved their plans because of the perceived difficulties in doing the necessary paperwork. Over the last few years, however, many steps have been taken to increase the ease of doing business in India, and foreign companies are being encouraged to have a footprint in India. In 2018, India jumped 23 ranks on the global “Ease of Doing Business” rankings, indicating that the pro-business steps are beginning to pay off. There are several ways in which a foreign company can set up business in India. A company can enter the Indian market by registering a completely Indian entity or as a foreign company . In this article, we look at a few important facets of available structures in India.



Operating as Foreign Company
I. Liaison Office
A Liaison Office (LO), sometimes referred to as a Representative Office, is a good way to establish a new presence in India. An LO liaises, communicating between the parent company and Indian entities. While an LO can promote the parent company’s interests and build a network, it cannot make money within India; all operating costs are borne from internal funds.

Meaning
As per law, ‘Liaison Office’ means a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.

Requirements to Establish Liaison Office


Registration
Registration of an LO is approved by RBI and then by MCA. It generally takes 45 days to register a LO and requires renewal after 3 years.

Permitted activities
i) Representing in India the parent company/group companies.
ii) Promoting export import from/to India.
iii) Promoting technical/financial collaborations between parent/group companies and companies in India.
iv) Acting as a communication channel between the parent company and Indian companies
LOs are by far the cheapest option of establishing an office in India, but provide limited scope of what a business can do in the country. Foreign companies use LOs primarily to oversee networking, create visibility about a company, and to chart out future business opportunities in India.

Posting of Expatriates
Expatriates are allowed to work on rolls of Indian Liaison office.

Remittance outside India
LO is only a cost centre and outward remittance is not allowed, except upon closure of LO.

Permitted Incomes
Inward remittance is allowed only from head office through normal banking channels to meet the expenses. Further, it cannot issue invoice from India since it cannot generate any income.

Indian Taxation
Since LOs are not meant to earn income, the Indian government does not tax them. However, where an LO becomes a Permanent Establishment in India, it will be taxed as a foreign entity at the rate of 40% plus applicable surcharge and cess.

II. Branch Office
Similar to an LO, Branch Office (BO) is not an incorporated company, but an extension of a foreign company. BOs can, however, engage in commercial business as a representative of the parent company. The BO can conduct research, carry out import and export activity, provide consultancy support, provide services in information technology (IT), and provide technical support for products supplied by its parent company.

Meaning
As per law, Branch Office’ in relation to a company means- (a) any establishment described as a branch by the company, or (b) any establishment carrying on either the same or substantially the same activity as that carried on by the head office of the company, or (c) any establishment engaged in any production, processing or manufacture, but does not include any establishment specified in any order made by the Central Government.

Requirements to Establish Branch office


Registration
Registration of a BO is approved by RBI and then by MCA. It takes 45 days to register a BO. Further, renewal of registration is generally not required but in some cases RBI gives approval for 2-3 years and renewal is required post

Permitted Activities
i) Export/Import of goods
ii) Rendering professional or consultancy services.
iii) Carrying out research work, in which the parent company is engaged.
iv) Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
v) Representing the parent company in India and acting as buying/selling agent in India.
vi) Rendering services in Information Technology and development of software in India.
vii) Rendering technical support to the products supplied by parent/group companies.
viii) Foreign airline/shipping company.
The RBI prohibits BOs from conducting manufacturing and processing work directly. BOs must subcontract such work to an Indian manufacturer. However, the RBI has made exception for BOs operating in Special Economic Zones (SEZs), allowing these particular BOs to engage in manufacturing themselves.

Posting of Expatriates
Expatriates are allowed to work on rolls of Branch office ..

Remittance outside India
A branch Office in India may remit outside India the profit of the branch net of applicable Indian taxes, on production of the following documents, and establishing the net profit or surplus, as the case may be, to the satisfaction of the authorized dealer through whom the remittance is affected.
a) certified copy of the audited balance sheet and profit and loss account for the relevant year;
b) a Chartered Accountant’s certificate certifying, –
i) the manner of arriving at the remittable profit,
ii) that the entire remittable profit has been earned by undertaking the permitted activities, and
iii) that the profit does not include any profit on revaluation of the assets of the branch.

Permitted incomes
The entire expenses of the Branch Office in India will be met either out of the funds received from abroad through normal banking channels or through income generated by it in India. It can also issue invoice from India.

Indian Taxation
A BO actually does business in India and is, therefore, subject to corporate tax @ 40%. Surcharge is applicable @ 2% on taxable income on income exceeding 1 Cr upto 10 Cr., and @ 5% on taxable income exceeding 10 Cr. Health and education cess is also applicable @ 4%.
A BO can repatriate profits back to their parent company after paying taxes.
Moreover, a BO is also required to file income tax return in India.

