INC-20A (DECLARATION OF COMMENCEMENT OF BUSINESS)

Ministry of Corporate Affairs has Introduced E-From INC-20A (Declaration of Commencement of Business), in compliance with the provisions of section 10A(1)(a) of the Companies Act, 2013 and Rule 23A of the Companies (Incorporation) Rules 2014.

As per the new provisions of the said section Every company which has been incorporated or will be incorporated on or after 02/11/2018, having share capital shall not commence its business or exercise any borrowing powers unless it files a declaration with the registrar of companies that ‘Every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of such declaration’ in Form INC-20A, within a period of 180 days from the incorporation of the company.

The contents of the said form is to be verified by a Company Secretary or Chartered Accountant in practice.

Further it is to be noted here that, in case a company pursuing object requires any approval from any regulatory authority like Rerserve Bank of India or SEBI or IRDAI, the same should be obtained and attached to the e form-20A.

Who is liable to comply with the provisions of this section?

Following classes of companies are required to comply with the provisions of this section:

  1. Companies incorporated on or after 02/11/2018
  2. and having share capital

What is the due date of filing Form INC-20A

180 days from the date of incorporation of the company

What are the documents which need to be attached to form INC-20A

Bank statement showing the credit entries of the money received from the subscriber.

Penal provisions for not compying with the provisons?

  1. Company will be liable to pay a penalty of Rs. 50,000/-
  2. Every officer of the company in default will be liable to pay an amount equal to Rs. 1000 for every day of default with a maximum of Rs. 1,00,000/-

Consequences of not filing the form Inc-20A

  1. The registrar of companies can initiate the procedure for removal of the company name from the register of Companies.
  2. Company can not borrow any money
  3. Company can not start its business

INC-22A(ACTIVE)

MCA vide its notification dated 21st February, 2019 and Companies (Incorporation) Amendment Rules, 2019 introduced Form INC-22A (Active i.e Active Company Tagging Identifies and Verification) which is hereby referred as the KYC of the Companies.

Who is required to file Form INC-22A?

Every company which has been incorporated under the companies act on or before 31st December, 2017, is required to file this form on or before April 25, 2019

Companies which are exempt from filing form INC-22A?

Following companies are not required to file form INC-22A

  1. Struck off companies
  2. Companies which are under the process of strike off
  3. Companies which are under the process of liquidation
  4. Companies which are dissolved or amalgamated

What are the prerquisites of filing the INC-22A?

  1. Every company which is required to file the said form Active must have filed its financial statements with the registrar of companies upto 31st March, 2018.
  2. The directors identification numbers must be active i.e the KYC of the directors must been completed.
  3. Auditor Appointment must have been made till March, 2019.
  4. Mandatorily filed Cost Auditor’s appointment till March, 2019.

What are the documents and information which is to be submitted along with this form?

  1. Along with the form a mandatory attachment of the registered office of the Company inside and outside the builing along with the physical presence of the director which shall affix the digital signatures on the form.
  2. Details of the Longitude and latitude of the premises
  3. Details of all directors along with their din, details of auditor and company secretary if any.
  4. SRN of the form AOC-4 and MGT-7

Email verification

A one time password will be sent to the email id of the company which needs to be verified.

What will be the consequences of non compliance?

In the event of the non compliance to the provisions of this rules, the status of the company will be changed to ACTIVE- Non Compliant of or after April 26, 2019 and shall be taken against the company under the provisons of sub-section 9 of section 12 of the Companies Act, 2013

Further the company will be debarred from filing the following forms:

  1. FORM SH-07 (Change in the authorized share capital)
  2. PAS-3 (Change in paid up capital)
  3. DIR-12 (Change in director except cessation)
  4. INC-22 (Change in Registered office)
  5. INC-28 (Amalgamation, de-merger)

What will be the late payment charge for filing the form beyond due date?

After the due date a penalty amounting Rs. 10,000 will be applicable.

Is certification of form INC-22A is mandatory and by whom it should be certified?

The form INC-22A is to be certified mandatorily by any one of CA, CS or CMA

TAX COLLECTED AT SOURCE

The Income Tax Department has mandated the tax to be collected at source on certain transactions at the at a certain specified rate.The provisions of the tax collected at source are governed by section 206C of the Income Tax Act.

