Branch Office in India

Branch Office in India

What activities can a branch office perform in India?

The branch office are often opened by any foreign company. The activities it can undertake are mentioned below:

• Export/Import of products
• Rendering consultancy services
• Carrying out research work, during which the foreign parent company is engaged.
• Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
• Representing the parent company in India and acting as buying/selling agents in India.
• Rendering services in Information Technology and development of software in India.
• Rendering technical support to the products supplied by the parent/ group companies.

A branch office cannot perform manufacturing activities on its own but can subcontract these to any manufacturer based in India. Branch Offices can remit the profits to its parent company after paying taxes on an equivalent (RBI).

Who is that the approving authority for branch office?
Reserve bank of India is that the nodal authority to urge the permission to start out a branch office in India

How much time does it fancy setup a branch office in India?
The Branch office could also be registered in 45–60 days

What are the pre requisites to start out a branch office in India?

• The name of Indian Branch office should be same as that of a parent company.
• The Branch is simply extension of the exiting company within the foreign country.
• All the expenses of the BRANCH office are met by the top office, if it doesn’t have the revenue from Indian operations.
• The foreign parent company getting to setup a Branch office should have a profitable diary during immediately preceding 5 years.
• The Net worth of the foreign company should be quite or adequate to USD 100,000. The networth certificate should be

A branch office is is suitable for foreign companies looking to setup a short lived office in India and not interested or not getting to have future plans for the Indian operations; except banking, shipping and airlines etc. mentioned above.

Documents required for forming a Branch Office in India
The application for forming a branch office is to tend to the bank in India. The bank then submits the appliance to RBI for approval.

The following documents are required to open a branch office in India:

• A Indian resident who are going to be liable for branch operations and can be susceptible to make the tax payments and regular compliances
• Form FNC 1 (Three copies)
• Letter from the principal officer of the Parent company to RBI.
• Letter of authority from the parent company in favor of Local Representative.
• Letter of authority/ Resolution from parent company for fixing BRANCH office in India.
• Comfort letter from the parent company meaning to support the operation in India.
• Two copies of English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary within the country of registration.
• Certification of Incorporation — Translated & Duly Notarized and properly authenticated.
• The Latest audited record and annual accounts of parent company duly Translated notarized for past Three years and properly authenticated
• Name, Address, email ID and phone number of the authorized person in Home Country.
• Details of Bankers of the Organization the Country of Origin along side the checking account number
• Commitment from the Organization to the effect that it’ll be hospitable report / opinion sought from its banker by the govt of India / Federal Reserve Bank of India
• Expected funding level for operations in India.
• Details concerning address of the proposed local office, number of persons likely to be used , number of Foreigners among such employees and address of the top of the Local office, if decided
• Details of Activity administered in Home Country by the applicant organization in short about the merchandise and services of company in short
• Bankers Certificate from the bank of the parent company about the small print of parent company and duration of banking with parent company
• Latest Proof of identity of all the administrators — Properly Certified by Banker in Home Country and duly authenticated
• Latest Proof of address all of Directors — Properly Certified by Banker in Home Country and duly authenticated
• Details of the Individuals / Company holding more 10% of Equity
• Structure of the Organization and its Shareholding pattern
• Complete KYC of Shareholders holding quite 10% Equity within the Applicant Company
• Resolution for Opening up checking account with the Banker
• Duly Signed checking account Opening Form for Indian Bank

The application for BRANCH office Licenses is approved by the RBI, but as per the recent changes the applications for BRANCH office are routed through the Authorized Dealers (AD). thanks to this the timeline for fixing the BRANCH office has increased tremendously. Further the documentation required for an equivalent has also increased to an excellent extent.

Post Incorporation Procedural Requirements
After Incorporation, the subsequent registrations also are necessary for a branch office:

• Permanent account number — PAN
• Tax deduction number — tan number Shop & establishment
• Registration GST Registration if providing services to Indian Customers

What are the compliances after the Branch Office is made in India?
Every year a branch office is required to undertake the subsequent activities:

• Book Keeping
• Audit
• Annual activity Certificate with RBI
• Filling of financials with Registrar of Companies

Branch office in India

Tax saving investments routes

Tax saving is the strategy by which one saves taxes by using the provisions specified under law. At the time of filing your return, you can seamlessly claim these exemptions and deductions from the income tax department. Such provisions are provided by the government to incentivize savings and investments in the economy. The process of tax saving is completely legal and encouraged by the government. It is a compulsory contribution to state revenue levied by the government on workers income and business profits or added to the cost of some goods, services and transaction. Taxes paid by public are used by the government for carrying out various welfare schemes including employment programs. Under section 80 of Income Tax Act, 1961 (“Act”) there are various deductions a taxpayer can claim from his total income which would bring down his taxable income and thereby reduce his tax outgo.

