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How to Calculate Income Tax on Salary

How to Calculate Income Tax on Salary with Example

Leave a Comment / Income Tax / By / February 17, 2024

How to Calculate Income Tax on Salary: Income Tax calculation in India is a complex process,    and even the mention of it intimidates people, especially those who have no taxation background. But the calculation of income tax does not have to be complex. Without the required information, it is apparent that one will end up either paying less tax or paying more tax. For this reason, one should have the required knowledge regarding income tax and the calculation of income tax.

The absence of knowledge is the primary reason why most people avoid doing taxes. The process of calculating and managing income tax on salary is mentioned below.

What is Income Tax?

According to the Income Tax Act, each individual receiving a salary must pay an amount known as income tax on their respective salary to the country. The government has made several amendments and exceptions with subsections mentioning tax payment, computation, and deduction to the law. After withdrawing the available tax-saving provisions and speculations, the final amount is given to the government as the income tax on salary.

Essential Terms for Calculating Income Tax

One should consider some basic terms should while calculating the income tax. They are listed below:

The tax year

The prior fiscal year for which the income tax is calculated is known as the tax year. From 1st April, the fiscal year begins and ends on the 31st March of the following year. For example, if one calculates their income tax for the year 2020, they need to include their salary income from 1st April 2019 to 31st March 2020.

Assessment year

The assessment year is a broad term, but most people confuse it with the fiscal year, which is very improper since both of them are entirely different. An assessment year begins after the prior fiscal year is over. The year’s calculation when an individual’s income tax for the last fiscal year is known as the assessment year. For example, if one calculates their salary income tax for the fiscal year 2019-20, their assessment year will be 2020-21, and the last date for Income Tax efiling their I.T.R. will be July 2020.

Salary breakup

The initial step is to get hold of the individual’s salary breakup before calculating income tax on salary. From the salary slip or salary statement, one can get hold of their salary breakup. If one fails to provide the salary slips or opinions, then one should go to their H.R. and ask for them. One will have good knowledge of the basic salary structure and will understand the significant components just by taking a good and close look at the slip or the statement. Tax deductions on paycheck like House Rent Allowance or H.R.A., Dearness Allowance or DA, etc., which are available to an individual, will help them calculate income tax.

Taxable income

After getting the salary breakup, one will have to calculate their taxable income. The income on which tax needs to be paid, including all other income apart from salary, is known as taxable income.

Taxable Income = Gross Income – Deductions

Source of Income with description

  1. Income from Salary: The income that one receives from their job, like salary, allowance, leave encashment, etc.
  2. Income from Property: The income one receives from a house or land (rented or self-occupied).
  3. Income from Business or Profession: The income that one earns from a part-time job or profession.
  4. Income from Gains: The income that one earns from the sale of a capital asset
  5. Income from other sources: Income received from any other source, like earnings from a fixed deposit, gifts, pensions, etc.

Deductions

The income tax comprises paying money to the government and includes the savings one makes due to the deduction in the income tax. Under section 80 of the Income Tax, the deductions are available. These deductions are deducted from net income to get the reduced taxable income.

Taxable Income = Gross Income – Deductions

(The summation of all income from every source is known as gross income.)

One needs to have a thorough knowledge of Section 80C to calculate the taxable income. All types of deductions, like mutual fund returns, investments made on mutual funds, life insurance policies, interest on savings, N.S.C., P.P.F., S.I.P.s, etc.

Home loans, etc. According to the latest tax regime, per year, one’s deductions can go up to 2.5 lakhs. So, therefore, one can save a lot on their annual income if they plan their investments smartly.

T.D.S.

Tax Deducted at Source or T.D.S. states that the tax one has to pay is directly reduced from their salary. A refund is available on T.D.S., so if excess T.D.S. has been deducted by mistake, then it’ll be refunded. Employees use T.D.S. to maintain a hassle-free tax design. Banks also use T.D.S. If one finds any inconsistency in the amount deducted, they can get a refund by showing the proper documents.

The payable tax calculation

After the reduction of all the applicable deductions and T.D.S., the amount calculated is the final tax amount that has to be paid to the Indian government. Payment of income tax is not required if anyone’s total income is less than 2.5 lakhs. Beyond this amount, everyone is liable to pay income tax according to their income slab.

For a salaried individual who is under the age of 60 years, the tax rate is:

  1. If the net income is lower than 2.5 lakhs, then payment of tax is not needed.
  2. If the income slab is between 2.5 and 5 lakhs, then 10% is paid as a tax rate.
  3. If the income slab is between 5 and 10 lakhs, then 20% is paid as a tax rate.
  4. If the income slab is above 10 lakhs, 30% of the amount is to be paid as a tax rate.

Tax Saving Tools

Every citizen desires to increase their income and decrease the amount of tax they pay, and specific methods help you get what you want. These methods are known as tax saving methods, and they help an individual save money for their future and save a significant amount on income tax. Some of the most popular tax savings tools are mentioned below:

ELSS

Equity Linked Savings Schemes or ELSS is a specific equity mutual fund with a lock-in period of 3 years and is offered by every mutual fund company. It falls under section 80C of the Income Tax Act of 1961 and is exempted for up to 1.5 lakhs. ELSS does not have a fixed return rate since it is based on market changes and it keeps changing frequently, but the returns are tax-free, which is why a vast number of people prefer investment in ELSS.

PPF

PPF stands for the Public Provident Fund. It is a government scheme with a lock-in period of 15 years, which can also be extended by a block of 5 years. It has been the most preferred investment method and tax savings for millions of people. The minimum limit for investing in P.P.F. is INR 500 annually, while the maximum limit is 1.5 lakhs annually. It also provides interest at a fixed rate of 7.9%. For people who dislike volatility in investments and want to invest in safe options, P.P.F. is the best choice.

