Requirements for Private Company?

Company is a a legal entity, allowed by company law in India, it permits a group of people, as shareholders (real owners), to apply to the Registrar of Companies for an independent business entity to be created, which can then focus on pursuing set of business goals and projects, and empowered with legal rights like individuals, such as to sue and be sued, own property, hire employees or loan and borrow money.

Incorporation / Formation of company involve a number of steps. We have tried to simplify the procedure to the maximum extent possible.

Minimum Requirement of a Private Company are as follows:

1. Minimum 2 Shareholders
2. Minimum 2 Directors (The directors and shareholders can be same person)
3. Minimum Authorised Share Capital shall be Rs. 100,000 (INR One Lac)
4. DSC (Digital Signature Certificate) for all the Directors (for applying of DIN)
5. DIN (Director Identification Number) for all the Directors
6. At least 1 of the Directors shall be an Indian Resident

Considering above minimum requirements interested business partners can form Private Company by appointing themselves as Directors as well as shareholders in company registration process. In simple words shareholders and Directors can be same person in company registration process.

Foreign company registration in India

India is one of the fastest growing economies in the world with healthy resources and a large market base. In the past few years, there is a great boost in foreign direct investment in India (FDI) because of the changed regulatory environment in the past few years. Therefore, it is very easy for foreign nationals to start a business in India.

Sometimes people get often confused in “Indian Company” and “Foreign Company”. If a foreign national incorporates a company in India then it is an Indian Company. But when a foreign company set up a branch office in India then it is known as Foreign Company.

Private Limited Company is considered to be the most ideal form of business for NRIs, foreign nationals and for foreign entities who want to set up business in India.
According to FEMA guidelines, Foreign Direct Investment (FDI) is not allowed in other types of businesses like Proprietorship, Partnership Firm and One Person Company. Though investment in LLP’s is allowed, but it requires prior approval of the RBI.

Subject to FDI norms, the shares of an Indian Company can be held by a NRI, Foreign National or Foreign Company. Therefore, Incorporation of a Private Limited Company is recommended for foreign nationals as it is the fastest and easiest way to enter into the Indian Market.

What is the process to be followed for a foreign company to establish their business in India?
For a foreign company to register in India, they need to follow certain norms and guidelines specified in the Company’s Act of 2013. A company of foreign nature can enter the Indian market and can commence its business operations by adopting the following methods.
As an Indian company:

• Wholly Owned Subsidiary
• Joint Venture

As a foreign company:

• Setting up of a Liaison Office
• Setting up a Project office or Representative office
• To open a branch office of the foreign company

Are there any restrictions for NRIs to set up a business in India?
Currently, there are no restrictions either for foreigners or NRI’s to start a business in India. With Foreign Direct Investment (FDI) gaining popularity and getting a much-needed boost from the Government many MRI’s are keenly looking forward to invest in India. Earlier NRI’s were not allowed to start or incorporate a business in India without the permission from the Reserve Bank of India (RBI). With the withdrawal of Foreign Exchange Regulation Act (FERA), such restrictions have been lifted.

Cost for company registration in India
Company formation services in India are inexpensive. The company formation process can be completed within few weeks. The incorporation process can be easy with the help of tax advisors in India. It would cost you some pennies but the whole process will be easy for you.

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STPI Registration

There is a 100% tax exemption U/S 10A of the Income tax Act, 1961 with respect to the profits earned by the 100% Export Oriented Units up to 31-03-2009, registered with the software technology parks of India (STPI).

The Documents for the application to the Software Technology Parks of India (STPI) to set up a 100% Export Oriented Unit (EOU), include:
1. Application Form in the prescribed form.
2. Memorandum and Article of Association.
3. Board Resolution for setting up STP Unit and persons authorized to sign and submit the application form.
4. Resume of person heading the operation/CEO.
5. Detailed project report/ Business plan consist of:

• Company profile.
• Promoters background.
• Units Area of expertise/Services offered.
• Marketing Strategy / marketing Arrangements.
• Manpower plan.
• Future plans.
• Brief write up on the parent Company and the activities proposed to be carried out by the Indian entity. (In case foreign equity participation)
• List of Capital goods proposed to be procured from abroad and within India.
• Details of foreign collaborator (whether financial or technical)
• Copy of floor plan of the Unit certified by an architect.
• Copy of the rent agreement if any.
• Copy of invoice of the Internet service provider.

6. Financials statement like. A. Cost of project & Means of finance.

• Projected P&L A?C.
• Projected Balance Sheet.
• Projected Cash flow/fund flow statement.
• Export workings- (As per Transfer Pricing guidelines where ever applicable)
• Financials for a 5 year period projecting income from operations, Capital expenditure & cash Flows.
• Detail for aggregate foreign exchange comings & outgo for first 5 years.
• Detail for estimated numbers of employees and wage bill for first 5 years.

