DOING BUSINESS IN INDIA

What are the type of Business Entities Available in India?

The following types of Business entitles are available in India:

• Private Limited Company
• Public Limited Company
• Unlimited Company
• Partnership
• Sole Proprietorship

In addition to the above legal entities, the following types of entities are available for foreign investors/foreign companies doing business in India:

• Liaison Office
• Representative Office
• Project Office
• Branch Office
• Wholly owned Subsidiary Company
• Joint Venture Company

What is a Private Limited Company?

A Private Limited Company is a Company limited by shares in which there can be maximum 50 shareholders, no invitation can be made to the public for subscription of shares or debentures, cannot make or accept deposits from Public and there are restriction on the transfer of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 2.

What is a Public Limited Company?

A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7.

What are the advantages of a Limited Company?

A limited company has following advantages:

• Members' (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares.
• The management structure is clearly defined, which makes it easy to appoint, retire or remove directors.
• If extra capital is needed, it can be raised by selling more shares privately.
  It is simple to admit more members.
• The death, bankruptcy or withdrawal of capital by one member does not affect the company's ability to trade.
• The disposal of the whole or part of the business is easily arranged.
  High status.

What are the disadvantages of a Limited Company?

A limited company has following disadvantages:

• Requirement to register the company with the registrar of companies and provide annual returns and audited statement of accounts. All details of the company are available for public inspection so there can be no secrecy. There are penalties for failing to make returns.
• Can be more expensive to set up.
• May need professional help to form.
• As a director, you are treated as an employee and must pay tax.
• The advantages of limited liability status are increasingly being undermined by banks, finance house, landlords and suppliers who require personal guarantees from the directors before they will do business.

What entity is best suited?

The choice of entity depends on circumstance of each case. Private Limited Company has lesser number of compliances requirements. Therefore, generally where there is no requirement of raising of finances through a public issue and the ownership is intended to be closely held by limited number of persons, Private Limited Company is the best choice.

What is the minimum paid-up capital of a Private Limited Company?

The minimum paid up capital at the time of incorporation of a private limited company has to be Indian Rupees 1,00,000 (about United States Dollars 2,250). There is no upper limit on having the authorized capital and the paid up capital. It can be increased any time, by payment of additional stamp duty and registration fee.

What is the difference between authorized capital and paid up capital?

The authorized capital is the capital limit authorized by the Registrar of Companies up to which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of the capital subscribed by the shareholders.

What is the procedure in obtaining a name approval for the proposed Company?

An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated.  The application is required to be signed by one of the promoters. The details to be state in the said application are as follows:1. Four alternative names for the proposed company. (The name can be coined names from the objects of the proposed company or the names of the directors, etc. but should definitely be indicative of the main object of the company. Justification for the name needs to be specified along with the application)2. Names and addresses of the promoters (Minimum 7 for a public company while 2 for private company).3. Authorized Capital of the proposed company.4. Main objects of the proposed company.5. Names of other group companies. On submitting the application, the ROC scrutinizes the same and sends the approval / objections in about 10 days to the applicant. On fulfilling of the objections a formal letter of name approval is issued.

DIGITAL SIGNATURE

PAN in Digital Signature needed for ITR filing purpose effective from Aug 1 2010

For the purpose of Income Tax Return filing, "Controller of Certifying Authorities" has amended the procedure to include "Permanent Account Number" in Digital Signatures.


1. This change is with effect from August 01, 2010.

2. PAN is a NEW additional field in digital signature.

3. The old DSC may not contain this value, even though if you had given PAN
    while availing DSC before 01/08/2010.

4. PAN is optional, and DSC can be issued even without PAN. If the  n   
    subscriber (user) intends to have PAN in it, he/she has to specifically          
    intimate the issuer.

ITR filing with DSC:

In ITR e-filing website, filing with Digital signature remains almost similar. That is,

1. Register the DSC for particular login

2. Re-Select the same DSC while uploading the XML


Earlier procedure:

DSC was not containing the encrypted PAN value of the assessee. So, in case of firms/companies, while registering the DSC at the website, it should have got at least one earlier ITR XML uploaded/accepted and "name of DSC holder" should match with any of the director/key-person list in earlier accepted-XML return. [In case of individuals, name should match with "PAN Name in ITD database" and email ID in DSC should match with email ID in website profile]

Further while uploading the XML, the selected DSC number (unique number of DSC stored in website while registering) should match with the one used for registering. Secondly, "name of DSC holder" should match with the "Name in ITD database" for the PAN mentioned in verification part of ITR-5/6.