ULIP

ULIP stands for The Unit Linked Insurance Plan. It is a combination of insurance and market-linked investments providing protection and savings with a lock-in period of 5 years. The authority can extend the lock-in period by up to 15 to 20 years. ULIP provides nine fund options between which an investor can switch any time they want, and the returns are also completely tax-free.

Deductions Made Under Section 80

Under section 80 of the Act, many deductions are available, which help an individual to bring their taxable income down by reducing the payable tax.

These deductions are as under:

Deduction under Section The maximum limit Deductions availed under
Section 80C 1,50,000  ELSS, ULIP, N.S.C., the Employee share of Provident Fund, L.I.C. Premium, Tuition fees for children, Home loan principal repayment, 5-year deposit scheme, purchase of a deferred annuity, Saving system for senior citizens, Setting up a pension fund by U.T.I. or mutual fund, annuity plan of L.I.C., Subscription to the scheme of Home Loan Account by the National Housing Bank and subscription to notified bonds of NABARD, Deposit scheme subscription of a company engaged in providing housing finance or public sector.
80CCC N/A On the amount deposited for a pension fund in the annual plan of L.I.C. or any other insurance plan.
80CCD (1) 1,50,000 Contribution of an employee to NPS account.
80CCD (2) 10% salary Contribution of an employer to NPS account.
80CCDD (1B) 50,000 Any other contribution by an employee to the NPS account.
80TTA (1) 10,000 Income from interest earned on the savings account.
80TTB 50,000 From the post office, bank, etc., interest is received but applies only to senior citizens.
80GG Monthly 5,000 or 25% of total income or rent paid – 10% of income (W.E.L) For rent paid when an employer does not send H.R.A.
80E Interest paid for eight years is equal to the amount For education loans, interest is paid.
80EE 50,000 Homeowners paid the interest on home loans.
80CCG 25,000 or 50% of the amount invested in equity shares (W.E.L) For investments in equities, Rajiv Gandhi Equity Scheme.
80D

 

 25,000 Self, spouse, and children’s medical insurance
80D 50,000 Medical insurance for parents above 60 years or parents above 80 years.
80DD 75,000 Medical treatment for the handicapped dependent.
80DD 75,000 for 40% to 80% disability and 1,25,000for more than 80% disability For the maintenance of handicapped dependents, a specific scheme was taken whose payment is made.
80DDB 40,000 or the amount paid (W.E.L) The medical expense for self or dependent who are less than 60 years.
80DDB 1,05,000 or the amount paid (W.E.L) The medical expense on self or dependent who are more than 60 years.
80U 1,25,000 (severe disability) and 75,000 (less severe disability)

 

 From physical disability, the occurrence of self-suffering including blindness and mental instability.
80GGB The contributed amount which is not in cash Companies contribute to political parties.
80GGC The contributed amount which is not in cash Individuals’ contribution to political parties.
80RRB Income received or 3,00,000 (W.E.L) From royalty or patent, income is received.

Calculation of Income Tax

For a more straightforward calculation of the income tax, a formula is used. The formula is:

Basic salary + Special Allowance + Transport allowance + Any other allowance

= Gross income from salary

(Along with basic salary, if we add up H.R.A., special allowance, transport allowance, and any other allowance, we get the gross income from salary.)

Gross income from salary – Deductions = Net income (For calculation of tax, the income tax slab is used)

(After getting the gross income from salary, subtract deductions from it to get the net income)

For example,

Let us assume that Ms. Bose receives a monthly salary of Rs. 40,000 along with a monthly dearness allowance of Rs. 4,300, a monthly entertainment allowance of Rs. 3,250, and also pays Rs. 4,500 as professional tax. Now let us calculate her taxable income:

Her salary is Rs. 40,000 per month.

Therefore, the basic salary is 40,000 * 12 = 4,80,000

Dearness allowance is 4,300 * 12 = 51,600

Entertainment allowance is 3,250 * 12 = 39,000

Therefore, the gross salary is (4,80,000 + 51,600 + 39,000) = 5,70,600

Her professional tax is 4,500.

Therefore, net income is (5,70,600 – 4,500) = 5,66,100

Now, her taxable income is Rs. 5,66,100, so consequently, she falls into the income tax slab of 5 lakhs to 10 lakhs. Hence, as income tax, she needs to pay 20% of her net income.

The income tax on the above-mentioned net income is 20% of 5,66,100 = 1,13,220

Conclusion

At the beginning of the assessment year, an individual should affirm all the investments correctly to calculate the tax properly. To build a strong foundation, information regarding taxes, deductions, and returns is very important since tax evasion is considered illegal and legally offensive. Income tax fraud comprises some of the scenarios which are mentioned below:

  1. Submission of false or fake tax returns
  2. Erroneous financial statements
  3. Persistently, avoiding the submission of the I.T. return
  4. Failing to pay due to taxes intentionally
  5. Not reporting total income
  6. Fake claims

If someone is found guilty of evading taxes, then legal actions are taken against them where they need to pay a heavy penalty, and sometimes it may also result in imprisonment.

Transport Allowance Exemption

Transport Allowance Exemption | Meaning, Is Transport Allowance Taxable?

Leave a Comment / Income Tax / By / February 17, 2024

Transport Allowance Exemption: Employer offers transport allowance to its workers for commuting from home to workplace & vice-versa. If the amount crosses the exemption limit, then it is taxable.

Many allowances are offered to their representatives by the Employers. One such allowance is provided for transportation. The allowance provided to the employees for commuting from residence to their workplace and vice versa is termed as transport allowance. From the basic Income salary structure that the employee receives and this allowance is provided in addition. The employer usually offers a transport allowance in circumstances where it does not offer any conveyor facility to its employees.

The Exemption Made Under Transport Allowance

As specified under Section 10 sub-Section 14(ii) of the Income Tax Act and Rule 2BB of Income Tax rule, the exemption provided for a transportation allowance. The transport allowance exemption limit is Rs. 1600 per month (Rs. 19200 per year). Any expense paid above the transport allowance limit is imposed to tax under the head Income from Salaries. The exemption can be professed by a person salaried employee.

