Handbook - Regulatory Compliances by Company After Incorporation

e-Lawyering re-defined

Handbook:

Compliance by Company

After Incorporation

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Handbook of Compliances by Limited Company © www.companiesinn.com 2

Table of Contents

11 LLiimmiitteedd CCoommppaannyy ................................................................................................................................................................................................................................................................ 44

1.1 Company Concepts: ................................................................................................................................................... 4

1.1.1 Shareholders ........................................................................................................................................................................... 4

1.1.2 Directors .................................................................................................................................................................................. 4

1.1.3 Concept of Limited Liability ................................................................................................................................................. 4

1.1.4 Memorandum of Association (MOA) .................................................................................................................................. 4

1.1.5 Articles of Association (AOA) .............................................................................................................................................. 4

1.2 Management and Administration of Companies ................................................................................................... 5

1.3 Corporate Compliance: Classification ..................................................................................................................... 5

22 CCaatteeggoorriieess ooff LLiimmiitteedd CCoommppaannyy ((OOtthheerr tthhaann OOPPCC)) .............................................................................................................................................. 55

2.1 Private Limited Company ......................................................................................................................................... 5

2.1.1 Small Company – Private Limited ....................................................................................................................................... 5

2.1.2 Regular Private Limited Companies.................................................................................................................................... 6

2.2 Public Company ......................................................................................................................................................... 6

33 CCoommppaanniieess AAcctt .......................................................................................................................................................................................................................................................................... 66

3.1 Board of Directors and Meetings .............................................................................................................................. 6

3.1.1 Board Meeting – Periodicity ................................................................................................................................................. 6

3.1.2 Notice of Board Meeting ....................................................................................................................................................... 7

3.1.3 Attendance by Directors to Meeting .................................................................................................................................... 7

3.1.4 Attendance by Video Conferencing ..................................................................................................................................... 7

3.1.5 Quorum for Board Meetings................................................................................................................................................. 7

3.1.6 Minutes of Board Meetings ................................................................................................................................................... 7

3.1.7 Secretarial Standards on Board Meeting ............................................................................................................................. 7

3.2 Shareholders Meetings ............................................................................................................................................... 8

3.2.1 Types of Shareholders Meetings .......................................................................................................................................... 8

3.2.2 Notice of General Meeting .................................................................................................................................................... 8

3.2.3 Types of Resolutions .............................................................................................................................................................. 8

3.2.4 Minutes of General Meetings ............................................................................................................................................... 9

3.2.5 Secretarial Standards on General Meeting .......................................................................................................................... 9

3.3 Minutes Books and Statutory Registers ................................................................................................................... 9

3.3.1 Minutes Book .......................................................................................................................................................................... 9

3.3.2 Statutory Registers / Records ................................................................................................................................................ 9

3.4 Share Certificate ........................................................................................................................................................ 10

3.5 Secretarial Standards ................................................................................................................................................ 10

3.6 Company Secretary .................................................................................................................................................. 10

3.7 Filing of Returns with office of Registrar of Companies (ROC) ......................................................................... 11

3.7.1 Annual Statutory Compliance ............................................................................................................................................ 11


3.7.2 Event Based / Process Compliances ................................................................................................................................... 11

44 AAccccoouunnttiinngg .................................................................................................................................................................................................................................................................................. 1122

4.1 Maintenance of Vouchers ........................................................................................................................................ 12

4.2 Data Entry to Accounting Software ....................................................................................................................... 12

4.3 Legal Requirements .................................................................................................................................................. 12

55 AAuuddiitt ooff AAccccoouunnttss .......................................................................................................................................................................................................................................................... 1122

5.1 Appointment of First Auditors ............................................................................................................................... 12

5.2 Reappointment of Auditors .................................................................................................................................... 13

66 IInnccoommee TTaaxx:: RReeggiissttrraattiioonnss && CCoommpplliiaanncceess ........................................................................................................................................................................ 1133

6.1 Income Tax Registrations ........................................................................................................................................ 13

6.1.1 Permanent Account Number (PAN) ................................................................................................................................. 13

6.1.2 Tax Deduction and Collection Account Number (TAN) ................................................................................................ 13

6.2 Income Tax Compliances ......................................................................................................................................... 13

6.2.1 Tax Deduction / Collection at Source (TDS/TCS) and filing of Returns ........................................................................ 13