Major limitation here was for first-time digitally signing assessee, where he should have earlier return. Further "Matching of name" was practical problem reported by several assessees.

New procedure:

The above limitations have increased due to mandatory Digitally signing of ITR-6. To overcome this issue, CCA, through the request from ITD, has introduced a new filed in DSC issuing. In this, DSC can have PAN encoded in itself, so that it can help ITR filing.

While registration, it asks the user to enter the PAN. This PAN should match with the DSC encrypted PAN. (No other matching is done here). While uploading, selected-DSC should have the encrypted PAN matching with the PAN mentioned in ITR verification part.

With effect from:The technical guidelines were issued by CCA, as early as at Dec-2009. With effect from August 2010, all Certifying authorities may issue DSC with encrypted PAN.

 

1. Assessees can also use earlier DSC, which has no encrypted PAN. In such case, "name matching" system continues as earlier.

2. Assessees, at their interest, can contact their current certifying authorities for upgradation / re-issue of DSC with the encrypted PAN. The certifying authorities can follow their own procedures for this purpose.

New Company Registration in Tamil Nadu

New Company Registration is the basic step, which will define the structure of a business and make it an entity enjoying legal acceptability. This way, the business can begin its operations in India & across the globe.

We offer new company registration, new company formation, limited company registration, online company registration, foreign company registration services in Tamil Nadu. Our aim is to improve international understanding about new company registration process, which is provided by us to register new companies in India & across the globe. We also value your time and money therefore considering this, we offer you relevant and required information about new company registration to achieve your business objectives and goals.
________________________________________________________





FOR MORE INFORMATION PLEASE CONTACT

New Company Registration in Tamil Nadu

New Company Registration is the basic step, which will define the structure of a business and make it an entity enjoying legal acceptability. This way, the business can begin its operations in India & across the globe.

We offer new company registration, new company formation, limited company registration, online company registration, foreign company registration services in Tamil Nadu. Our aim is to improve international understanding about new company registration process, which is provided by us to register new companies in India & across the globe. We also value your time and money therefore considering this, we offer you relevant and required information about new company registration to achieve your business objectives and goals.

IEC Export Code

The IEC Code (Import Export Code Number) is a unique 10 digit code essentially needed by the exporter and importer for the purpose of import and export in India. No exporter or importer is permitted to carry out any type of trade activity without this IEC Code Number. Compulsory Documents for the application for obtaining the IEC Code, sent to the Joint Director General- Foreign Trade include the following:

1. Application in Duplicate (Aayaat Niryaat Form).
2. Copy of Tax ID Allotment. This document has to be produced in original at the time of submission of the application form.
3. Two photo's of the Director preferring the application certified by the Banker's along with Name and Designation of the Banker verifying the photograph and the official stamp of the bank, should be affixed on to the application form.
4. Bank's Certificate regarding satisfactory account maintenance. It should include the Signatures, Name, and Designation of the Banker issuing the certificate, together with the official stamp of the bank.
5. Fee of INR 1000.
6. Attested copies of the Memorandum of Association & Articles of Association of the Company in Duplicate.
7. Authority Letter with photograph and the signatures of the person authorized to submit the application, which is to be attested by the director authorized by the company to file the application for IEC Code No.
8. Certified true copy of a board resolution authorizing the referred person to sign the application on behalf of the company, and the signatures of the person authorized should also be there on the Board resolution, along with the signatures of the person certifying the board resolution.
9. List of Directors along with a copy of passport.
10. One Self Addressed Envelope.
11. Address Proof of the registered office of the company, and in case the company has a number of units then address proof of all the units.

VAT Registration

Value added tax (VAT), is a sales tax levied on the sale of services and goods. VAT is an indirect tax, which is collected from someone other than the person who actually bears the cost of the tax. Personal end-consumers of s services and products cannot recover VAT on purchases, but businesses are able to recover VAT where they use the supplies that they receive that bear VAT to make further supplies that also bear VAT. VAT registration is essential depending on your sales turn over and other business parameters. Along with VAT registration, we look after registration with excise and customs also. VAT registration and VAT returns submissions are also carried out through our panel of experienced tax experts.