The TCS provision mandates the tax to be collected at source at the time of sale of certain specified goods from the buyer at the time of sale.

Now we will discuss the goods on which the tax is to be collected at source and the rates for the different products.

  1. Alchoholic liquire made for human consumption the tax is to be deducted @ 1%
  2. Timber Wood under a forest leased the tax is to be deducted @ 2.5%
  3. Timber wood other than forest leased the tax is to be deducted @ 2.5%
  4. Tendu Leaves the tax is to be deducted @ 5%
  5. Forest produce other than tendu leaves and timber the tax is to be deducted @ 2.5%
  6. Scrap the tax is to be deducted @ 1%
  7. Minerals like ignite, coal and iron ore the tax is to be deducted @ 1%
  8. Bullion exceeding value of Rs. 2 lakhs the tax is to be deducted @ 1%
  9. Jewellery exceeding value of Rs. 5 lakhs the tax is to be deducted @ 1%
  10. Purchase of Motor Vehicle exceeding Rs. 10 lakhs the tax is to be deducted @ 1%
  11. Parking lot, toll plaza, mining and quarrying the tax is to be deducted @ 2%

This is to be noted here the above mentioned goods if used for the purpose of resale or trading then the tax will be collected at source if the same goods are sold for the manufacturing, processing or producing things no tax is to be collected.

Definition of sellers and buyers for the purpose of Tax Collected at Source.

Below mentioned are the persons and organizations which are classified as sellers for the purpose of tax deducted at source, no sellers other than those mentioned below are required to comply with the provisions of the tax collected at source:

  1. Central Government
  2. State Government
  3. Local Authority
  4. Statutory Corporation or Authority
  5. Companies registered under Companies act
  6. Partnership Firms
  7. Co-operative Societies
  8. Any person or individual who is required to get its accounts audited under income tax act for a particular financial year.

In the same way the following classes of buyers are required to comply with the provisions of the tax collected at source

  1. Central Government
  2. State Government
  3. Public Sector Companies
  4. Embassy of high commission
  5. Consulate and other Trade Representation of a Foreign Nation
  6. Clubs such as sports clubs and social clubs

Exemptions under TCS provisions

Following transactions are exempt from the provisions of TCS

  1. When the specified goods are used for personal consumption
  2. When the buyer purchases the goods for the purpose of manufacturing, processing and producing.

TCS under GST

The followng will be the impact of TCS on GST

  1. Every dealer selling the goods online will get the amount from online payment gateway after the deduction of tax at 1% under IGST (0.5% CGST & 0.5% SGST)
  2. The tax deducted will required to be deposited withe goverment by 10th of the next month
  3. All the dealer are required to get themselves registered under GST compulsorily.
  4. These provisions have been made effective from 1st October, 2018


Highlights of the 33rd GST Council Meeting held on 24th February, 2019

The 33rd Meeting of the GST Council was held on 24th February, 2019 at 2 P.M. at New Delhi

First the 33rd meeting of the Council was decided to be held on 20th February, 2019 via video conferencing, however the meeting was adjourned to 24th February, 2019, considering the complexity of the matter such as GST or real estate as the crucial and important matter can not be decided via a video conference.

Also the GST council extended the due date of filing of GSTR-3B for the Month of January, 2019 from 20th February to 22nd February.

The 33rd GST council meeting which was held on 24th February, 2019 was headed by the Finance Minister Mr. Arun Jaitley and it was the first meet of the council after the interim Budget, 2019.

Further the Last GST council meeting i.e 32nd GST Council was held on 10th January, 2019 which was also headed by the Finance Minister Mr. Arun Jaitley.