6.2.2 Advance Tax Payments ....................................................................................................................................................... 14

6.2.3 Filing of Income Tax Returns .............................................................................................................................................. 14

6.2.4 Dividend Distribution Tax (DDT). ..................................................................................................................................... 14

77 SSeerrvviiccee TTaaxx .................................................................................................................................................................................................................................................................................... 1144

7.1 Registration Requirements ...................................................................................................................................... 14

7.2 Payment of Service Tax ............................................................................................................................................ 15

7.3 Filing of Service Tax Returns .................................................................................................................................. 15

88 VVaalluuee AAddddeedd TTaaxx ((VVAATT)) ...................................................................................................................................................................................................................................... 1155

8.1 Payment and VAT Returns ..................................................................................................................................... 15

99 SShhoopp aanndd EEssttaabblliisshhmmeenntt RReeggiissttrraattiioonn .......................................................................................................................................................................................... 1166

1100 PPrrooffeessssiioonnaall TTaaxx .................................................................................................................................................................................................................................................................. 1166

1111 IImmppoorrtteerr EExxppoorrtteerr CCooddee ((IIEECC)) .................................................................................................................................................................................................................. 1166


1 Limited Company

A Limited Company is treated as artificial legal person in relation to regulatory compliance provisions.

Once a company is registered, it has its own identity separate from its shareholders and directors. So it is

ideal to understand certain basic concepts of a Limited Company at first.

1.1 Company Concepts:

1.1.1 Shareholders

Shareholder(s) or Member(s) are the persons who invest capital and holds shares in a company. Members

are the ultimate owners of the company.

1.1.2 Directors

Directors of company are responsible for company management and legal compliance under various

laws.

Shareholders and Directors can be same persons and Directors need not be shareholder and vice versa

1.1.3 Concept of Limited Liability

Limited liability means that the personal financial liability of an investor in a business limited to the

extent of a fixed amount that one has agreed to invest in a company or a limited liability partnership. In

other words, the investor is not personally liable for the business debts and liabilities of the Limited

Company or Limited Liability Partnership.

In the unfortunate event of winding up of the business, the investor's liability is limited to the unpaid

amount of agreed contribution by shares or otherwise.

1.1.4 Memorandum of Association (MOA)

Memorandum of Association (MOA) is the charter document of a company. A company is created by

registering a memorandum.MOA contains the name of a company, the state in which the registered office

of the company is located, objectives, and its authorised capital.

The details of subscribers to the MOA cannot be amended or changed at any point of time during the life

of the company, as it constitutes the document giving birth to a company. Subsequent changes in the

shareholding or directorship of the company should be reflected in its internal records and will not affect

the subscriber details in the MOA.

1.1.5 Articles of Association (AOA)

AOA is the bylaws of a company and can be filed along with the incorporation document.AOA contains

rules and regulations for the management of a company's internal affairs and conduct of its business. It

defines the relationship of company between its members and directors and relation between members

and directors. It also describes powers of directors. Further, the AOA describes the rights and duties of its

members as well as the duties and responsibilities of its directors.

The details of subscribers to the AOA cannot be amended or changed at any point of time during the life

of the company, as it constitutes the document giving birth to a company. Subsequent changes in the

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shareholding or directorship of the company should be reflected in its internal records and will not affect

the subscriber details in the AOA.

1.2 Management and Administration of Companies

The management and administration of Companies are subject to compliance of various legal

requirements. The individual Promoters / Directors are required to ensure the compliance of the

provisions of respective Acts and rules while conducting the business activities and regulatory

procedures.

Administration of a Company are administered primarily by the by the Companies Act 2013 and Rules

made there under. A Company also has to comply with the legal and regulatory requirements of various

Laws depend on its business operations, location and number of employees etc.

1.3 Corporate Compliance: Classification

Corporate Compliance is an essential part of a corporate function failing which stringent penalties are

imposed under the provisions of Companies Act and other applicable Laws.

The general compliance requirement of Company can be broadly classified in to:

1. Companies Act

2. Accounting and Audit

3. Taxation

4. Other Compliances - Specific to Business Category and Location

2 Categories of Limited Company (Other than OPC)

2.1 Private Limited Company

A Private Company has the following features / requirements

Criteria Limit

Minimum Maximum

No of Shareholders 2 200

No of Directors 2 15

Further, depends on the basis of Capital and Turnover, Private Limited Company is classified as under:

2.1.1 Small Company – Private Limited

A Private Limited Company that fulfils both the following conditions shall be treated as ‘Small

Company’:

Criteria Monetary Limit(Both Conditions to be fulfilled)

Paid-up share capital Rs.50 Lakhs or less

Turnover Does not exceed Rs.2 Crores

Small Companies are exempted from certain compliance requirements under Companies Act.