MANDATORY REGISTRATION


Who must apply for registration?

Every dealer is required to apply for registration, if: -

The dealer's turnover in the year preceding the commencement of this Act exceeded the taxable quantum; or
the dealer's turnover in the current year exceeds the taxable quantum; or
Regardless of the taxable quantum, the following dealers must apply for registration, if :-
You make any interstate sale; or
You make interstate purchases for resale in Delhi.

HOW TO CALCULATE MY TAXABLE TURNOVER?
Taxable turnover is the aggregate total of sale prices of all taxable goods including goods taxable at zero rate. Sale price of goods and transactions exempted and VAT charged on taxable sales do not form part of Taxable Turnover. "Taxable quantum" of a dealer is five lakh rupees, or such other amount as may be specified by the Government by notification in the official Gazette.

a dealer who imports for sale any goods into Delhi, the taxable quantum shall be "Nil" or such other amount as may be specified by the Government by notification in the official Gazette.
The taxable quantum of a dealer shall not include turnover from:-
Sales of capital assets;
sales made in the course of winding up the dealer's activities; and
sales made as part of the permanent diminution of the dealer's activities.
In case of dealers involved in execution of works contracts, the taxable quantum shall be calculated with reference to the total contract amount received.  you deal entirely in exempt goods, you are not required to apply for registration under DVAT.  In which capacity you register yourself.

It is the person, NOT the enterprise, who is registered for VAT. The person is only registered once for all enterprises/branches/divisions carried on unless permission is granted to register them separately.

The term dealer includes :-

Sole proprietor (individual)
Partnership
Hindu undivided family
Club, Society or Association
Incorporated/unincorporated body of persons
Corporation / company
Association not for gain
Welfare organization / trust
Local authority and certain public authorities

WHEN CAN I REGISTER FOR VAT ON A VOLUNTARY BASIS?

In addition to the regular registration, the Act allows a person to take voluntary registration for VAT. You can register yourself under VAT voluntarily i.e. even if you are not liable to register under VAT Laws. You will have to charge VAT on all your taxable sales and keep all the records, which all taxpayers must keep. You will be allowed to reclaim input VAT on your purchases and expenses. You will need to think carefully about the advantages and disadvantages of being registered.

You may apply for voluntary registration even though the value of taxable supplies in the course or furtherance of your enterprise is below the limit of threshold per annum. It may be in your interest to register if you make supplies of goods or services mainly to other vendors. Before applying for voluntary registration you should, however, consider the obligations/implications of registration. You may, however,
a) Claim a credit for input tax
b) Issue tax invoices to customers who are vendors.
Registration is not available to persons who make only exempt supplies.

WHAT FACTORS DO I HAVE TO CONSIDER IN DECIDING WHETHER TO APPLY FOR VOLUNTARY VAT REGISTRATION?

In considering whether you should register voluntarily for VAT, you should ask yourself these questions:
Do I make taxable sales to other VAT dealers?If you are not registered for VAT you cannot issue tax invoices on which your customer (VAT dealer) can claim credit for the tax. Your customer will therefore have to charge a higher price for his sales if he cannot claim a credit for the VAT. In this case he might choose to trade with another VAT dealer and you would lose business.

Do I trade, primarily with non-VAT dealers/consumers?In this case, it is likely to be in your interest not to register for VAT.

What are the obligations of VAT registration?
Once registered, you will have to account for output tax that is attributable to your taxable sales. You will also have to submit VAT returns monthly to the Commercial Taxes Department and keep proper books of accounts.

If you decide to register voluntarily, the Law requires that you must remain registered for VAT for a period of 24 months regardless of your taxable turnover.

Is my input tax credit likely to exceed the tax on the sales I make?
In this case you will benefit from VAT registration.

When do I start to charge VAT?

You should start keeping VAT records and charging VAT to your customers from the date notified to you by the Commercial Taxes Department. This will be the date shown as the effective date of your registration on your Certificate of Registration. You will have to account for VAT from that date.

What are my obligations as a VAT registered taxpayer?Display your certificate of registration.
Charge VAT on all taxable transactions from the date of registration.

Issue tax invoices.
Keep accurate and up to date books and records and make it available for inspection by VAT auditors.
Submit a declaration to the local VAT office each month.Pay the tax due each month.