Special Exemption Cases:

  • The exemption limit for blind and orthopedically handicapped people is Rs. 3200 per month.
  • The conveyance allowance as per section 10(45), offered to the chairman or members of UPSC, is not charged to tax.

What does Transport Allowance Mean?

Transport allowance is the money that one receives from their employer for travelling from their home to the workplace and vice-versa.

Suppose one is an employee in the System of Transport who operates a transport from one place to another as a part of their official duty. In that case, conveyor allowance means the money one receives to meet their personal expenses acquired during the development of their official duty, granted the employee is not in receipt of the everyday allowance.

Who Receives Transport Allowance?

Not everyone gets the allowance for transportation. Only those workers whose employer specifically grants their CTC structure receive it. Thus, the relationship between employee and employer must endure as a precondition for obtaining the transport allowance. This implies all salaried individuals are eligible for getting an allowance for transport, and self-employed individuals cannot declare it.

Is Transport Allowance Taxable?

The aggregate amount of transport allowance earned is not taxable. The government recognizes the expenses as a genuine expense and thus wants to save one from the burden of paying heavy taxes. For this purpose, the amount collected as transport allowance is executed partially taxable, i.e., and under section 10(14)(ii) of the Income Tax Act is partially exempt.

How Much Tax Is Exemption On Transport Allowance?

The Transport Allowance means that the entire amount of transport allowance permitted is not tax-free. There are limits on tax exemption depending on their tax status.

These are :

On Transport Allowance, Limits of Tax Exemption

Transport Allowance provided:

  • For Salaried Individual (who is Non-Handicapped)- For a salaried employee, the Transport Allowance of Rs.1,600 per month is tax-free. Any amount earned in a surplus of Rs.1600 is taxable.
  • For a Handicapped Person- For employees who are handicapped, the Transport Allowance of Rs.3,200 per month is tax-free. The employees who are handicapped mean all the employees who are deaf or dumb or orthopedically handicapped or blind with the inability of lower extremities.
  • For employees of Transport System- Taxability for specified employees of the transport system, lower than 70 % of transport allowance or Rs.10,000 per month is tax-free. This exemption is provided to those employees who operate transport from one place to another as a part of their official duty and do not obtain a daily allowance.

For A.Y. 2018-19(F.Y. 2017-18), Transport Allowance Exemption

Persons: Yearly Tax Exemption(Rs./year.) & Monthly Tax Exemption(Rs./month)

Salaried Persons (Non-Transport Industry, Non-Handicapped)- 

  • (Rs./year.)- 9,200 Yearly Tax Exemption, and
  • (Rs./month)- 1,600 Monthly Tax Exemption

Handicapped Persons(Salaried)-

  • (Rs./year.)- 38,400 Yearly Tax Exemption
  • (Rs./month)- 3,200 Monthly Tax Exemption

Employees of Transport System-

  • (Rs./year.)- 70% of the amount received or 1,20,000 as Yearly Tax Exemption, whichever is less
  • (Rs./month)- 70% of the amount received or 10,000 as Monthly Tax Exemption, whichever is less

How Is The Calculation for Tax Exemption on Transport Allowance?

The calculation is straightforward for the tax exemption. All one has to prepare is just subtract the expense of tax exemption (depending on the limit applicable) from the cost received.

For instance

If one receives Rs. 2000 per month from their company as transport Allowance then their tax situation would be –

Amount of Allowance Received For Transport– Rs.2000/month

Less: As per law- Rs.1600/month Amount of Tax Exemption

Rs.400/month – Amount That is Taxable of Tax Exemption

Practice our free tax exemption utility under Transport Allowance specifically composed to calculate the amount that is tax-free on Transport Allowance.

Is There Any Difference Between Conveyance Allowance And Transport Allowance?

Many people are confused between the terms conveyance allowance and transport allowance and, while claiming tax exemption in their Income Tax Returns, execute significant mistakes.

Under Section 10(14)(ii) of the Income Tax Act, the Transport Allowance is covered. It is tax-exempt to the range of the amount declared by the Income Tax Department. Actual expenditure is not needed in order to declare the tax exemption.

Under Section 10 (14)(i) of the Income Tax Act, the Conveyance Allowance is covered. It is tax-exempt to the range of the amount actually spent for the official purpose for which it is furnished in order to declare the tax exemption. Tax benefit can be practised only when no free conveyance is granted for the same goal.

One should perceive that it is not compulsory to spend the entire amount of Transport Allowance collected in order to receive the benefit of tax exemption.

While Filing Income Tax Return, How can a Person Claim Transport Allowance?

Ordinarily, the employer of the company takes care that one is receiving the benefit of tax exemption on transport allowance at the time of deducting their TDS from their paycheck properly. Then, all one has to do is just register the amount mentioned in point 6 of their Form 16 part B in the Income from Salary column of their ITR Form.

But in case an individual wants to check whether their employer has furnished the firm a full tax benefit on transport allowance or the individual completely forgot to provide the tax benefit in their Form 16, then here is what one should do-

  • Firstly the individual must check their CTC structure from their salary slip.
  • Examine how much sum of the Transport Allowance is part of their CTC.
  • The whole amount must be tax-free if the CTC structure’s amount is less than Rs. 1600 per month.
  • If the sum in the CTC structure is higher than Rs.1600 per month, then the amount that will be tax-free would be to the limit of Rs. 1600 per month only.
  • Check Form 16 that the precise amount has been decreased from the Taxability of Salary Income.
  • If not lessened the correct amount in Form 16 from salary, then one can decrease it and can claim it in their ITR accordingly.

Expert Tip: “Check the CTC structure today, and if the Transport Allowance is not mentioned as the part of the CTC, request HR to restructure the CTC and save the Tax.”

Track PAN Card Application Status

Track PAN Card Application Status | How To Track Your PAN Card Application Status Online?