2.1.2 Regular Private Limited Companies

A Private Limited Company which is not a Small Company is referred as Regular Private Limited

Companies.

Criteria Monetary Limit( Any Conditions )

Paid-up share capital Rs.50 Lakhs or More

Turnover More than Rs.2 Crores

Exemptions that are exclusively available to Small Companies won’t be available to Regular Private

Limited Company.

2.2 Public Company

Public Limited Company is a Company which is not a Private Company or OPC.

It has the following features / requirements

Criteria Limit

Minimum Maximum

No of Shareholders 7 NA

No of Directors 3 15

Capital NA NA

Turnover NA NA

Operations of public limited companies are subject to compliance of many of the restrictive provisions of

the Companies Act.

3 Companies Act

A Limited Company has to comply and adhere to various legal process and procedures as required under

the Companies Act and Rules.

The compliance process in a company is ensured by way of meetings of directors and shareholders,

maintenance of Minutes of Board Meetings and Shareholders Meetings, Registers and Records,

maintenance of accounts and audit, Filing of periodic and event based returns to Registrar of Companies.

3.1 Board of Directors and Meetings

Directors are appointed by shareholders and the day to day management of company is vested with the

Board of Directors. The Board of Directors manages the company subject to the provisions of Companies

Act and Rules.The Board carries the management of Company through decisions taken at their meetings.

The decisions at the meeting of directors are carried by way of resolutions.

All the Companies other than OPC are also required to comply with therequirements stipulated under

the Secretarial Standards 1- Board Meetings issued by the Institute of Company Secretaries of India(ICSI).

3.1.1 Board Meeting – Periodicity

Every company shall hold the Meeting of Board of Directors as follows:


The first meeting of the Board of Directors within thirty days of the date of its incorporation

Minimum four meetings Every Year.

The interval between two consecutive meetings shall not be more than 120 days.

One Person Company, Small Company and Dormant Company are required to hold at least one meeting

of the Board of Directors in each half of a calendar year and the gap between the two meetings is not less

than ninety days.

3.1.2 Notice of Board Meeting

A meeting of the Board shall be called by giving not less than seven days’ notice in writing to every

director at his address registered with the company. The notice shall be sent either by hand delivery or by

post or by electronic means. In case of urgency to transact urgent business, a meeting of board can be

convened after obtaining consent from majority of directors.

3.1.3 Attendance by Directors to Meeting

Directors can participate in a Board Meeting either in person or through video conferencing or other

audio visual means.

3.1.4 Attendance by Video Conferencing

Attendance through video conferencing or other audio visual means are also subject to conditions laid

down for recording, storing and retrieval of the proceedings of such meetings for future reference.

Meetings through Skype / Team Viewer etc. are not acceptable as attendance through video conferencing

under the Companies Act.

3.1.5 Quorum for Board Meetings

The quorum for a meeting of the Board of Directors of a company shall be one third of its total strength or

two directors, whichever is higher. Participation of the directors by video conferencing or by other audio

visual means shall also be counted for the purposes of quorum.

3.1.6 Minutes of Board Meetings

Minutes of Board Meeting should be recorded and kept signed by the Chairman of the meetings.

3.1.7 Secretarial Standards on Board Meeting

While convening, conducting and recording the minutes of Board Meetings, every company, other than

One Person Company (OPC) has to follow the conditions stipulated under the Secretarial Standard – 1

issued by the Institute of Company Secretaries of India (ICSI)

Major Points to be noted are as follows:

a. Every Meeting shall have a serial number.

b. Any Director can attend a meeting through electronic mode if the Company provides such facility.

c. Notice in writing of every Meeting shall be given to every Director by any physical/electronic means.

d. The Board shall meet at least once in every calendar quarter, with a maximum interval of one

hundred and twenty days between any two consecutive Meetings of the Board, such that at least four

Meetings are held in each Calendar Year.


e. The Quorum for a Meeting of the Board shall be one-third of the total strength of the Board, or two

Directors, whichever is higher.

f. Every company shall maintain separate attendance registers for the Meetings of the Board and

Meetings of the Committee.

g. A distinct Minutes Book shall be maintained for Meetings of the Board and each of its Committees.

h. The draft Minutes shall be circulated to all the members of the Board within fifteen days from the

date of the conclusion of the Meeting.

i. Minutes shall be entered in the Minutes Book within thirty days from the date of conclusion of the

Meeting.