Every year most of us struggle to save our tax and it might be challenging for the new earners or newly recruited employees as well. Most commonly used option to save income tax is section 80C. According to this section, if an individual or hindu undivided family (HUF) invests in or spends on specified sources, then up to INR 1.5 lakhs of such investment can be claimed as a deduction from gross total income before calculating tax payable on it in financial year. Such deduction made can be claimed only from the income in the financial year in which such investment was made.
Tax saving investment is an essential part of tax planning we do to save our tax and also an activity which every tax payer should undergo. So, here is all the information and analysis we need in order to choose the tax saving investment scheme under section 80C:

1. Public provident fund (PPF): Investment in PPF is the best option under section 80C of Income Tax Act. It is worthiest for the ones who need to keep aside funds for their retirement. It declares to allow the return on par with the inflation generally. Contribution amounting INR 150,000 is allowed under PPF. Rate of interest is determined by Ministry of Finance from time to time. Interest earned is tax-free. The lock-in period for PPF is 15 years. After five years amount can be withdrawn subject to certain conditions. It is amongst the best strategies for tax saving.
2. 5 year bank fixed deposits (FDs): Any term deposit with the tenure of at least 5 years with the scheduled bank also qualifies for the deductions under section 80C and the interest earned on it is taxable. The investment made in FDI cannot be withdrawn in between.
3. Equity Linked Saving Schemes (ELSS): ELSS funds have the shortest mandatory lock-in period of three years among the tax-saving investment options available under section 80C. The investment is made in equity, directing more prominent returns and gives about 15% in the long term. The deduction can be claimed u / s 80C easily. ELSS is an overall financial plan and is perfect to assemble one’s long-term fiscal goals.
4. National Savings Certificate (NSC): The best thing about this instrument is that unlike an insurance policy or a pension plan NSC does not require a multi-year commitment. So, it is a good option for those who don’t have time to study the features of the plan or look up to the promising ELSS funds. It is issued in the post offices. The income tax deduction for this investment can be claimed under section 80C of the Act.
5. Unit Linked Investment Plan (ULIP): ULIP came into focus from last year after the budget introduced tax on long-term capital gains from stocks and equity funds. It is the combination of investment and insurance which is eligible for tax exemption. It covers the return but there are no guaranteed returns.
6. Premium of life insurance: The scheme is covered under section 80 of the Act. The schemes of life insurance help a person to protect itself and its dependents from any risk occurring in future.
7. Senior Citizens Savings Scheme (SCSS): SCSS was already the best tax-saving option for those above 60 years of age, but last year’s budget made it more attractive by offering senior citizens an additional INR 50,000 exemption on interest income. This means that the overall tax exemption for senior citizens above 60 is now INR 3.5 lakhs and for very senior citizens above 80 is INR 5.5 lakhs. Maximum limit for the above mentioned investment is INR 15 Lakhs. The lock-in period of 5 years. The deduction is allowed under section 80C.

Above stated are the investments which provide deductions that can be claimed under section 80C for saving the tax, considering various provisions. The last quarter of every financial year that is January to March is the time when most of us rush to settle our tax saving exercise by submitting the documents to our employers and also making various investments. Doing this we should keep in mind some important points or measures which we should take for exercising the tax saving benefit. The same will be discussed in our next segment.

We have a team of skilled professionals who can help you with making appropriate investment decisions, tax planning, computation and payment of advance taxes, etc. Still confused and have questions regarding Income tax saving or planning, get assistance from our team of experts click here.