Leave a Comment / Finance / By / February 21, 2024

Track PAN Card Application Status: Tracking of PAN Card application status has become way easier. Various modes are provided to help one track their PAN Card application status online. But before gaining more information on how to track the status of a PAN Card, one should be aware of how to apply for a PAN Card. The process is given below.

What is the Method for Applying for a New or Duplicate PAN Card?

Both online and offline submission of applications for a new PAN Card or duplicate PAN Card is available. One can apply through various websites, any time they want, from the comfort of their home, in the case of the online mode, whereas in the offline mode, one can go to their nearest TIN-FC Centre and submit their forms.

The process of applying online for a new PAN Card through the NSDL website is given below:

  1. Click on the link to open the online portal https://www.onlineservices.nsdl.com/paam/endUserRegisterContact.html
  2. Next, click on the ‘Apply Online’ tab and choose the type and category of application.
  3. Fill in the various spaces of the form with the required information and the captcha code.
  4. As a consequence, a token number will be produced. (Using this number, one can either fill out the form later or continue filling it at that time. If one fills out the form later and opens the link after a certain point of time, then they can directly click on the ‘Registered User’ tab and fill in their e-mail id and date of birth details along with the token number.)
  5. Now, on the screen, the form will appear asking for more personal details. Input all the required information.
  6. Click on submit after attaching the required documents.
  7. Before clicking on the Proceed to the Payment button, check and verify the provided details in the preview and then click.
  8. Lastly, download the pre-filled application form, which is generated after the payment, and print it.

Why is it Important to Check the PAN Card Application Status?

After applying for the PAN card, it typically reaches the individual within a span of 15 to 20 days. Within that span, one can check the status of their PAN application for discrepancies, and if found, then resolve them accordingly within time. Hence, it is important to check the status of the PAN card until it arrives.

What is the Process for Tracking the Status of the PAN Card Application?

One can easily track the status of an individual’s PAN Card application using any of the three modes. A detailed description of the modes is provided below:

  1. Through Call Service: An individual can call the number 020-27218080 at the TIN call center to track their PAN application status. One only needs to provide their15-digit acknowledgment number of the PAN application.
  2. Through SMS Service: An individual can track the status of their PAN application via SMS too. One only needs to send their 15-digit acknowledgment number of PAN application to ‘57575’, and they will receive a status SMS.
  3. Through Online Service Providers: With the help of various service providers, one can easily track the status of an individual’s PAN application online. Some of the service providers are mentioned below:
    1. By TIN NSDL
    2. By UTIITSL
    3. By E-Mudhra

While checking the status of the PAN, one must remember to check it only through the website provided by the service provider from which the individual has applied for their PAN. Those who have applied physically at the TIN-FC Centre can check the status through the website of NSDL.

Get To Know How to Cancel PAN If You Have More Than One PAN from here

The process of checking PAN status using the modes mentioned above is explained in brief below:

 Using NSDL, Check the Status of the PAN Card

On the NSDL website, using the acknowledgment number, one can find the option to check the status of their PAN card. The process is mentioned below:

  1. Firstly, visit the NSDL portal.
  2. Select ‘PAN – New or Change Request’ for the field of ‘Application Type.’
  3. In the provided box, enter the ‘Acknowledgement Number.’
  4. In the box, enter the displayed captcha code.
  5. Lastly, click on the option of ‘Submit,’ and the screen will display the status.

Using UTIITSL, Check the Status of the PAN Card

While checking the PAN card status through UTIITSL, one must keep their application coupon number readily available. The process for checking is mentioned below:

  1. Firstly, visit the UTIITSL portal.
  2. If an individual has applied for a change or correction to their PAN Card, they can enter their ‘Application Coupon Number’ or ‘PAN Number.’
  3. In the box, enter the displayed captcha code.
  4. Lastly, click on the option of ‘Submit,’ and the screen will display the status.

 Using e-Mudhra, Check the Status of your PAN Card

If an individual has applied for their PAN card through E-Mudhra, then they should follow the process mentioned below:

  1. Firstly, visit the E-Mudhra portal.
  2. Enter the ‘Application number’ of the individual, which was generated while applying for their PAN, and enter their ‘Date of Birth.’
  3. In the box, enter the displayed captcha code.
  4. Lastly, click on the option of ‘Submit,’ and the screen will display the status.

FAQ’s on Track PAN Card Application Status

Question 1.
What is a PAN Card?

Answer:
The Permanent Account Number or PAN is a ten-digit alphanumeric code issued by the income tax department, allocated to every individual for performing various financial transactions. The PAN Card remains valid for the entire lifespan of the cardholder.

Question 2.
What are the required documents to check one’s PAN Card status?

Answer:
The portal through which an individual has applied for their PAN Card will determine the required documents. For each portal, different documents are needed.

  1. For NSDL, the required document is the acknowledgment number.
  2. For UTITSL, the required document is the Application Coupon number.
  3. For the E-Mudhra Portal, the required document is the application number.

Question 3.
Using a PAN status printout, can one open a savings bank account?

Answer:
Yes, one can. For opening a savings bank account, banks do accept the printout of PAN status.

Question 4.
Using Acknowledgment or Application Number, how can one track their PAN Card Application Status?

Answer:
Using the acknowledgment or application number, one can track their PAN Card status by using calls, SMS, TIN, NSDL, e-Mudhra, or UTI.

Question 5.
When an individual’s PAN status shows that their pan card is under printing, how many days will it take for their PAN card to reach them?

Answer:
Usually, after applying for a PAN Card, individuals will receive their PAN Card within 21 days, but there are certain cases where the number of days varies.

Question 6.
When an individual’s PAN Card status shows that no matching record has been found, what does it signify?

Answer:
If the PAN status displays this message, then it means that the PAN issuing authority has not received their application, and they should urgently send an e-mail or call the respective authority for further details.

Question 7.
How can one check the application status of UTI PAN?