III. Project Office
A project office operates similarly to a branch office, the main difference being that a company establishes a project office for specific work in India. Project offices may be set up for carrying out construction or for projects co-funded by Indian and international financial institutions.

Meaning
Project Office’ means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.

Requirements to Establish


Registration
Registration of a Project Office is approved automatically by Authorized Dealer Bank and does not required prior approval from RBI. It takes 15 -20 days to register a PO. However, it has to be closed soon after completion of the project.

Permitted activities
A foreign Company may be permitted to open a Project Office/s in India provided it has secured from an Indian company, a contract to execute a project in India. Project Office shall not undertake or carry on any other activity other than the activity relating and incidental to execution of the project.

Posting of Expatriates
Expatriates are allowed to work on rolls of Project Office ..

Remittance outside India
A Project Office in India may be permitted for the intermittent remittances pending winding up / completion of the project provided they satisfy the bonafides of the transaction, subject to the following:
a. The PO submits an Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc.
b. An undertaking from the PO that the remittance will not, in any way, affect the completion of the project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad.

Permitted Incomes
The entire expenses of the Project Office in India will be met either out of the funds received from abroad through normal banking channels or through income generated by it in India. It can also issue invoice from India.

Indian Taxation
A PO actually does business in India and is, therefore, subject to corporate tax @ 40%. Surcharge is applicable @ 2% on taxable income exceeding 1 Cr upto 10 Cr., and @ 5% on taxable income exceeding 10 Cr. Health and education cess is also applicable @ 4%.
A PO can repatriate profits back to their parent company on completion of project after paying taxes.Moreover, a PO is also required to file income tax return in India..

Operating as an Indian Company
If a foreign company wants to carry on its Indian operations under an Indian entity, then it can go via joint venture route, create a wholly owned subsidiary or a LLP in India. The wholly owned subsidiary would mean that a foreign company incorporates a new company which is held solely by the foreign company, or purchases all shares of an Indian company, which then becomes a wholly owned subsidiary of the foreign company. In a joint venture, the foreign company and the Indian partner sign an agreement (a Memorandum of Understanding or a JV Agreement) either for perpetual existence or for a specific project or limited duration.
The formation of wholly owned subsidiary will need to comply with all the Registrar Of Companies processes including submission of different forms (DIR-12, INC-7, INC-22 etc.), payment of necessary fees, opening of bank accounts, etc. Once the certificate of incorporation is received, the documents for capital infusion have to be submitted for complying with Foreign Direct Investment regulations prescribed by the Reserve Bank of India.

IV. Limited Liability Company
A limited liability company is an incorporated entity that is legally separate from its shareholders and members. A limited company requires a minimum of two shareholders and foreign companies can hold up to 99.9 percent of its shares. Limited companies can own property, hire employees, sue and be sued. A limited company also has unlimited existence, meaning its existence is not dependent on the status of shareholders or members. Limited companies can borrow funds.
Establishing a limited company provides the most control and strongest presence to a foreign company.
Incorporating a private limited company is the simplest and quickest mode to set up a business in India for a foreign company. Moreover, further exemptions are available to private companies with lesser restrictions as compared to public limited companies. Thus, most of the foreign companies prefer to form a fully owned private limited company as a subsidiary.

Meaning
An incorporated entity formed and registered under the Companies Act, 2013. It is a distinct legal entity, apart from its shareholders.

Registration
Registration of a private limited company is required to be done under MCA. It takes 15 days to register a company. Minimum two shareholders and two directors are required.
There is no minimum paid-up capital required as per Indian law.

Permitted activities
As per its ‘main objects’ stipulated in the Memorandum & Articles of Association of the company. However under the foreign direct investment (“FDI”) policy of the Government of India foreign investment in the following industries is prohibited:
a) Lottery Business including Government/private lottery, online lotteries, etc.
b) Gambling and Betting including casinos etc.
c) Chit funds
d) Nidhi company
e) Trading in Transferable Development Rights (TDRs)
f) Real Estate Business or Construction of Farm Houses ‘Real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014.
g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
h) Activities/sectors not open to private sector investment e.g. Atomic Energy

Posting of Expatriates
Expatriates are allowed to work on rolls of Limited Liability company.

Permitted incomes
All income arising out of its business activities. It can also issue invoice from India.