Perceiving tax scrutiny

Thousands of income tax returns (“return”) filed are reviewed and filing patterns are monitored by Income Tax department (“Department”) annually. Some scrutiny cases are selected randomly whereas some are chosen deliberately as a result of meeting the pre-set watch criteria, laid down by the Department. Income tax scrutiny notice is sent to a large number of individuals as well as businessmen filing returns by the Department as a part of their routine check and annual supervision. The idea behind this process is to assess that all the filings made by any person are in compliance with all the protocols, norms and regulations laid down by the Department.

Scrutiny assessment
Critical examination of returns by giving reasonable opportunity to the assessee to substantiate the income, losses and expenses furnished as well as deductions and exemptions claimed, in the return in relation to information provided in the evidence. Income tax officer conducts enquiry from assessee and third party as a part of its assessment. Scrutiny assessment is undertaken to ascertain the factual and legal correctness of the claims for deductions, exemptions, etc.

Purpose of scrutiny assessment
Enquiries are conducted by the assessing officer to ensure that following activities are not performed by the assessee:

• Understatement of income as compared to actual
• Computation of excess loss than actual
• Underpayment of tax
• Concealing any material facts, incomes, etc.

Penalties
In case information supplied in the return is incorrect under any circumstances, whether in the form of omissions, inaccuracies, discrepencies, etc. as a result of this examination. Assessing officer is authorized to assess the income in accordance with his best knowledge (termed as best judgement) as well as evidence or facts so derived and as per the provisions under section 143(3) of the Income Tax Act (“Act”). Assessing officer further has the following authorities:

• Charging of requisite additional interest
• Levying penalties as per the set provisions of the Act
• Initiating prosecution proceedings

Types of scrutiny assessments
Following are the types of scrutiny assessments:

1. Manual scrutiny cases
2. Compulsory scrutiny cases

We have a team of professionals possessing desired experience in annual filings of returns or e-TDS returns as well as other compliances, representation, opinion, litigation, conducting independent audit, furnishing reports, assessments and tax planning services.
Our team is also proficient in the areas of accounting and bookkeeping, auditing & assurance, internal audit, tax audit, management audit, statutory audit, income tax, tax planning, direct taxes, service tax, delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation India, corporate compliance, foreign branch / liaison office registration. Get in touch with us for any assistance by clicking here

Source: http://www.newcompanyregistrationindia.com/blog/perceiving-tax-scrutiny/

What is Foreign Tax Credit (FTC)?

If you have paid or accrued foreign taxes in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, you may be able to take either a credit or an itemized deduction for those taxes.

Characteristics of FTC

• FTC is a method for elimination of double taxation.
• Credit for the amount of any foreign tax paid in the source country against the taxes to be discharged in the residence country.
• In India income tax system, tax Residents and Ordinary Residents (ROR) on worldwide income and offer FTC to tone down the potential for double taxation of income.
• It can be adjusted against tax, cess and surcharge payable under the Income Tax Act.
• It cannot be adjusted against interest, fee or penalty payable under the Act.
• It is not available in case foreign tax or part thereof is disputed by the assessee in any manner.

Conditions to avail FTC
For a tax payer to be eligible for FTC:

• He must have made a payment to a foreign government;
• The payment must be towards an income tax, or a tax in lieu of an income tax; and
• It is permissible in the year where income is offered in India by the assessee within six monthsfrom the end of the month.

Regulations governing FTC

• Section 91includes the tax credit for countries where no DTAA is in force.
• Section 90includes the tax credit for countries where India has entered into a Double Tax Avoidance Agreement (DTAA).
• Rule 128along with Form 67 was introduced in 2016 and came into force on 4.2017

Before the introduction of Rule 128 and Form 67, these provisions were there in the Income Tax Act but no specific rules governing mechanism for determining foreign tax credit.

Unilateral tax credit system in India (Section 91 of Act)

Preconditions

• Available to a tax resident of India.
• Available in respect income accruing or arising outside India.
• Actual tax payment in foreign country on such income.
• Tax liability resulting in tax payment in India (i.e. income is actually doubly taxed).
• No DTAA with the foreign country in which tax is paid.

Quantum of relief

• Proportionate relief at lower of ‘Indian tax rate’ or ‘foreign tax rate’.
• Not full credit.

Bilateral agreements elimination of double taxation (Section 90 of Act)

Two methods envisaged by Model convention – Choice left to the treaty partners.