7. Other documents like
A. Copy of service agreement signed with parent company / clients/ PO with clients/ Master service Agreement.
B. Initial application processing fee of INR 2,500
8. Advances services charges of INR 50,000 at the time of executing the legal agreement. Service to be paid annually as per the following slabs.
Annual charges for 3 years are payable in advance. At the time of signing the Legal undertaking, the unit is needed to pay additional fees as per the turnover achieved, if the achieved turnover is more than the projected turnover. Note: Once the legal agreement has been executed then a request letter has to be sent to ht STPI for the issue of the Green Card.

(Company formation in India)
(Company registration in India)


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GST Audits- An overview

Section- 2(13) of the CGST Act defines Audit as the examination of records, returns and other documents maintained or furnished by the registered person under the Act / rules made there under or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of the GST Act or the rules made thereunder.
*No audit is required for businesses with turnover less than INR 2 crore.
Types of GST Audit
There are 3 types of GST audits:

1. Audit to be conducted by a Chartered Accountant or a Cost Accountant: Every taxpayer with revenue exceeding the prescribed limit of INR 2 crore during a financial year shall get his accounts audited by a Chartered Accountant or a Cost Accountant. Such taxpayers whose audit is conducted by a Chartered or Cost Accountant shall submit:

• An annual return by filling the form GSTR 9B along with the reconciliation statement by 31st December of the next financial year;
• The audited copy of the annual accounts;
• A reconciliation statement, reconciling the value of supplies declared in the return with the audited annual financial statement; and
• Other particulars as prescribed.

2. Audit to be conducted by the tax authorities: As per Section 65 of the CGST / SGST Act, the Commissioner or any officer of CGST or SGST or UTGST authorized by him by a general or specific order, may conduct audit of any registered / enlisted individual. Intimation of the audit is provided to the taxpayer at least 15 days in advance in Form GST ADT-01 and the audit is to be completed within 3 months from the date of commencement of the audit. In rare cases, the GST Commissioner has the powers to extend the period by another 6 months, if required.
3. Special Audits: If at any stage of investigation or any other proceedings, tax authority is of the opinion that the value has not been correctly declared or credit availed is not within the normal limits, department may order special audit under the mandate of Section 66, by its nominated Chartered Accountant or Cost Accountant.

The Chartered Accountant or Cost Accountant so named will submit review answer to impose officer inside the time of 90 days. This period might be broadened promote for 90 days by duty officer on application made by enrolled individual or the sanctioned bookkeeper. The enrolled individual will be given a chance of being heard in regard discoveries of exceptional review. The costs of the review of records, including the compensation of such contracted bookkeeper or cost bookkeeper will be paid by the Commissioner.
Where the extraordinary review directed outcomes in recognition of assessment not paid or short paid or mistakenly discounted, or input charge credit wrongly benefited or used, the officer may start required activity.
Obligations of the Auditee
Auditees shall have following obligations during the course of audit:

• The taxable person will be required to provide the necessary facility to verify the books of account / other documents as required.
• The auditee needs to furnish the required information and render assistance for timely completion of the audit.

Findings of the Audit
On conclusion of an audit, the officer shall inform the taxable person within 30 days of:

• Findings of audit;
• Their reasons; and
• The taxable person’s rights and obligations.

If you are facing challenges in compliance with GST or require any assistance in GST audits, you may reach us. For any questions regarding this, please click here. 

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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BUSINESS OPPORTUNITIES IN INDIA

India has emerged as the number one FDI destination in the world during the first half of 2015.With FDI capital inflows of US$30.8b, India has outpaced all other economies, moving up to the premier position from being in the fifth spot during the corresponding period of the previous year.
In FY15, India’s growth was 7.3 per cent, which would increase to 7.5 percent each in the next two years of 2016-17 and 2017-18.

Why invest in India?
India is a large and rapidly growing consumer market constituting up to 300 million people for branded consumer goods.

• This market is estimated to be growing at 8% per annum.
• Demand for several consumer products is growing at over 12% per annum.

Consultancy on following:

•  Expansion of business.
• Tax implications.
•  Setting up of new business abroad.
•  Regulatory compliance.
•  Accounting needs.