Now we will discuss the highlights of the 33nd GST Council Meeting:

Rate cut for properties under construction:

The Finance Minister Mr. Arun Jaitley announced a rate cut for the under construction properties in the segment of Residential sector as mentioned below:

  1. GST rate for affordable housing scheme has been reduced from existing 8% to 1% without taking the benefit of the input credit.
  2. The definition of the affordable housing has been provided under the GST law as follows:
  • In case of metro cities flats with a value of Rs. 45 lakhs or less with the carpet area of 60 sq.mtr.
  • In case of non metro cities the flats with a value of Rs. 45 lakhs or less with a carpet area of 90 Sq.mtr.
  1. The GST rate for non affordable housing scheme has been reduced to 5% from existing 12% without taking the benefit of input credit.
  2. The changes will be made applicable from 1st April, 2019
  3. The exemption was proposed on intermediate tax on Transfer Development Rights(TDR)/ Joint Development Agreement(JDA), Long Term Leas Premium, FSI-Press release states for residential properties for which GST is payable.

Out of Discussion Matters

  • There was no discussion made on the rate cut on cement which is currently charged @ 28%.
  • No discussion was made on lottery rate slash.

BUDGET 2019 HIGHLIGHTS

  1. Individuals having income upto Rs. 5 lakh are no longer required to pay taxes.
  2. Standard deduction provided to salaried employees earlier Rs. 40,000 has now been raised to Rs. 50,000/-
  3. Threshold limit for TDS deduction u/s 194I has been raised to Rs. 2,40,000 from Rs. 1,80,000/-
  4. The income under the head house property will not be counted on the basis of deemed income even if the assessee has two self occupied house properties.
  5. Threshold for TDS on interest has been raised to Rs.40,000 from Rs. 10,000/-
  6. Deduction under seciton 54 can now be availed for two houses can be availed only once for a lifetime.
  7. The collection from direct taxes has been almost doubled from 6.38 lac crore to 12 lac crores.
  8. The percentage of non scruitiny and accepted Income Tax Returns has been raised to 99.54%
  9. Rs. 75000 Crore budget has been set under PM Kisan Yojna for the farmers having land upto 2 hectares to receive Rs. 6,000/- per annum under the scheme.
  10. Pradhan Mantri Shram Yogi Maandhan Yojana has been introduced to provide the pension of Rs. 3,000/- per month to the workers of unorganized sector earning monthly income upto Rs. 15,000/-
  11. 2% rebate will be provided on interest on loan upto Rs. 1 crore for GST registered SME.
  12. 2% interest subvention will be provided for farmers affected by natural calamities and additional 3% interest subvention for farmers repaying the loans on timely basis.
  13. Rs. 1.3 lac crore taxes were recovered under anti black money measures taken by the goverment.
  14. Section 80-IBA deduction has been extended to one more year till 31st March 2020.
  15. Exemption from leavy of rent on unsold inventory has been extended from one year to two years begining from the year in which the project is completed.
  16. GST returns will be filed quarterly for SMEs with turnover upto Rs. 5 Crore.
  17. The requirement for sourcing from SMEs by Government enterprises has been raised to 25% including 3% reservation for Women owned MSEs.
  18. The Government will soon implement a business loan upto Rs. 1 crore in 59 minutes.
  19. More than 35000 crore has been allocated for defence personnels under the ‘One Rank One Pension’ scheme.
  20. Maternity leave to women will be given for 26 weeks.

SECTION 8 COMPANY

Definition

As per section 8 of the Companies Act, 2013, such companies are defined as the companies whose objectives are to promote the fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection or other related activities.

One more essential characteristic of these companies is that they do not provide any dividend to their members rather they apply all its income to the furtherance of its main objects.

Formerly these companies were defined in section 25 of the Companies Act, 1956, with more or less same provisions, however the new act has given some more objectives for which these companies can work.

We can look into the famous examples of section 8 companies as Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industries (CII). These companies work for facilitating the growth of trade and commerce in India.

Some of the characteristics of section 8 companies are mentioned below:

i. Charitable activities : A Section 8 Company can be formed only to carry on the charitable activities on non profit making basis. Further we have already discussed the activities which are charitable for this purpose.

ii. Minimum Share capital not required : As per the companies act, section 8 companies are not required to comply with the provisions of having minimum share capital.

iii. Limited Liability of members : Members of these companies in no case can have unlimited liability.

iv. License from Central Government : A section 8 company must get a license under this section from central government before starting its activities.

v. Additional Privileges : Keeping in mind the companies charitable activities, companies act has provided several benefits to section 8 companies.

vi. Non individual Members : A section 8 company can have individuals, association of persons as well as Firms as its members.