Exemption method	Credit method
Focus is on income.	Thrust is on taxes and not on income.
Full exemption is granted. Doubly taxed income do not form part of resident country tax computation.	Full credit is granted. Deduction allowed for taxes paid in the source country.
Exemption with progression. Resident country considers doubly taxed income only for the purposes of rate determination.	Ordinary credit is granted. Deduction quantified with relevance to resident country tax on double taxed income. Most of the DTAAs provide for this model of relief.
Taxes retained at the level imposed by source country.	Equality in treatment of capital investment whether made within or outside resident country. If the source country has lower tax rate, overall taxes are increased to that prevailing in the resident country while if source country has higher tax rate, credit is restricted to taxes prevailing in resident country.
Losses incurred in source country can be adjusted.	Losses incurred in source country can lead to “double dip”.

Form-67

Documents required to claim FTC

• Form 67 fully verified and certified by a Charted Accountant (CA) on or before furnishing the tax return.
• Produce a certificate issuedby the concerned tax authority of the foreign country or the specified territory or from the person who is responsible for the deduction (ex. employer) that includes (i) Nature of foreign income and (ii) the amount of TDS.
• A proof of payment of foreign tax.

Few key points

• Form 67 is to be filed electronically.
• It is to be filed on or before due date of filing Income Tax Return.
• It is available on the e-filing portal itself.
• Electronic Verification Code (EVC) or a Digital Signature Certificate (DSC) is required to be filed.
• It should be submitted before filing of Income Tax Return.

This is a complex compliance; you can seek help from our tax experts to claim your FTC.

Visit: Company formation in India

What is Foreign Tax Credit (FTC)?

If you have paid or accrued foreign taxes in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, you may be able to take either a credit or an itemized deduction for those taxes.
Characteristics of FTC

• FTC is a method for elimination of double taxation.
• Credit for the amount of any foreign tax paid in the source country against the taxes to be discharged in the residence country.
• In India income tax system, tax Residents and Ordinary Residents (ROR) on worldwide income and offer FTC to tone down the potential for double taxation of income.
• It can be adjusted against tax, cess and surcharge payable under the Income Tax Act.
• It cannot be adjusted against interest, fee or penalty payable under the Act.
• It is not available in case foreign tax or part thereof is disputed by the assessee in any manner.

Conditions to avail FTC
For a tax payer to be eligible for FTC:

• He must have made a payment to a foreign government;
• The payment must be towards an income tax, or a tax in lieu of an income tax; and
• It is permissible in the year where income is offered in India by the assessee within six monthsfrom the end of the month.

Regulations governing FTC

• Section 91includes the tax credit for countries where no DTAA is in force.
• Section 90includes the tax credit for countries where India has entered into a Double Tax Avoidance Agreement (DTAA).
• Rule 128along with Form 67 was introduced in 2016 and came into force on 4.2017

Before the introduction of Rule 128 and Form 67, these provisions were there in the Income Tax Act but no specific rules governing mechanism for determining foreign tax credit.


Unilateral tax credit system in India (Section 91 of Act)
Preconditions

• Available to a tax resident of India.
• Available in respect income accruing or arising outside India.
• Actual tax payment in foreign country on such income.
• Tax liability resulting in tax payment in India (i.e. income is actually doubly taxed).
• No DTAA with the foreign country in which tax is paid.

Quantum of relief

• Proportionate relief at lower of ‘Indian tax rate’ or ‘foreign tax rate’.
• Not full credit.

Bilateral agreements elimination of double taxation (Section 90 of Act)
Two methods envisaged by Model convention – Choice left to the treaty partners.
Exemption method
Credit method
Focus is on income.
Thrust is on taxes and not on income.
Full exemption is granted. Doubly taxed income do not form part of resident country tax computation.
Full credit is granted. Deduction allowed for taxes paid in the source country.
Exemption with progression. Resident country considers doubly taxed income only for the purposes of rate determination.
Ordinary credit is granted. Deduction quantified with relevance to resident country tax on double taxed income. Most of the DTAAs provide for this model of relief.
Taxes retained at the level imposed by source country.
Equality in treatment of capital investment whether made within or outside resident country. If the source country has lower tax rate, overall taxes are increased to that prevailing in the resident country while if source country has higher tax rate, credit is restricted to taxes prevailing in resident country.
Losses incurred in source country can be adjusted.
Losses incurred in source country can lead to “double dip”.
Form-67
Documents required to claim FTC

• Form 67 fully verified and certified by a Charted Accountant (CA) on or before furnishing the tax return.
• Produce a certificate issuedby the concerned tax authority of the foreign country or the specified territory or from the person who is responsible for the deduction (ex. employer) that includes (i) Nature of foreign income and (ii) the amount of TDS.
• A proof of payment of foreign tax.

