Post Incorporation, Corporate Compliances & Reporting in India

Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act Post incorporation in India, a company needs to meet the compliances laid down in the Companies Act

After the incorporation process, there will be compliances that a company must conduct in order to preserve its legal status.

In order for the company to continue as an officially recognized company after incorporation, the law requires that companies follow certain "corporate formalities" and keep accurate records of their activities. There are basically three prongs of the corporate formality requirement:

  1. The Corporate Records Requirement
  2. The Annual Reporting Requirement
  3. The Meetings Requirement

List of activities/ formalities to be carried out immediately after the incorporation are enumerated as under:

1. To check company’s master data on MCA portal to confirm:

  • Authorised share capital
  • Paid-up share capital
  • Registered office address
  • E-mail Id
  • Company status
  • Date of incorporation

2. The company needs to display the following things outside the company’s registered office and get the same printed on their letter head or any other stationery:

  • Name of the company
  • Registered office address of the company
  • Corporate identity number or CIN
  • Telephone number, e-mail id
  • Website address and fax number, if any

3. First board meeting is to be conducted within 30 days of incorporation considering the following matters namely,

  • Taking on record the certificate of incorporation of the company;
  • Noting of situation of registered office address - a company shall on and from the fifteenth day of its incorporation and at all times shall have registered office.
  • Noting of 1st directors - The persons whose name will be mentioned in Articles of Association will be First Directors of Company, in case of absence of name in Article of Association, subscribers of Memorandum of Association will be first Director of Company.
  • Approval of preliminary expenses - the pre-incorporation expenses to be approved accordingly.
  • Approval for opening of a current account - Company should open Bank account of Company before issue of shares.
  • Appointment of 1st statutory auditors - The First auditor of company shall be appointed by the
  • Appointment of internal auditor, if required
  • Appointment of secretarial auditor, if required
  • Appointment of cost auditor, if required
  • Taking on record the disclosure of interest of directors at the first board meeting of the company in the financial year.
  • Taking on record PAN & TAN of the Company.

4. Allotment of the securities should be made with related certificates thereto after passing a board resolution and on surrender of the letter of allotment along with stamp duty payment, if applicable and a return of allotment shall be filed with the registrar.

5. Application with respect to registration for VAT/ CST/ service tax (if applicable) shall be made to the relevant authorities for different purposes;

6. Verification of the registered office of the company capable of receiving all communications and notices shall be completed by filing with the registrar the relevant statutory forms;

7. Entries in the various statutory registers mentioned below shall be made under the companies act, 2013:

  • Register of members;
  • Register of transfers;
  • Register of directors & shareholdings;
  • Register of charges;
  • Register of contracts & arrangements in which the directors are interested;
  • Meetings attendance registers etc.

8. If fund has been received from any other country other than India as Share Subscription money, then Company needs to report this transaction to Reserve Bank of India in Form FC-GPR. Remitter Bank will provide FIRC& KYC to the AD Bank and then Company would initiate process for filing of FC-GPR through AD Bank.

Accounting, Filling and Auditing Requirement:

Financial Statement

Companies are required to prepare the financial statements each year, as per the provisions of Companies Act. Financial Statements must be prepared from 1st April to 31st March, in accordance with accounting standards prescribed under Companies Act. India has proposed convergence of its accounting standards with IFRS, these standards are called the Indian Accounting Standard (also known as Ind As). From 1st April’ 2016, these standards will be mandatory for listed and unlisted companies subject to the conditions.

Auditing

Companies are required to prepare the financial statement and to have them audited by a practicing chartered accountant or a firm of chartered accountant registered with ICAI. The audited financial statement must be approved by members or shareholders in an annual general meeting. The companies with paid up capital INR 5 million or turnover exceed INR 50 million need to have their internal audit to certify internal control system. The companies can carry out this function through practicing chartered accountant or a firm of chartered accountant registered with ICAI.

Filling

Companies are required to file their audited financial statement with the Registrar of Companies after they approved from the members or shareholders in the annual general meeting.

S. no Compliance Period
1. Appointment of Auditor 30 days from the date of incorporation
2. Preparation of Financial Statement 1st April – 31st March
3. Annual General Meeting 6 months from the date of closing of financial statement
4. Filling of Annual Return to the Registrar of Company 60 days from date of Annual General Meeting

 

KYC of Director: The Company needs to file KYC of the all the Director each and every year with the Registrar of Company (ROC) at the dates assigned by ROC. The dates may vary every year subject to availability of form. In case of non-compliance of this, Company Director status may become non-active.

Income Tax:

Introduction: India follows a residence based taxation system in India. The taxpayer may be classified as ‘resident’ or ‘non-resident’. A resident individual may also be classified as ‘non ordinary resident’ and corporation is deemed to be resident in India if it is incorporated in India or if its control and management is wholly situated in India.

Tax Year: The Indian tax year extends from 1 April of a year to 31 March of the subsequent year i.e., previous year or fiscal year. Income of the fiscal year is assessed to tax in the next fiscal year i.e. assessment year.

Tax Registration: Every Company needs to apply for and obtain the tax registration called permanent account number (PAN) and Tax-deduction Account Number (TAN). PAN is required to file the tax return and TAN needs to be reported in the tax deduction returns or certificates.

Filling: A company must file a final tax return, reporting income of the previous year, by 30 September immediately following the end of the fiscal year, stating income, expense, tax paid and due for the preceding year. In case of transfer pricing, the due date of filling of return is 30 November instead of 30 September.