Answer:
It is very simple. Go to the UTI PAN Card website and enter the application coupon number along with the captcha code. Click on the Submit button, and the screen will display the status.

 

Total Income (TI)

Total Income (TI) | What is Total Income and How to Calculate Total Income?

Leave a Comment / Income Tax / By / February 17, 2024

Total Income (TI): Gross Total Income (GTI) or Total Income (TI) are the terms practised correspondently but vary in substance. Whereby summing up incomes earned as per all five sources of income, the Gross Total Income is calculated. As per under Section 80C to 80U (namely, Chapter VI A deductions) under the Income Tax Act 1961, after subtracting the deductions from Gross Total Income, the Total income is entered. This signifies GTI is a significant element out of which, on subtracting a certain specified amount, we can come at the TI.

What is Total Income?

Net Income or Total Income is the amount left from an individual’s gross income after procuring out all deductions permitted under the ITA.

It is the taxable part of your income; your tax liability depends on this amount.

The Total Income is defined by Section 2(45) of the ITA, and the scope is established by Section 5.

  1. For Indian residents: Any interest accrued, income received, and also required to obtain (deemed payment)
  2. For Indians who are not ordinarily resident: Incomes generated through businesses controlled in foreign countries or operated from India.
  3. For Indians who are non-resident (NRI): Only those earnings accruing or arising in India.

Benefits in Income Tax for Senior Citizens can be found here.

Under Section 2(45), the Total Income is defined with the scope which has been defined by Section 5 of the Income Tax Act, 1961

  • If one is an Indian resident in the previous year, any income received, deemed, or accrued to be received by that individual will be accounted for
  • If one is are not ordinarily resident in the previous year, incomes originating out of India will be added only if they are from a business performed or controlled in India.
  • In the matter of non-residents (NRI), only incomes accruing or arising in India will be included.
  • Total Income is reached by subtracting all qualified deductions from “Total Income.”

The tax liability of any individual will be estimated on the Total Income. In simple terms, one pays tax on their Total Income.

How to Calculate Total Income?

Total Income can be determined by-

  • Summing up incomes from all five sources of income
  • Under Section 80C to Section 80U of the Income Tax, reducing from it permissible deductions

The resultant sum is Total Income.

For better understanding, the tabular presentation explains how to compute total income.

Particulars

Income from Salaries

  • Income from salary
  • Income by way of allowances
  • The taxable value of perquisites
  • Gross salary
  • Less: under Section 16, all the Deduction
  • Allowance for Entertainment
  • Professional Tax
  • UNDER THE HEAD SALARIES: The Taxable Income

Income from House Property

  • The adjusted net annual value
  • Less: Deduction under section 24
  • UNDER THE HEAD HOUSE PROPERTY: The Taxable Income

Income from Profession or Business

  • As per profit and loss account: Net profit
  • Add: Amounts that are debited to P&l a/c but are not allowed as a deduction under the act
  • Less: Expenditure which is not debited to P&L a/c but is allowed as a deduction under the act
  • Less: Income which is credited to P&L a/c but is exempt under section 10
  • Add: Income which is not credited to P&L a/c but is taxable under this head
  • PROFIT & GAINS TAXABLE UNDER THE HEAD BUSINESS & PROFESSION

Income from Capital Gains

  • Amount of capital gains
  • Less: Amount exempt under sections 54, 54B,54D,54EC,54F, 54G, 54GA, 54GB, and 54H
  • INCOME TAXABLE UNDER THE HEAD CAPITAL GAINS

Income from other sources

  • Gross income
  • Less: Deduction under section 57
  • INCOME TAXABLE UNDER THE HEAD OTHER SOURCES
  • Total [i.e., (1) +(2) +(3) +(4) +(5)]
  • Less: Adjustment on account of set-off and carry forward of losses
  • Gross total income
  • Less: Deductions
  • Total Income or Net income

What is the Importance of Total Income (TI) Calculation under the Income Tax Act?

An inquiry might come up in a person’s mind why it is necessary to comprehend total income?? The necessity to understand the concept of total income becomes important because it directly impacts the tax payments of any person. Tax is calculated on an individual’s net income or total income and not on Gross Total Income. If the estimate of Total Income is made incorrect, i.e. either it is calculated lower than actual income or higher, the resulting consequences shall follow.

  • In circumstance, Total Income has been determined more than the actual amount. Then the tax would be assessed on such an increased amount, and one might end up spending higher taxes unnecessarily.
  • The other faction is even further distressing. Computing Total Income that is lower and resultantly spending lower income tax will be an open invite for tax notices, prosecution and penalties.

FAQ’s on Gross Total Income

Question 1.
What is the difference between total income and gross income?

Answer: 
As defined under sections 80C to 80U of the income tax act, Gross income is a broader term from which total income can be arrived at after subtracting the deductions and the aggregate income.

Question 2.
Is taxable income and total income different?

Answer:
No, net income/total income and taxable incomes are one and the same thing.

Question 3.
What is the definition of annual income?

Answer:
Annual income means the income from all sources of an individual, and it is the corresponding as for Gross Total Income.

Question 4.
What is the difference between taxable income and total income?

Answer:
Taxable income and Total income are terms that are interchangeable. Basically, there is no difference.

Question 5.
What does total income mean?

Answer: 
Individuals need to sum up their annual income under all the five heads of income and account for the reductions under chapter VIA to know their total income. The net outcome would be their net or total income.

Question 6.
What does the total gross income mean?

Answer: 
Under chapter VIA, Aggregate income before deductions is known as Gross Total Income.

Question 7.
Is total income after-tax or before?

Answer: 
When the deduction tax is made from gross income, the resultant amount is total income. Hence, total income is eternally after tax.

GST Full Form Meaning

GST Full Form and GST Meaning In Various Languages

Leave a Comment / GST / By / February 16, 2024

GST Full Form Meaning: Any nation’s government needs funds to function, and taxation is a primary revenue stream for governments. As a consequence, the taxes collected are spent on welfare for the benefit of the general population.