3.2 Shareholders Meetings

Shareholders are the ultimate owners of the company and thus they are the ultimate decision making

authority for matters such as appointment of directors etc. Shareholders takes decision through

resolutions passed at shareholders meeting.

3.2.1 Types of Shareholders Meetings

3.2.1.1 Annual General Meeting (AGM)

Every year, the company has to convene an Annual General Meeting (AGM) of the shareholders for

adopting the Annual Accounts and appointment of Auditors for the following year.

3.2.1.2 Extra Ordinary General Meetings (EGM).

Any meetings of shareholders other than the Annual General Meeting are called Extra Ordinary General

Meetings (EGM). In case of any items that requires shareholders’ approval and cannot be waited for next

AGM, usually decided at an EGM of shareholders

3.2.2 Notice of General Meeting

A General meeting can be convened after giving Notice of 21 clear days, excluding the date of notice and

date of meeting. A General Meeting can also be convened at a short notice after obtaining written

consent, by physical or electronic means, of not less than ninety-five per cent of the Members entitled to

vote at such Meeting.

3.2.3 Types of Resolutions

Considering the requirements of majority for passing, resolutions can be classified in to Ordinary

resolution and Special resolution. Companies Act 2013 specifies the business items that require Special

Resolution. Any item other than that requires Special Resolution can be decided by Ordinary Resolution.

3.2.3.1 Ordinary Resolution:

Ordinary Resolution is a resolution where the votes cast in favour of the resolution exceed votes cast

against the resolution in any general meeting by members or proxies attending the meeting with voting

rights.


3.2.3.2 Special Resolution:

Special Resolution is a resolution where the votes cast in favour of the resolution are not less than three

times the number of votes cast against the resolution in a general meeting by members or proxies

attended the meeting with voting rights.

3.2.4 Minutes of General Meetings

Minutes of every general meetings of the company should be recorded and kept signed by the Chairman

of the meetings.

3.2.5 Secretarial Standards on General Meeting

While convening, conducting and recording the minutes of General Meetings, every company, other than

One Person Company (OPC) has to follow the conditions stipulated under the Secretarial Standard – 2

issued by the Institute of Company Secretaries of India (ICSI)

Major Points to be noted are as follows:

a) A General Meeting shall be convened by or on the authority of the Board.

b) Notice in writing of every Meeting shall be given to every Member of the company by

physical/electronic means.

c) Notice and accompanying documents shall be given at least twenty-one clear days in advance of the

Meeting.

d) A Member entitled to attend and vote is entitled to appoint a Proxy, to attend and vote instead of him

and a Proxy need not be a Member.

e) A distinct Minutes Book shall be maintained for Meetings of the Members of the company

f) Minutes shall be entered in the Minutes Book within thirty days from the date of conclusion of the

Meeting.

3.3 Minutes Books and Statutory Registers

3.3.1 Minutes Book

The decision making process in a company happens through Meetings of Board of Directors and

Members. Minutes of these meetings are required to be recorded, serially numbered, each page should be

initialed and the last page should be dated and signed by the Chairman of Meetings as required under

Companies Act.

3.3.2 Statutory Registers / Records

A company is required to maintain and preserve a set of records as required under Companies Act. The

records and registers should be made available for inspection by Directors/ Shareholders and Regulatory

authorities as and when required subject to restrictions under the Act. To ensure timely compliance of

requirements in a systematic manner, the following records, registers and stationery is required by a

company.

The following are the Registers that are mandatory to be kept by a company

a) Register of Members

b) Register of Directors

c) Register of Directors Shareholding


d) Register of Companies / Firms in which Directors are interested

e) Register of Contacts in which Directors are interested

f) Register of Charges

g) Register of Investments not in the name of Company

h) Register of Loans and Guarantee

i) Register of Investments

j) Register of Share Transfers

3.4 Share Certificate

Share certificate is the proof of shareholding in a company. The company has to issue share certificate to

the subscribers of Memorandum on receipt of subscription money as agreed in the Memorandum of

Association and for all subsequent share allotments.