Remittance outside India
Remittance is allowed by way of:
1. Dividends
2. Royalties
3. Fees towards technical knowhow
4. Remittances under Supply Contracts (subject to limitation of matters of ‘Related Party transactions’)

Indian Taxation
A limited Liability company actually does business in India and is, therefore, subject to corporate tax @ 25% (for turnover upto Rs. 2.5 Billion) and 30% (for turnover exceeding Rs. 2.5 Billion). Surcharge is applicable @ 7% on taxable income exceeding 1 Cr upto 10 Cr., and @ 12% on taxable income exceeding 10 Cr. Health and education cess is also applicable @ 4%.
Moreover, a company is also required to file income tax return in India.
Further, a company is also subject to Dividend Distribution Tax @ 15% (plus surcharge and Health and education cess as applicable).

V. Limited Liability Partnership
A limited liability partnership firm (LLP) is a cross between partnership firms and a limited company. An LLP is a separate legal entity than its members, which means that the liability of members is limited to their agreed contributions. Only in sectors where the RBI permits 100 percent foreign direct investment (FDI) can a foreign company establish an LLP. Under Prime Minister Modi, the Indian government has eased FDI restrictions and the list of sectors under 100 percent FDI is growing.
LLPs can buy and own property, produce revenue, and remit earnings outside of India. LLPs are taxed at 30 percent, and an additional surcharge of 12 percent is applied to LLPs if total income exceeds one crore.
In comparison to a Limited Company, an LLP requires less paperwork and minimal record keeping. An LLP also has a reputational advantage over a Partnership Firm because of the additional registration involved. An LLP must register with the Ministry of Corporate Affairs, lending credible proof of the company’s existence.

VI. Joint Ventures
A joint venture is a partnership between two or more companies or individuals who agree to pool capital or goods into a uniform project. Joint ventures in India have been most popular for sectors that do not have 100 percent FDI.
Joint ventures offer relatively low risk to foreign companies, provided that these companies conduct due diligence on their Indian partners. A joint venture allows foreign companies to utilize the existing networks of their Indian partners, and once taxed, such companies can remit their Indian profits outside the country.
JVs are subject to corporate tax @ 30% plus surcharge and cess.

Making the right choice
Choosing whether to set up an office, firm, or company in India has to correspond to a company’s size, ambitions, and desired trajectory in the country.
An LO may work best for a smaller company exploring prospects in India. Alternately, incorporating a limited company would be the logical decision of a company looking to aggressively expand within Asian emerging markets.
In making a decision for your business, do consider consulting a professional advisor on the following:

• A review of the latest laws and regulations;
• Due diligence for would-be partners and service providers;
• Exit strategy planning for limited control establishments; and,
• Operational issues – such as connectivity, labor laws, and state-based regulations –when planning the physical location of your Indian presence

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Sebi to make listing start-ups attractive

The Securities and Exchange Board of India (Sebi) may soon bring in a slew of changes to make it attractive for startups to list on the bourses.
Among other things, the regulator may broaden the definition of startups to include non-tech companies and allow them to list directly on the main board of stock exchanges under a separate segment.
The changes are part of the proposals prepared by a Sebi-appointed panel to revive startup listings. The regulator is expected to take a final call on these proposals later this month.
The regulatory framework for institutional trading platform (ITP) was announced on August 14, 2015, to enable listing of new-age and technologically-intensive companies in sectors such as e-commerce, data analytics and bio- and nano-technology. Subsequently, Sebi came up with recommendations to make the platform more accessible via a discussion paper on July 29, 2016.

MCA eases process for incorporation of LLPs; specifies new forms ‘RUN-LLP’ and FiLLiP
Ministry of Corporate Affairs (MCA) has notified amendment to the Limited Liability Partnership Rules, 2009 wherein process of incorporation of LLPs and reservation of their name have been amended in order to ease of doing business. Under revised norms, a new web based form ‘RUN-LLP’ has been introduced through which names of a LLP can be reserved without digital signature and Designated Partner Identification Number (DPIN). This form is very much similar to RUN web service reservation of name in case of companies. In this form, only two name can be proposed at single point of time and one resubmission is also allowed for reservation of name. In total, 4 names can be proposed.

Now, Shareholders are free to decide managerial remuneration – A big relief to companies
The Ministry of Corporate Affairs has done away with the mandatory approval from the Central Govt. for payment of managerial remuneration to top executives which means they can receive salary in excess of 11 per cent of net profit of a company. Now, the decision for payment of excess salary to top executives will be approved by the shareholders through special resolution.