Taxes are typically divided into two types:

  1. direct taxes
  2. indirect taxes

GST is an abbreviation for Goods and Services Tax. It was structured to substitute a range of indirect taxes collected by the Indian state and central governments. The indirect taxes structure has been modified as a consequence of this.

What Exactly is Represented by “Direct Tax”?

An assessee’s income is liable to direct taxation (individual or company or firm or HUF or any other person).

The percentage of tax payable depends greatly on the individual’s income from multiple sources such as salary, housing rent income, bank FD interest, etc. So, the greater your income is, the higher tax you owe to the government, emphasizing that the affluent pay more tax than the underprivileged.

The following is an overview of direct taxes that are relevant in India:

What Exactly is Represented by “Indirect Tax”?

Indirect taxes are not levied directly on people’s earnings. Alternatively, it is levied on products and services purchased, influences the price or MRP of such products and services.

In sharp contrast to direct taxes, indirect taxes should be incurred by the end consumer, with rich and poor treated as equals.

There are a few indirect taxes.

The list consists of existing indirect taxes in India:

  • Goods and Services Tax (GST)
  • Customs duties
  • Excise tax (on Petrol, diesel, natural gas, alcohol)
  • Sales Tax at the State Level (relevant for certain goods only

Why was GST Implemented in India?

Originally a Value Added Tax (VAT) structure existed in place of GST, which was a bit flawed with the double taxation regime and non-integration with the service tax.

GST, which combines many Central and State levies into a single tax, has emerged as the most substantial taxation policy in the national economy since independence.

As an indirect tax, GST is also included in the purchase price of products or the service charge paid by a person.

The Products and Services Tax (GST) is a comprehensive tax scheme that extends to both goods and services.

The parallel adoption of GST at the Centre and State levels has consolidated taxes on goods and services for the specific purpose of a set-off, committed to ensuring that the compounding impact of taxes is minimized.

Pocket Guide to GST with Illustration can be found from here.

What are the Different Indirect Taxes Incorporated under GST?

The following taxes are covered in the GST slab:

  • VAT
  • Sales Tax
  • Service Tax
  • Entertainment tax
  • Octroi
  • CVD etc

What Does GST Mean in Various Languages?

S No Language GST full form in Various Languages
1 GST full form in Hindi वस्तु एवं सेवा कर
2 GST full form in Marathi वस्तू आणि सेवा कर
3 GST full form in Gujrati માલ અને સેવાઓ કર
4 GST full form in Punjabi ਗੁਡਸ ਅਤੇ ਸਰਵਿਸਿਜ਼ ਟੈਕਸ
5 GST full form in Malayalam വസ്തുക്കളും സേവന നികുതിയും
6 GST full form in Bengali পণ্য ও সেবা কর
7 GST full form in Kannad ಸರಕು ಮತ್ತು ಸೇವೆಗಳ ತೆರಿಗೆ
8 GST full form in Telegu వస్తువులు మరియు సేవ పన్ను
9 GST full form in Tamil பொருட்கள் மற்றும் சேவைகள் வரி
10 GST full form in Sindhi سامان ۽ خدمت ٽيڪس
11 GST full form in Urdu سامان اور سروس ٹیکس
12 GST full form in Nepali सामान र सेवा कर
13 GST full form in Arabic ضريبة السلع والخدمات

 

Standard Deduction from Salary & Pension Income

Standard Deduction from Salary & Pension Income

Leave a Comment / Income Tax / By / February 16, 2024

Standard Deduction from Salary & Pension Income: The Income Tax Act includes procedures for levying taxes on citizens’ incomes and consists of a combination of techniques for claiming deductions and tax refunds. Deductions are authorized dependent on how taxpayers utilize their own money.

What is the Standard Deduction Under the Income Tax Act?

The term “standard deduction,” as stated in Section 16(i)(ia), corresponds to a direct reduction of the wage earned income up to Rs.50,000/-.

Salaried employees and pensioners are entirely entitled to a fixed limit under the standard deduction by default, without any investment or expense on the part of the individual taxpayers. Typically, the standard deduction is withdrawn from the gross salary and filed as a tax exemption.

In Budget 2018, Minister Of finance Jaitley officially announced the Standard Deduction of Rs. 40,000, allowing the salaried class to have something to celebrate about. It substituted the Rs. 19200 transport allowance and the Rs. 15,000 medical reimbursement annually.

Remarkably, the Standard Deduction provision was formerly accessible to the public.

It was, eventually, eliminated in the Finance Act of 2005.

The Interim Budget, which was published on February 1, 2019, featured a whole slew of tax breaks for salaried and middle-class taxpayers prominently. Among these, a significant increase in the Standard Deduction of Rs. 10,000 (from Rs.40,000) was particularly notable.

Note: From Financial years 2020-21 (AY 2021-22), an entity can only obtain the deduction if they prefer the previous taxation system.

Let us analyze the actual tax benefit offered by the standard deduction.

Suppose the Transport Allowance is Rs. 19,200.

The Medical Allowance is Rs. 15,000.

  • Now, for the financial year 2018-19, the standard deduction was Rs. 40,000. Hence, the net tax benefit amounted to Rs. 5,800.
  • Similarly, for the financial year F.Y. 2019-20 & F.Y. 2020-21, the standard deduction was Rs. 50,000. Hence, the net tax benefit amounted to Rs. 15,800.

What is the Significance of this Deduction?

One of the objectives was to deliver tax relief to middle-class taxpayers while still extending benefits to retirees.

While the benefit of this provision on the salaried employees might very well seem to be very little, employers stand to profit from this move in light of avoiding a sizable proportion of administrative effort in filing medical costs for their workers.

What is its Immediate Impact?