Few key points

• Form 67 is to be filed electronically.
• It is to be filed on or before due date of filing Income Tax Return.
• It is available on the e-filing portal itself.
• Electronic Verification Code (EVC) or a Digital Signature Certificate (DSC) is required to be filed.
• It should be submitted before filing of Income Tax Return.

This is a complex compliance; you can seek help from our tax experts to claim your FTC.

Private Ltd, LLP or Public Ltd, which to choose when going for New company registration in India

Fortunately, the new rules and regulations are easier when it comes to start-up a new business in India. Also, there are hassle free new company registration service providers available in India who take care of A to Z of forming and registration of the company. In this post, we will touch upon various forms of new company registration In delhi presently available and which is best suited for your business.

To start with, below mentioned is explanation for new company registration in Gurgaon that are done in India:

Sole Proprietorship:The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

When to incorporate: However, after the introduction of the concept of One Person Company. It is not recommended to form a proprietorship in India.

Limited Liability Partnership: Partnerships when given the feature of limited liability, the LIMITED LIABILITY PARTNERSHIPS came into picture. LLP is a separate legal entity and which can be formed in India by minimum of two persons with a motive of earning profit.

When to incorporate: LLP enjoys the benefits of private limited company and traditional partnerships, therefore, because of increasing compliance in private limited company, it is recommended for start-ups to incorporate LLP if they are not planning to raise investments in future.

Partnership: A business organization in which two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business. Partnerships are easy to form. There is no minimum capital requirement. Only two people are needed to incorporate the partnership.


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Audits Under PCAOB Standards

A yearly audit is a key safeguard for your money and a planning tool for the year ahead. Think of it as a “year in review” for your finances.

The primary benefit of an annual audit under PCAOB standards  is the confidence it gives you and your members that the PTO’s financial house is in order. Basically, the audit verifies the numbers, ensures accuracy, and assesses procedures. A comprehensive audit also identifies internal controls that should be implemented to improve the integrity of your financial systems. Furthermore, the audit gives closure to the treasurer and sets a starting point for the new year’s activity. An audit is also the primary tool for uncovering financial mismanagement. Hopefully you won’t need to conduct an audit for this reason, but an annual audit can uncover problems before they become significantly more serious. Your PTO might also choose to include in your audit a review of how closely your group’s income and expenditures matched the year’s budget. This type of review can be a strong planning tool.

The audit is not within the jurisdiction of the PCAOB. This seems like a strange request.  Perhaps the client is a clearing agency or futures commission merchant registered with the Commodity Futures Trading Commission, which requires that entities registered with it have an audit performed in accordance with PCAOB standards. Maybe the client has entered into a contractual agreement that requires an audit conducted under PCAOB standards. Or maybe, for whatever reason, the client just wants an audit conducted under PCAOB standards.

The PCAOB determines which audits are within its jurisdiction, including audits of the financial statements of issuers and nonissuer brokers and dealers registered with the SEC. A regulator (other than the PCAOB) requiring that the audit be conducted in accordance with PCAOB standards does not make the audit fall within the jurisdiction of the PCAOB. Therefore, even though the regulator— for example, the CFTC— requires an audit to be conducted in accordance with PCAOB standards, that audit is required to also be conducted in accordance with GAAS.

The Auditor’s Report

The report from the auditor will mark the completion of the review. If you are using volunteers, you should clearly itemize what you expect back, so your auditors know when they have completed their job.

Ensure that your auditor has returned the files you provided, and file the original report in the PTOs permanent archives. At the first meeting of the new school year, you should present the auditors report and move that it be adopted. According to Robert’s Rules of Order, once the annual report of the auditor is adopted, it is no longer necessary to move to adopt each month’s treasurer’s report. The reports are presented and then simply filed for next year’s audit.

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