Key Investors

•  Expansion of business
•  Setting up of new business abroad
• SMEs and Large size firms

Benefits

•  Better Business Contacts
•  Ease of Business Promotion
•  Effective communication
•  Global Presence
•  Improvement in Quality of Service
•  Cost Savings
•  Increased Revenue Potential

INDIA GROWTH & INITIATES

• By 2040, India will have added 1bn people (Almost it’s entire current population to the middle class)
• The biggest youth population in the world.(572 million are under the age of 24)
• One of world’s top ten industrial producers.(19th largest exporter and 10th largest importer in the world.)
• World’s third largest economy by 2030.
• One of the world’s biggest telecom markets (with over 850 million wireless subscribers ).
• One of fastest growing retail markets. (The estimated economic value of top 5 retail markets is $450 billion.)
• Purchasing power parity, India’s economy is fourth largest in the world at $ 4.06 trillion

Now that you now know these facts, it becomes important that you sit and check yourself to see if you would still want to go ahead with setting up your business in India. This is not to say that India isn’t a favorable place for business. As a matter of fact, you can make loads of returns of investment in India.

10 REASONS WHY ONE SHOULD DO BUSINESS IN INDIA

Reserve Bank of India recently painted quite a gloomy picture for the Indian economy and rating house Moody's too pointed out how corruption and scams are hampering the country's business environment.

According to research firm Dun and Bradstreet, India will become a $5.6 trillion economy by 2020. The firm has also predicted a three-fold jump in the country's gross domestic product, from $1.7 trillion last fiscal, on the back of rapid investment and growing consumer expenditure.

1. India's GDP is on a roll
India's gross domestic product is reaching new heights every year. India is now the 11th biggest economy in the world.

2. India's trade is growing steadily

India's imports are increasing more than 25 per cent year on year (since 1960). Even if 2009 saw a small fall-back due to global recession, in 2010 imports were however again growing at 32.2 per cent (August, 2010 -- year on year growth) and reached over $140 billion (2010).

3. India's FDI is on the rise 

India's foreign direct investment has been increasing significantly since the past five years.

There are three major countries that are known to be the biggest foreign direct investors in India. Topping the list of India's foreign direct investment ranking is the small island nation called Mauritius.

This country is located very close to India and enjoys very small tax rate.

 This is the reason why many companies set up their businesses there or invest in the existing organisations.
The tax levied is no more than 3 per cent.
In the second place is Singapore, which invests funds in almost the same sectors as the United States, though Singaporeans are also interested in the transportation sector.
Coming in at third place is the United States, which bring in more than $15 billion into the country.

4. India is turning into an industrialised economy

India is moving from being an agriculture based economy to an industrialised and service focused economy similar to the US, Europe and other industrialised countries.
India is now the world's biggest manufacturer of small cars.
India is ranked 12th in the world in terms of nominal factory output.
The Indian industrial sector underwent significant changes as a result of the economic reforms of 1991.

5. India's population keeps on growing
In terms of population, India is the second largest country in the world.
By 2025, India will be the biggest country in terms of population.
Western markets like the European Union and the United States are set to benefit from a 1.15 plus billion population in India.
The population will continue to grow also in terms of disposable income and consumption of Western products.

6. There are 771 million mobile phone subscribers in India
More than half the population owns a mobile phone in India now.
India is the world's fastest growing wireless market, with 771 million mobile phone subscribers as of February 2011.
It is also the second largest telecommunication network in the world in terms of number of wireless connections after China.

7.Wireless technology to boost India's Internet access
Wireless Internet is going to massively increase the access of hundred of millions of Indians across the subcontinent.
A new era awaits the country's 584 million mobile phone users, with a faster and more robust Internet, and better access to data services including e-commerce, social networking and telemedicine.
Also ready are mobile device manufacturers with a slew of 3G handsets; providers of hosting, billing and network management services with expanded offerings; and content providers selling cell phone ring tones, wallpapers and graphics.

8. India's GNI per capita is growing
Gross National Income per capita in India in terms of purchasing power parity is increasing.
In less than 10 years, the GNI per capita doubled (from $1,560 in 2000 to $3,250 in 2009).
This means Indian consumers can now afford double as much goods and services as just 10 years back.

9. Doing business in India is getting easier
India is among the top 40 nations to have carried out the highest number of business regulation reforms in the last five years, most of these related to introduction of technology to ease business operations.
Nowadays, in just 30 days one can have one's business up and running. Doingbusiness in India is getting easier and investor friendlier year-on-year.

10. India & China: New Economic Gravity by 2050
Andreas De Rosi mentions in his article a research paper of Danny Quah, from the London School of Economics.
Quah wrote that the world's economic centre of gravity is projected by 2050 to locate, literally, between India and China.
Observed from the Earth's surface, that economic centre of gravity will shift away from its 1980 location a distance of 9,300 km or 1.5 times the radius of the planet.
So doing business in India is a must for companies with a long-term view.
India will sooner or later come back to the time when it was the biggest economy in the world.
Great news for Indians, indeed!

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