Who can make an application to register a section 8 company:

Any individual or association of persons who is interested in carrying on the charitable activities can make an application to the registrar of companies in prescribed form and with prescribed documents and fee for the registration of a company under section 8, the registrar if satisfied by the documents and information provided by the applicant may accept such application and register the company.

It has to be noted here that a section 8 company can be registered only in form a public limited company, moreover these companies are not required to place the word “limited” or “private limited” in their names like other companies.

As we have already discussed that these companies can work only on the basis of the license granted to them by the central government these companies can not even alter their memorandum without the permission of the central government.

Cancellation of the license

The central government have the power to cancel the license granted to a company under section 8 of the companies act on the following grounds:

i. If the provisions of section of the companies act has been violated by the company or its members.

ii. If the terms on which the license was granted has been violated

iii. If the company carries on any fraudulent activity of activities which in violation to its main objection or which are not according to the public policy.

The central government will give an opportunity of being heard to the company before the cancellation of license or initiating wound up procedure.

The government also has the power to pass an order for amalgamating that company with another similar company.

GST on Rent

According to the GST act, renting of immovable property will be treated as supply of service under GST. However, in GST regime certain types of rent will attract GST. In this article, we look at types of rent that attract GST in India.

The Pre-GST Era

In order to get the complete knowledge of the concept, we will first look at the matter before GST regime, before the implementation of GST, the owners of the immovable property had to get themselves registered under Service Tax Act if their gross income from letting out of there immovable property exceeds Rs. 10 lakhs in a financial year. The owners of the property had to charge  service tax @ 15% on their rental income from the property let out for commercial purpose. This was also applicable if a residential property was used for commercial purposes.

GST on Rental Income

The rental income from letting out of any property commercial or residential is exempted from GST upto Rs. 20 lakhs in any financial year. However, there would be no GST applicable if a house is given out for residential purposes, irrespective of the amount of income. Renting of properties is considered as a supply of services under the GST Act. Every commercial property let out will be considered as supply of service under GST and will be taxable at the rate of 18% and the place of supply of service will be considered as the location of the property.

Exemptions

GST will not be applicable in certain cases of renting of immovable property as mentioned below:

  1. When the property is given for residential purpose.

  2. When the rental income from a property that is let out for commercial purposes does not exceed the threshold of INR 20 Lakhs annually.
  • When the rent earned by a registered charitable trust or a religious trust and the rent of the space, be its business units, shops or community halls of such a charitable trust is INR 10,000 or less for a day.

GST Registration for Landlords

Every land owner who doesn’t fall under any of the categories that are exempt from paying GST on the amount of rent received by them, are mandatorily required to get themselves registered under the Goods and Service Tax and pay taxes at the applicable rates under GST.

Input Tax Credit

An individual who pays GST on the rent can take input tax credit for paying GST. In simple words, input tax credit on GST paid on rental income can be claimed if all the provisions to claim the input tax credit are fulfilled.

TDS on Rent Section 194I

Persons required to deducted Tax – Any person who is responsible for paying rent to a resident in excess of Rs. 1,80,000/- for a particular financial year  is required to deduct tax under this section.

Tax is to be deducted at the time of credit of such rent to account of payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode,whichever is earlier.

TDS is deductible under this section for rent paid on account of lease, sub-lease, tenancy or any other arrangement. Rent includes rent on land, building, plant and machinery, equipments, furniture and fittings whether given separately or together.

TDS Rates

For the use of any plant or machinery and equipment – 2%

For the use of any land or building or furniture or fittings for all persons – 10%

In case the payment is to be made to a resident no surcharge or education cess will be payable.

It is to be noted here that if the PAN of the deductee is not available, the rate of TDS will be 20%.

If in the opinion of the assessee, his annual taxable income on which tds is to be deducted will be less than the minimum amount chargeable to tax or the actual tax payable will be less than the tax deducted, then he can make an application to the assessing officer for no TDS deduction or deduction of TDS at a lower rate under section 197.