Payment of Tax: Taxes on income of a fiscal year usually are paid in the following installments by way of advance tax:

Due Date Percentage of Estimated Tax
15th June 15%
15th September 45%
15th December 75%
15th March 100%

 

Withholding Tax: All corporations (including foreign entities) will be required to deduct tax on the prescribed heads of income at the time of making the payment or at the time of credit of the sum to the account whichever is earlier at applicable rates and hand over the same to the Government’s treasury within seven days from the end of the month during the said tax has been deducted. The payment and compliances under withholding tax are as follows:

Due Date Percentage of Estimated Tax
15th June 15%
15th September 45%
15th December 75%
15th March 100%

 

Withholding Tax: All corporations (including foreign entities) will be required to deduct tax on the prescribed heads of income at the time of making the payment or at the time of credit of the sum to the account whichever is earlier at applicable rates and hand over the same to the Government’s treasury within seven days from the end of the month during the said tax has been deducted. The payment and compliances under withholding tax are as follows:

Particular Due Date
Payment 7th day of the Next Month (April 30 for the month of March)
Filling 15th day of the next month from the end of the quarter(15th May for the Q4 i.e., Jan – March )
Certificate 30th of the next month (for salaried certificate, by 30th May)
15th March 100%

 

Transfer Pricing:

The Indian transfer pricing regulation provides that the price of any international transactions or specified domestic transactions between two or more associated enterprises has to be computed with regard to the arm’s length price.

Documentation requirements: The taxpayers are required to maintain the information and documents relating to the transaction undertaken between associated enterprises. The code prescribes detailed information and documentation that the taxpayer has to maintain to demonstrate that the price complies with the arm’s length principle. All such information or documents should be contemporaneous and in place by the due date for filing the return of income (i.e. 30 November following the close of relevant tax year).

The taxpayer whose aggregate international transactions below the threshold of one crore rupees (INR 10 Million) and specified domestic transactions below the threshold of five crore rupees (INR 50 Million) are relieved from maintaining the prescribed documents. However, even in such cases, it is necessary that the documentation maintained should be adequate to substantiate the arm’s length prices of international and specified domestic transactions.

Accountant’s report: It is mandatory for all taxpayers, to obtain an independent accountant’s report with respect to all international transactions and specified domestic transactions between AEs. The report has to be furnished by the due date of the tax return filing is on or before 30 November following the close of the relevant tax year.

Expatriate: The incidence of tax depends on the residential status of the individual. Typically, expatriates who are assigned to India for the first time for the first two to three years of their stay in India are taxable as follows:

  • Income received or deemed to be received in India
  • Income accruing / arising in  India or deemed to accrue / arise in India

 

The salary for services rendered in India is deemed to be India-sourced income and, therefore, is taxable, irrespective of the place of receipt and the expatriate’s residential status. However, a safe harbor may be available under the Indian domestic tax laws (the 90-day rule) or the DTAA between India and the home country. There are prescribed conditions that need to be satisfied in both cases.

Withholding Tax: In respect of employment income, the employer will be required to withhold tax on the earnings from salary at applicable rates and hand over the same to the Government’s treasury within seven days from the end of the month during which salary is paid (except for March wherein the time line is extended to 30 April). This is applicable even if the employer is not resident in India.

Tax Return Filling: At the end of each year, a tax return has to be filed with the income tax authorities in the prescribed form. The due date for filing of return is 31 July of the relevant assessment year. However, a belated return can be filed before the expiry of one year from the end of relevant assessment year. It is mandatory to file the return electronically if the total income exceeds INR 10,00,000.

Custom Duty:

Custom duty is levied on import of goods into India and is typically payable by the importer of goods. It is also levied on export of certain goods. Custom Duty rates depend on the classification under the Custom Tariff, which is aligned with the International Harmonized System of Nomenclature —generic rate being 37.47%.
 
Customs duty generally comprises the following components:

  • Basic Customs Duty (BCD)
  • Social Welfare Surcharge (SWS)
  • Goods & Service Tax (GST)

The GST paid on import of goods is allowed as credit against the output GST tax liability, subject to conditions.

In case of import from related parties, the matter is typically referred to the Special Valuation Branch authorities by the customs authorities prima facie to determine if the assessable/transaction value is at arm’s length. Accordingly, the relevant customs-related procedures would need to be filled.
 
The compliance requirements include determination and deposit of duty prior to clearance of goods by customs authority.

Goods & Service Tax:

The government of India has replaced all the indirect taxes previously levied on goods and services by the Centre and States and implemented Goods and Services Tax (GST) with effect from 1 July 2017.

Central taxes such as Central Excise duty, Additional Excise duty, Service tax, Additional Custom duty and Special Additional duty as well as state-level taxes such as VAT or sales tax, Central Sales tax, Entertainment tax, Entry tax, Purchase tax, Luxury tax and Octroi will now be replaced by GST. GST has a four-tier rate structure – 5%, 12%, 18% and 28%.

The minimum threshold under GST is INR2 million of aggregate turnover in a financial year. However, in certain states the limit is reduced to INR1 million. The Input Credit can be claimed by a tax payer on basis of the documents such a tax invoice, debit note or bill of entry. In case the payment has not been made within 180 days, the amount of input credit will be added to the output liability. The Input Credit cannot be claimed beyond the six months from the end of financial year or date of filling of annual return whichever is earlier. The key compliances under GST are as follows:

Particular Due Date
Payment of GST 20th of next month (31st March for the march)
Monthly Return of GST 10th of next month
Annual Return 31st December of next financial year

Secretarial Compliances: The companies need to compliance with secretarial matter under the Companies Act and report to the registrar of companies. The key compliances are as follows:

Particular Compliance
Change in Address Mandatory
Change in Director Mandatory
Statutory Registers Mandatory
Resident Director Mandatory
Allotment of shares Mandatory
Board Meeting A minimum 4 board meeting must be held every year, and the time gap between two consecutive meeting cannot exceed 120 days
Annual General Meeting 6 months from the date of closing of financial statement


- As on 1st July 2019

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