RBI Eases Norms For Overseas Fundraising
The Reserve Bank eased norms for companies in the manufacturing sector to raise overseas funds and allowed Indian banks to market masala bonds in-line with the government’s measures to prop up the rupee.

Following a review of the economy by Prime Minister Narendra Modi last week, the government announced an array of measures to check the decline of rupee and curb the widening current account deficit. Liberalisation of the external commercial borrowing norms was among other measures announced by the government.

“It has been decided, in consultation with the government, to liberalise some aspects of the ECB policy including policy on rupee denominated bonds (Masala Bonds)…,” RBI said in a notification. As per the revised policy, eligible ECB borrowers in the manufacturing sector, will be allowed to raise up to $50 million or its equivalent with a minimum average maturity period of 1 year. Earlier the average minimum maturity period was three years.

Sebi to Review Proposed New Norms for FPI Investments
The Securities and Exchange Board of India (Sebi) said it would review the norms on foreign portfolio investors and take a holistic view.

“The working group has heard various stakeholders, has held consultations and is in the process of giving its recommendations. Ministry of Finance, Government of India has also been consulted on various issues. Based on these inputs, Sebi would review the matter and shortly take a holistic view,” Sebi said in a statement which was posted on its website.

The regulator has formed a committee to review foreign portfolio investors norms under the chairmanship of HR Khan, former deputy governor of Reserve Bank of India.

Sebi likely to approve commodity trading by foreign entities soon
With an aim to deepen the commodity derivatives market, regulator Sebi’s board is likely to approve a proposal to allow trading in this segment by foreign entities with exposure to the Indian physical commodity market.

Such foreign entities may be allowed to hedge their exposures with derivatives trading in all commodities traded on Indian exchanges, barring the sensitive commodities.

Chartered accountant in India

´PoeM´ firms to be taxed at 40%

Foreign companies whose place of effective control are in India will have to shell out 40 per cent corporation tax against 30 per cent levied on domestic firms.
The Central Board of Direct Taxes has come out with clarifications for place of effective management (PoeM) through a notification for these companies.
Through PoeM, the government taxes companies located outside the country but controlled from India.
It applies to companies having annual turnover of more than Rs. 500 million.

Soon, govt to carry out KYC of company directors
Directors at companies will soon be required to share their personal mobile numbers and e-mail ids with the government as part of verifying their credentials, amid continuing efforts to weed out bogus directorships.
In a significant move, the corporate affairs ministry has decided to carry out KYC (Know Your Customer) process for all directors, including those who have been disqualified.
A new electronic form is set to be introduced specifically for the directors through which all required details have to be submitted to the ministry, according to a communication.
The e-form — DIR-3 KYC — would be “notified and deployed shortly” as part of updating the ministry’s registry.
After the deadline, the MCA 21 system would mark all approved DINs — allotted on or before March 31 this year — against which DIR-3 KYC form has not been filed as ‘de-activated’.

AAR Ruling a Tax Twist for Foreign Hotels
A significant judgement by the Authority of Advance Rulings (AAR) may have an impact on taxes to be paid by overseas hotel companies. AAR has held that Accor-owned FRHI Hotels & Resorts property Swissotel Kolkata will constitute a fixed place permanent establishment for FRHI and that its income from operations would be taxable as business profits in India. AAR said this is due to the degree of ‘control’ exercised by the foreign company over the Indian firm. FRHI asked AAR if payments received by it from the Indian hotel owner for provision of global reservation services would be taxable in India as ‘fees for technical services’ or ‘royalty,’ under provisions of the Income Tax Act, 1961 read with Article 12 of the India-Luxembourg double taxation avoidance agreement . FRHI ought a ruling only on the limited question of “taxability of fees for providing global reservation services.”

CBDT proposes clear-cut timelines under transfer pricing
The income-tax (I-T) department has proposed clear-cut timelines by which excess amount assessed by transfer pricing officials (TPOs) over what was declared by associated enterprises of multinational corporations (MNCs) has to be brought in India. These timelines relate to advance pricing agreements (APAs) and mutual agreement procedures (MAPs).
In the Union Budget 2016-17, the government has come out with a concept of secondary adjustments. This basically means that if there is primary adjustment either made by the TPO or suo motu by the companies, which differs from what was declared by companies earlier, the excess amount over Rs 10 million has to be brought back to India within a stipulated time.
Otherwise, there would be secondary adjustment, which means this excess amount will be deemed as loan by Indian entity to the associated enterprise and a notional interest would be levied on it.
Now, the Central Board of Direct Taxes had earlier said that the excess amount has to be returned within 90 days of filing of returns. But, then the question arose over what will happen in case of APAs and MAPs.
Now, the department, through a draft notification, suggested that the amount should be returned within 90 days of signing of APAs and MAPs.