A Share certificate is required to be issued under the authority of board resolution with the common seal

of the company and is required to be signed by two directors and an authorized signatory. Stamp duty is

to be paid on share certificate according to the respective state stamp rules.

3.5 Secretarial Standards

Every company other than One Person Company (OPC) in which there is only one Director on its Board

are required to follow the standard Secretarial practices that are stipulated in Secretarial Standards issued

by the Institute of Company Secretaries of India (ICSI).

The following Secretarial Standards issued by the Institute of Company Secretaries of India are

mandatory to be followed by every every company other than One Person Company (OPC) from 1st July

2015

1. Secretarial Standard 1 - Board Meetings

2. Secretarial Standard 2 - General Meetings

3.6 Company Secretary

Every company having a paid up capital of Rs.5 Crore or more shall appoint a whole time Company

Secretary. Compliance requirements on Certification from a Company Secretary in Practice are as follows:

1. Signing of Annual Return by a Company Secretary in Practice

Annual Return (Form No. MGT.7) of every company other than OPC and Small Company are to

be signed by a Company Secretary in Practice

2. Certification of Annual Return

The annual return of following Companies shall be certified by a Company Secretary in Practice

in Form No. MGT.8

a. a company having paid-up capital of Ten Crore Rupees or more

b. a company having turnover of Fifty Crore Rupees or more

This is in addition to Signing of Annual Return by a Company Secretary in Practice.


3.7 Filing of Returns with office of Registrar of Companies (ROC)

Compliance mechanism under Companies Act mandates a company to file documents and Returns

to office of Registrar of Companies (ROC) from time to time. Compliance related filing of returns /

documents with the office of Registrar of Companies can be broadly classified in to:-

1) Annual Statutory Compliances

2) Event Based / Process Compliances

3.7.1 Annual Statutory Compliance

Irrespective of the fact whether the company is carrying the business or not, every company

required to file certain yearly returns with the office of registrar of Companies. Failure in filing

the return will attract huge penalty and may have to face legal proceedings for non-compliance.

3.7.1.1 Annual Accounts

Every company has to prepare financial accounts consisting of Balance Sheet and Profit and Loss

account on a yearly basis duly audited by a Chartered Accountant and the same has to be placed

before the Annual General Meeting (AGM) of the company.

A Copy of the Annual Accounts has to be filed with the Registrar of Companies within 30 days

from AGM.

3.7.1.2 Annual Return

Every year a company shall file a return with the Registrar of Companies within 60 days of AGM

containing the particulars such as address of registered office, register of its members, register of

its debenture holders, shares and debentures, indebtedness, members and debenture holders,

past and present, and directors, managing directors, past and present as on every 31st March.

3.7.2 Event Based / Process Compliances

The following are few instances that require a filing of a return with the Registrar of Companies.

Events that requires filing of Returns

a. Increase Authorized Capital

b. Allotment of Shares

c. Changes in Directors - Appointment / Resignation of Directors

d. Change in Registered Office of the company

e. Filing of certain Resolutions Passed by the Board / General Meetings and Agreements

entered by the company

f. Change of Company Name

g. Creation / Modification / Satisfaction of Charges

h. Conversion of Private Company to Public and vice versa

i. Various Approvals from the office of Central Government / Regional Director / Company

Law Board /Registrar of Companies


4 Accounting

If finance is the life blood of Business, accounting is the function that of a heart. A Company or LLP is

required to maintain proper books of accounts with respect to

a. Sums of money received and expended

b. Sales and purchase of goods and services

c. Assets and liabilities

4.1 Maintenance of Vouchers

Accounting starts with every transaction of receipt or payment. It is advisable to the company to maintain

vouchers for every transaction. Well maintained vouchers will help the accountant to record the

transactions periodically, if not instantly.

4.2 Data Entry to Accounting Software

For due recording and retrieval of accounting data at any given point of time, it is advisable to use

accounting software like QuickBooks / Tally.

4.3 Legal Requirements

As per Companies Act, books of accounts to be maintained according to double entry system on accrual

basis in accordance with the Indian accounting standards and the same shall be maintained at the

registered office of the company.

A company has to close its accounts every financial year and such financial year may be less more than a

calendar year but it shall not exceed fifteen months.