  • The implementation of the standard deduction greatly aided middle-class employees in regards to lessening their tax obligation. The total additional deduction amount was Rs. 5,800 (Rs. 15,800/- for the fiscal year 2019-20).
  • This policy to permit standard deduction considerably assists pensioners, who don’t ordinarily get any tax allowance for transportation or medical bills. Likewise, retirees will only be liable for the standard deduction if their taxes are paid as gross salary. If it is filed to the IRS as other sources of income, the standard deduction will not be accessible.

Note: According to a recent statement published by the income tax department, if a taxpayer receives a pension from a previous employer, it is taxed under the heading ‘Salaries.’

As a consequence, the taxpayer is liable to a standard deduction of Rs. 50,000 or the amount of his or her pension, whatever is less.

What is the Maximum Allowable Standard Deduction?

The total amount of the standard deduction cannot surpass the value of the paycheck. The ceiling deduction shall be Rs. 50,000/- or the salary amount, whichever would be less.

An Application of a Standard Salary Deduction

Consider the following details to better comprehend the scenario.

  • Gross Salary = Rs. 3,50,000
  • HRA exemption = Rs. 80,000
  • LTA exemption = Rs. 1,10,000
  • Other exemption = Rs. 1,30,000
  • Therefore,
  • Net Salary = Rs. ( 3,50,000- 80,000- 1,10,000 – 1,30,000) = Rs. 30,000
  • Standard Deduction = Rs. 30,000 ( Since Rs. 30,000 is less than the maximum allowable sum of Rs. 50,000 )

The net benefit is not constant. If we modify the numbers, it will alter.

In the Context of Multiple Employers, How is the Standard Deduction Assessed?

The standard deduction is not obtainable depending on the number of employers. The standard deduction is the maximum limit for the whole year, rather than just the number of employers.

For clarity, consider the following example.

Assume Mr. A operated for two companies in the fiscal year 2019-20. In such a situation, you might be questioning how much of Mr. A’s standard deduction he can receive.

Two possibilities appear to be credible.

  • Option 1: 50,000 rupees
  • Option 2: 50,000 rupees for each employer, ie, Rs. ( 50,000 + 50,000) = Rs. 1,00,000

As previously stated, the standard deduction is the total amount; hence, the first option is approved, i.e., Mr. A can reap the benefits of the standard deduction up to Rs. 50,000/-.

As a result, a single fixed deduction is permitted for the total pay obtained from all employers.

Standard Deduction in the case of a New Taxation System

Budget 2020 brought in a new taxation system. Under this new system, taxpayers choose to pay decreased tax rates; however, substantial deductions and exemptions are not legally permitted.

Individuals who choose a new tax system are not eligible to receive the Rs 50,000 salary standard deduction. They are ineligible to receive section 80C deductions of Rs 150,000 and interest deductions of up to Rs 200,000 on a self-occupied property.

Assume a person’s salary is Rs. 3,50,000.

Now, under the old taxation structure, an Rs. 50,000 deduction was permitted, reducing the taxable income to Rs. ( 3,50,000- 50,000) = Rs. 3,00,000.

However, there is no applicable deduction under the existing taxes structure. As a consequence, the taxable income stays at Rs. 3,50,000.

How Is The Standard Deduction Displayed On An Income Tax Return?

The online taxation registration form for salaried people is ITR -1. This Form already has the individual taxpayer’s credentials, such as his name, PAN, Aadhaar number, etc. As a key component of this, the salaried employee must specify the required additional data:

Once you upload all of the details on Form ITR -1, the Form automatically generates the ultimate taxable income.

Miscellaneous Deductions Available to Salaried Employees

In addition to the above-mentioned basic standard deduction, the Income Tax Act of 1961 provides significant deductions and allowances to salaried income. Deductions under Sections 80C, 80D, and 80E decrease an employed taxpayer’s tax liability.

How Does the Standard Deduction vary from Income Tax Deductions?

  • The standard deduction is a pre-determined deduction that is not affected by actual expenses.

For the deductions under Section VI-A, actual expenditure/investment is the ground for deductions.

  • Individuals with salary income are not eligible for the standard deduction.

The other deductions can be applied from every other source of revenue.

  • Prior to actually computing the Gross Total Income, the standard deduction is authorized from pay income.

These deductions are permissible after computing Gross Total Income under Section VI-A.

  • The standard deduction upper limit is Rs. 50,000/-. ( Rs. 40,000 for FY 2018-19).

For the other deductions, the deduction ceiling changes per section.

For example, the cap under Section 80C is Rs. 1,50,000.

FAQ’s on Standard Deduction from Salary & Pension Income

Question 1.
Can I deduct Rs 50,000 for prior returns as well?

Answer:
Unfortunately, you may only claim a tax deduction of Rs. 50,000 for the financial year 2019-2020. Formerly, the maximum amount was Rs. 40,000.

Question 2.
Can I receive transportation and medical allowances in addition to the standard deduction?

Answer:
Absolutely not. You could only take the standard deduction of Rs. 50,000, not quite the transportation and medical expenditures.

Question 3.
Is the standard deduction easily accessible to senior citizens as well?

Answer:
Certainly, the standard deduction applies to all waged taxpayers and pensioners, regardless of age or gender of age.

Question 4.
Can I consider taking the standard deduction if my revenue increases Rs 5,00,000?

Answer:
The standard deduction is obtainable notwithstanding your income tax bracket. If you have a salary and benefits, you will be liable for the benefit. In this instance, the quantity of income is relatively insignificant.

Question 5.
Is it possible for an employee to accept both the standard deduction and the income tax deduction?

Answer:
Absolutely, an employee can deduct respectively standard deductions and income taxes.

Question 6.
Is the standard deduction implemented on a monthly basis?

Answer:
The standard deduction is not assessed every month. For the whole year, a fixed deduction is granted.

Question 7.
Is the standard deduction of Rs 50,000 valid to someone whose primary source of income is F.D. interest?

Answer:
No, the standard deduction is exclusively offered on salary and pension income and not in other forms of income.

Question 8.
How can I recover deductions that my employer did not account for on Form-16?