Other important Points to be noted here are:

  1. No surcharge is applicable except where the payment of rent is to be made to a foreign company and the amount exceeds Rs. 1 crore.
  • No education cess is to be levied on TDS on rent.
  • If the receiver of rent does not furnish his PAN to the tenant then the tenant is required to deduct the TDS @ 20%.
  • If in case the municipal taxes, ground rent etc are borne by the tenant, no tax would be deducted on such amount.
  • If the property is co-owned by two or more landlords , limit of Rs. 1,80,000 will be calculated separately for each co-owner.
  • While TDS is to be deducted on non-refundable deposits made to the landlord, serving as security deposit using the asset, there will be no tds on the security deposit which is refundable at the end of the tenancy period.
  • Where the accommodation charges are paid to a hotel on regular basis it will be subject to TDS.

TDS is to be deducted on monthly, quarterly or half yearly

Section 194-I doesn’t specifically states that the tds is to be deducted on monthly basis, hence the tds is to be deducted in accordance with the payment of rent being made. If the payment of rent is made on monthly basis, quarterly basis, half yearly or yearly basis, the tds is to be deducted on monthly, quarterly, half yearly and yearly basis respectively.  

All about Dir-11 and Dir-12

All about Dir-11 and Dir-12

As per Sections 7(1) (c), 168 & 170 (2) of the Companies Act, 2013, in case of appointment, resignation or change in designation of a director Form Dir-12 is required to be filed by the company to intimate the registrar of companies about the same:

Where as , the director itself is required to intimate the registrar of companies about the notice of resignation of the director as per Section 168 (1) of the Companies Act, 2013 and Rule 16 of Companies (Appointment and Qualification of Directors) Rules, 2014

E- form Dir-12

Where in an existing company or in a new company a director is appointed or resigned or there is a change in the designation of a director, the company in that case is required to file the intimation of such appointment, resignation or change in directorship with the registrar of companies within a period of 30 days from the date of appointment, resignation or change in directorship.

Now we will discuss some of the features of DIR-12:

  1. A single form can be filed for appointment, resignation and change in directorship of different directors provided the same has been filed within a period of 30 days form all of the events.
  2. For appointment and resignation and change in directorship of same director different DIR-12 is required to be filed.
  3. In case of resignation of all of the directors and appointment of new directors two e form DIR-12 is required to be filed as all of the existing directors can not resign at a time.
  4. The e form contains some mandatory fields marked * which needs to be filled mandatorily, failing which the e form will not be filed.
  5. In case the no. of directors for which DIR-12 is required to be filed are more than 15, the abbendum e- form DIR-12 is required to be filed.
  6. The appointee director for which the e form DIR-12 is required to be filed shall not have directorship in more than 20 Private Limited Companies or 10 Public Limited Companies.
  7. Every appointee director who is to be appointed shall give his consent in writing to act as the Director of the company in DIR-2.
  8. With regard to every appointee director, interest of the director in other entities is also required to mentioned in DIR-12 including CIN no., Percentage of shareholding and amount of shareholding and nature of interest. Details pertaining to only one entity can be filed in DIR-12, for interests in more than one entities separate sheet is required to be attached.

Following attachments are mandatorily to be attached in scanned pdf formats to DIR-12

a. In case of appointment

i. Letter of Appointment
ii. Declaration of the appointee director in dir-2
iii.Separate sheet for interests in other entities in case of interest in more than one entity.
iv. In case of a new company declaration by the first directors in INC-9

b. In case of Resignation

i. Notice of Resignation

ii. Evidence of cessation

E-Form Dir-11

Where a director resigns from his directorship in a company, he shall within a period of 30 Days from the date of resignation, forward his resignation along with reasons in eform DIR-11 to the registrar of companies.

Now we will discuss some features of DIR-11:

  1. The resigning director must clearly mention the reason for his resignation from the company.
  2. The e from shall be digitally signed by the resigning director itself unlike DIR-12 which has to be digitally signed by the Continuing director other than resigning director of the company.
  3. The resignation shall be effective from the date of notice given by the resigning director or the date specified in the notice for taking effect of the resignation.

Following documents must be mandatorily attached to the e form DIR-11

a. Notice of resignation

b. Proof of dispatch