5 Audit of Accounts

The financial accounts of every company have to be audited by a Chartered Accountant. The requirement

of audit is applicable to all companies irrespective of size and turnover.

Every Annual General Meeting (AGM), the board of directors shall place the accounts of the company

consisting of Balance sheet as at the end of the financial year and a Profit and loss Account for that period

along with the report of auditors.

In case of companies where annual turnover is Rs.100 Lakhs or more, there is an additional requirement

of audit under Income Tax Act by a Chartered Accountant and the report to be submitted along with the

Annual Tax Returns.

5.1 Appointment of First Auditors

Every newly registered Company is required to appoint a Chartered Account in Practice as its Auditors

within 30 days of Incorporation. Details of Appointment are required to be filed with Registrar of

Companies within 15 days of Appointment.

Delay in filing the details of appointment will attract additional fee and penalty as per Companies Act.


5.2 Reappointment of Auditors

Appointment of Auditor can be made for a period of 5 years at the first instance. At the every Annual

General Meeting, either the auditors are reappointed for next term or has to be ratified.

6 Income Tax: Registrations & Compliances

Income tax is a direct tax collected by the Central Government and is levied on all income other than

agricultural income on a person liable to pay such tax. Company is a separate person different from its

owners and income of company is taxed at the hand of the company.

6.1 Income Tax Registrations

6.1.1 Permanent Account Number (PAN)

Permanent Account Number (PAN) issued by the Income Tax Department to a tax payer. All the

Companies are required to obtain PAN for Income Tax references. PAN is required as reference in many

other instances as well.

6.1.2 Tax Deduction and Collection Account Number (TAN)

Certain category of payments requires Tax Deduction at Source (TDS) and the tax so deducted must be

remitted to the Government of India. To enable TDS remittance, TAN is required. This can be obtained

after approval and issue of PAN.

6.2 Income Tax Compliances

6.2.1 Tax Deduction / Collection at Source (TDS/TCS) and filing of Returns

A Company while making specific payments has to deduct tax at source. TDS is applicable to payments

such as Salary, Interest, Dividend, Rent, Fee for professional and technical services, Commission and

brokerage etc. The collection tax will be made at the source where income arises or accrues.

The Incomes Tax Act mandates the payer to deduct specific percentage from the payment and pay the

balance to recipient. The payer has to file quarterly returns to Income tax department with details of

payee, date of deduction and date of remittance to department etc. The due dates for filing TDS returns

are as follows:

Quarter Filing Due dates

First Quarter (April to June) July 15th

Second Quarter (July to Sept) October 15th

Third Quarter (Oct to Dec) January 15th

Fourth Quarter (Jan to March) May 15th

After payment of TDS to the Government, the company has to issue TDS Certificates periodically to the

person from whom the amount is deducted. Delay in filing the returns and issue of TDS Certificates

attracts penalty.


6.2.2 Advance Tax Payments

Income Tax laws mandate payment of Income Tax in Advance in case of assesses total tax liability for a

financial year exceeds Rs.10000 or more after deducting the tax deducted at source from the gross tax

payable on the current income. Schedule of Advance Tax Payment for Companies are as follows:

Instalment Due Date Percentage

First 15th June 15%

Second 15th September 45%

Third 15th December 75%

Fourth 15th March 100%

If the advance tax payment is not made in time, interest will be applicable for the delay in

payment.

6.2.3 Filing of Income Tax Returns

As per Income Tax Act, company or LLP has to close its financial year as on 31st March every year and has

to file the returns with Income Tax Department. In case of Company / LLP whose annual turnover is

more than Rs.60 Lakhs, the accounts have to be audited as required under Income Tax Act as well. A

company / LLP have to file its Income tax Returns on or before the due dates as follows:

Audit Requirements Due Date

Where the accounts are not required to be audited under any

Law

31st July of every year

Where the accounts are subject to Audit under any Law 30th September of every year or such

other date as may be notified by the

Income Tax authorities.

6.2.4 Dividend Distribution Tax (DDT).

A company can distribute profit to shareholders as dividend after paying dividend distribution tax

(DDT). The dividend, if distribute after payment of DDT will not be taxed again at the hands of

shareholders.

7 Service Tax

Service tax is a tax levied on services rendered by a person and the responsibility of payment of the tax

lies with the service provider.