VAT REGISTRATION PROCEDURE

A dealer who is required to apply for registration shall make an application for registration to the Commissioner in Form DVAT-04 within a period of thirty days from the date of his becoming liable to pay tax under the Act and shall pay the filing fee as prescribed in Annexure 1 to the VAT rules.

DOCUMENTS REQUIRED FOR VAT REGISTRATION

The application for registration is to be accompanied by the following:

1) Deposit receipt of prescribed amount towards fees for registration. Such deposit receipt is to be obtained from the appropriate treasury after payment of the fee amount.
2) Copy of the constitution document e.g. Partnership deed for a partnership firm, Memorandum and Articles of Association for a company.
3) Board Resolution authorizing the signatory to sign the application in case of company.
4) Proof of identification of the authorized signatory e.g. voter identity card, passport, driving license.
5) Proof of principal place of business e.g. rent receipt, lease agreement, electricity bill.

Who is required to sign the application for registration?

The Application for registration is required to be verified and signed by an authorized signatory. An authorized signatory for different categories of persons is:

Proprietor, in case of proprietorship concern
Managing partner, in case of partnership firm and where there is no managing partner, by any of the partners.
Managing Director or authorized signatory, in case of a company.
Karta, in case of Hindu Undivided Family and authorized signatory.
For detail information on VAT registration in various States and required form please visit:             WWW.ALLINDIANTAXES.COM/VAT.PHP

ANNUAL FILING IN ROC

As a part of Annual Filing, companies incorporated in India - including subsidiaries of foreign companies, joint venture companies and others, under the Companies Act, 1956 are required to file the following documents for annual filing along with the e-Forms with the Registrar of Companies (RoC) with proper jurisdiction over the company:


Balance-Sheet in Form 23AC to be filed by all companies
Profit & Loss Account in Form 23ACA to be filed by all companies
Annual Return in Form 20B to be filed by companies having share capital
Annual Return in Form 21A to be filed by companies without share capital
Compliance Certificate Form 66 to be filed by companies with paid up capital between Rs. 10 lakh to Rs. 2 crore


Important Points to Remember


The Balance Sheet and the Profit & Loss Accounts are to be filed as two separate documents with different e-forms.
Each e-Form along with the relevant attachment should be less than 2.5 MB.
The Annual Return, the Balance Sheet and the Profit & Loss Account are filed as attachments to the respective e-Forms. So far, the users have been filing the attachments as scanned images of those documents. Please note that a scanned copy considerably increases the size of the document. As such, you are advised to use the Text file/ Excel sheets as such, convert the same into PDF by using the PDF converter and upload these attachments as PDF documents.
The MCA21 database in respect of Authorized Capital and Paid-up Capital may not be correct. The companies have been requested to apply for correction of Master Data in this respect. Since this process is taking time, the Ministry will be accepting the Authorised Capital and Paid-up Capital figures as declared by the companies in the respective forms pertaining to Annual Filings. Accordingly, the companies are requested to declare the correct amount on these points without waiting for formal correction in the database.

How to do the Annual Returns Filing
The companies can do Annual e-Filing in three different ways:

Efiling Through MCA Portal

The company representative can upload the e-Forms from the MCA21 portal through the ‘Annual Filing Process’ link (after registering oneself as a user of the portal) at his convenience from his office/ home. This is the most convenient way for e-Filing.

Efiling Through Facilitation Centres

The company representative can prepare the e-Form following the guidelines, copy them in a CD and go to the nearest Temporary Facilitation Offices (to be opened at Delhi, Mumbai, Kolkata, Chennai, Hyderabad, Bangalore, Ahmadabad, Pune, Kanpur and Jallandhar ) opened for the purpose of accepting Annual Filings e-Forms. During the normal days, the TFO staff will help the company representative to upload the form and generate a Challan. During last 10 days of Oct and Nov. CDs will be collected and an acknowledgment given. The files will be uploaded into the system subsequently and the company will have to download the challan from the link provided at the Annual Filing Corner of the portal after two working days of the submission. At Other locations where TFO’s/Collection Centre are not being opened, the eForms will be accepted at the existing Registrar’s Front Offices (RFO).

E-Filing through Certified Filing Centers (CFC's)

The company representative can also contact any of the Certified Filing Centers (CFCs) for the Annual Filing of e-Forms by paying the service charges to the CFCs. The details about the CFCs are available under the ‘CFC Corner’ on the MCA21 Portal.