India Notifies Rules for I-T Computation for Foreign Firms
The government has notified rules for computation of income tax for foreign companies if they have place of effective management in the country. According to tax experts, it brings clarity on various aspects of the new place of effective management (POEM) regime.
Central Board of Direct Taxes (CBDT) has notified a mechanism for calculation of written-down value, and computation of brought-forward loss and unabsorbed depreciation.
It has said a company would continue to be treated as a foreign company even after it becomes resident in India.
The notification has provided clarity to the foreign companies which shall be considered as a resident in India owing to its POEM being in India. It provides guidance in case any conflict arises in the application of provisions of the Act to such foreign company qualifying as a resident company vis-à-vis a domestic resident company.

Govt. defers GST provisions on TDS or TCS till September 30, 2018
The Govt. has deferred the provisions of tax deduction at source (TDS) and collection of tax at source (TCS) under sections 51 and 52 of the Central GST Act, 2017 respectively till September 30, 2018.

Aviation ministry may want inclusion of ATF under GST

The civil aviation ministry is likely to approach the Goods and Services Tax(GST) Council soon for bringing aviation turbine fuel(ATF) under the tax regime.
Thursday´s meeting in the Capital was attended by AirIndia Chairman and Managing Director(CMD) Pradeep Singh Kharola, Pawan Hans CMD BP Sharma, the chief executive officer of a private airline, and the chief financial officers of other carriers.”We have given our suggestion to the ministry and Minister of State for Civil Aviation Jayant Sinha is likely to meet the GST Council soon to present our case,” a senior airline official said.
Currently, jet fuel is not under the GST ambit and the levy on it varies from state to state.
New system for monitoring of foreign investment limit in listed Companies to be operational on June 01, 2018
SEBI had introduced a new system for Monitoring of Foreign Investment limits in listed Indian companies and prescribed guidelines w.r.t the necessary infrastructure, data to be provided by listed Indian companies and other related matters. In this regard, it has been decided to extend the deadlines for Companies to provide necessary data to the depositories to May 25, 2018 and the new system for monitoring foreign investment limit in listed companies shall be made operational on June 01, 2018.
IBC Ordinance may Restrict Relief Proposed for MSMEs
The government has further revised the ordinance it proposes to move to make changes to the Insolvency and Bankruptcy Code (IBC). The updated note that will be sent to cabinet for approval is likely to restrict the wide exemption proposed earlier for micro, small and medium enterprises (MSMEs) from the provisions of Section 29A that disqualifies certain persons from bidding for an insolvent company. The revised cabinet note will also include a provision to allow participation by promoters released from imprisonment six years before the date of submission of a resolution plan, a senior official told ET. Many of the changes to the IBC will be made through the rules and regulations.
Merchant Exporters May Receive Govt Incentives
Slow growth in India’s exports has prompted the government to promote merchant exporters, who contribute almost a third of India’s exports in value terms but can’t avail of some incentives meant for manufacturer exporters.
Merchant exporters do not own manufacturing facilities but buy goods from manufacturers here and sell to overseas customers. They have the flexibility to procure goods from many sellers and sell them after negotiating the best prices to foreign buyers.
They are usually able to negotiate prices with buyers, sellers and shipping lines which are better than regular exporters.
The department of commerce is mulling ways to reduce the cost of credit for them.
“It is crucial to promote merchant exporters and make use of their marketing and negotiating skills with global partners,” said an official in the know of the development.
Legal Shield in the Works for Foreign Investments
India is working on a framework that will provide legal backing for a stable and predictable foreign investment regime in the country as it looks to attract more capital to help create jobs and accelerate economic growth.
The law that is in the works in the finance ministry is aimed at promoting and protecting foreign investments. It will spell out the rights and obligations of foreign investors and remove the grey areas that exist in the current system.
While Foreign Exchange Management Act (FEMA) deals with cross-border capital controls, a legal framework to guide foreign investment is still not in place. Bilateral Investment Promotion Agreements (BIPAs) have provisions but do not enjoy the force of law.
Hotel, restaurant services provided to SEZ units taxable
Hotel or restaurant services provided to special economic zone (SEZ) developers or units will not be treated as ´zerorated´ supplies and will be taxable under the goods and services tax, said the Authority for Advance Ruling (AAR). In an application before the Karnataka Bench of the AAR, the applicant had sought to clarify whether hotel accommodation and restaurant services provided to employees and guests of SEZ units be treated as supply of goods and services.

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