7.1 Registration Requirements

Requirement of Service Tax Registration by a company providing taxable services as follows:

Turnover of taxable services exceeds Rs.9 lakh in the previous financial year

Certain categories of service recipients

Distribution of service if the turnover of taxable services exceeds Rs.9 lakh in the previous

financial year

Other compelling reasons such as requirement ST Registration for vendor enlistment from a

customer.


7.2 Payment of Service Tax

After obtaining the ST Registration, the service provider has to collect service tax at the

specified rate from the recipient of services and has to pay to the government periodically.

Service tax to be paid on or before 20th day of the following month.

7.3 Filing of Service Tax Returns

All the Companies that are registered under Service tax has to file the ST returns, even if there no ST

Billing and Collection. The service provider has to file the return to Service Tax Department as

follows:

Periodicity Due Date

Monthly On or before 20th of the following month

Quarterly returns On or before 20th day of the following month after each

quarter

Half yearly returns On or before 20th day of the following month after each

half year

Yearly returns On or before 20th day of the following month after each

Financial year

If there is no billing and collection of ST, the company has to file a NIL Return in the referred intervals.

8 Value Added Tax (VAT)

Companies that are dealing with taxable goods and materials should register under VAT if the turnover

of Company from taxable goods is above the exempted limits as prescribed under state VAT Rules.

Value Added Tax (VAT) or Sales Tax is a consumption tax levied on sale of taxable goods and materials.

VAT is a state specific registration and it is applicable to sales within the state as well as interstate sales.

The seller is liable to pay VAT to the government. As the name suggested this tax is levied on the value

added on the product by a dealer.

For example X sells a product at Rs.1100.00 (including 10% VAT) to Y. Y adds margin of Rs.200 and sells

the product to the customer at Rs.1320.00 (ie., 1200+10% VAT). Tax liability in this case is follows:

X to Government Rs.100.00 (10% of Rs.1000.00)

Y to Government Rs.20.00 (10% of Rs.1200 – Rs.100)

8.1 Payment of VAT and Filing of Return

The amount of VAT collected should be paid to Government on monthly basis and the required return

also has to be filed on or before 20th of day of the following month.

If there is no billing and collection of VAT, the company has to file a NIL Return in the referred intervals.


9 Shop and Establishment Registration

Every Commercial Establishment has to be registered under the respective State Labour Regulations

within 30 days of commencement of work.

A Commercial Establishment means a business or trading or banking or insurance establishment, or an

establishment or administrative service in which persons employed or mainly engaged in office work, or

a hotel, restaurant, boarding or eating house, a cafe or any other refreshment house or a theatre, cinema

or any other place of public amusement or entertainment.

Every state has its own process and regulation for registration of Shops and Establishments to regulate

conditions of work and to provide for statutory obligations of the employers and rights of the employees

in un-organized sector of employment and other establishments in their jurisdiction.

Every business has to maintain the following records under Shops and Establishments Act:

a) Registration Certificate under Shops and Establishments Act

b) Registers giving details of employment, fines, deductions and advances, salary, holidays, etc.

c) Details of annual holidays, number of employees etc.

10 Professional Tax

This is a tax on employment and profession. Professional tax is imposed at the state level. Companies

employing people with stipulated salary shall have to obtain registration for Professional Tax.

The slab for professional tax differs from state to state. Business owners, working individuals, merchants

and people carrying out various occupations comes under the purview of this tax.

11 Importer Exporter Code (IEC)

Importer Exporter Code (IEC) is a unique 10 digit code issued by Director General of Foreign Trade,

Ministry of Commerce, Government of India. To carry on import or export in India, IE Code is

mandatory. No person or entity shall make any Import or Export without IE Code Number. If there is

any change in the particulars of company, changes in directors, change of address, an application has to

be made to Director General of Foreign Trade to effect such changes in the IEC Records / Certificate.

For any clarifications and more details on specific compliance, contact:

CompaniesInn Solutions Private Limited

#48, 100Ft Road, Opp to KendriyaSadan, Koramangala, Bangalore – 560034

Phone: +91 80 3025 5900;

E-Mail: [email protected]

URL: www.companiesinn.com

mailto:[email protected]

http://www.companiesinn.com/

Handbook - Regulatory Compliances by Company After Incorporation

Business

Transcript of Handbook - Regulatory Compliances by Company After Incorporation