Answer:
You may claim deductions at the time of filing returns if they are not reported for by your company if you are perfectly entitled to do otherwise.

Removal Auditor Term Companies Act 2013

Removal of Auditor Before Term Under Companies Act, 2013

Leave a Comment / Companies Act / By / February 16, 2024

Removal Auditor Term Companies Act 2013: In accordance with the Companies Act, 2013 and associated provisions and rules, it is compulsory for every company to designate an auditor from incorporation to their running out of business. An auditor is a qualified individual who audits the financial part and works for the company. Hence, every company necessitates appointing an auditor. Notably, there are several times when management is not contented with the assistance of the auditor, and this is when the replacement/elimination of the auditor from the company comes into the picture.

There are appointed for a maximum of five (5) years for one term and hold a fixed term in a company. However, sometimes due to some reason, the management council of the Board can decide to remove the auditor before the end of their term.

What Does the Word ‘Term’ for Auditor in a Company?

The word ‘term’ here signifies the number of years the auditor is designated by affiliates of the company in the Annual General Meeting.

A company can designate for a maximum of five years in one term. This can further be classified as follows:

  • All unlisted public companies as well as a listed company holding paid-up share capital of ten crores rupees or more and all private limited companies holding paid-up share capital of fifty crores or more rupees and all companies holding paid-up share capital of below threshold limit mentioned in (a) and (b) above but having public borrowings from banks, public deposits, or financial institutions of fifty crores rupees or more, will not appoint: –
  • a person as an auditor for more than one term of five consecutive years
  • a firm for audit as an auditor for more than two terms of five consecutive years:
  • Again, note that once terms are completed, the same firm and individual shall not be selected for three (3) years in the same company.
  • Companies other than the above particularised are free to select the same auditor for the “N” number of terms once their maximum number of terms is expired, which is five (5) years.

What is the Maximum Number of Terms an Auditor can be Appointed in a Company?

As explained above, an auditor can be equipped as follows:-

  1. All unlisted public companies as well as a listed company holding paid-up share capital of ten crores rupees or more and all private limited companies holding paid-up share capital of fifty crores or more rupees and all companies holding paid-up share capital of beneath the above-mentioned threshold limit but having public borrowings from banks, public deposits, or financial institutions of fifty crores rupees or more, will not appoint: –
  2. a person as an auditor for more than one term of five consecutive years
  3. a firm for audit as an auditor for more than two terms of five consecutive years:
  4. Again note that once terms are completed same firm and individual shall not be selected for a period of three (3) years in the very same company.
  5. Companies other than the above particularised are free to select the same auditor for the “N” number of terms once their maximum number of terms is expired, which is five (5) years.

What are the Rules or Provisions Directing the Removal of an Auditor Before their Term?

According to Section 140(1) of the Companies Act, 2013, the auditor designated under section 139 may be withdrawn from their office before the expiry of their term only by a special resolution of the company, after receiving the previous approval of the Central Government in that behalf in the prescribed manner.

According to Rule 7(1) of Companies (Auditors and Audit) Rules, 2014, the application for removal of the auditor shall be made in Form ADT-2 to the Central Government and shall be accompanied by fees as implemented for this purpose under the Companies (Registration Offices and Fees) Rules, 2014. Also, in accordance with Rule 7(2), the application shall be addressed to the Central Government (powers authorized to Regional Director) within 30 days of the resolution relinquished by the Board.

What is the Procedure to Remove the Auditor?

If a company is not contented with the services of the sanctioned auditor, the company can commence the method for removal of the auditor. The following method is needed: –

  • Determining the Board Meeting besides the agenda to be addressed in the meeting.
  • Auditor has to be provided with a reasonable possibility of being heard.
  • To the Regional Director, the drafting of a petition should be made (through the MCA notification dated 21st May 2014, deleted by the Central government)
  • Operating of the Board meeting and judging the petition
  • ADT-2 as an attachment for filing of a petition to the Regional Director should be done to e-form RD-1 within thirty (30) days from the passing of the resolution of the Board.
  • After receiving approval from the Regional Director, getting the Board meeting for exercising note of the same and passing as well as fixing the Annual General Meeting or Extraordinary General Meeting of members for removal of auditor before their term within sixty days.
  • Holding of Extra-ordinary Annual General Meeting/ General Meeting of members and passing of a special resolution for equivalent.
  • Once the Special resolution is filled, fill MGt-14 within thirty days from the Special resolution.

What are the Forms Concerned in the Elimination of an Auditor?

Not multiple forms are needed in the removal of auditors before their term; particularly the following forms are asked:-

  1. ADT-2
  2. RD-1
  3. MGT-14

What Documents are Needed for Filing RD-1?

Since already explained that ADT-2 should be attached with e-form RD-1. Following documents are needed to be associated with e-form RD-1:-

  1. The ground of attempting removal of auditor
  2. Have a check in the during the last three years, whether the accounts have been qualified
  3. Date of SRN of notice and appointment of auditor of such appointment
  4. Check whether the audit fee has been paid or not.
  5. Any other information/attachment is deemed access by the Board of company.

Disclaimer: – The above article is adapted to keep in mind all the basic and important questions while excluding an auditor before their term under the Companies Act, 2013. The author has tried to cover all the basic and essential questions. Under no circumstance, the article shall not be liable for any special, or incidental damage, direct, indirect, resulting from, arising out of, or connected with the application of the information.

Independent Auditors Report | Components and Annexures of an Auditor’s Report

Leave a Comment / Finance / By / February 16, 2024

Independent Auditors Report: An auditor’s report is a penned letter from the Auditor carrying their judgment on whether the financial statements of a firm are free from material misstatement and the statements do comply with GAAP- Generally Accepted Accounting Principles.

The external and independent audit report is typically published with the annual report of the Company. The Auditor’s report is critical because creditors and banks require an audit of the financial statements of the provided Company before lending to them.

How Does Auditor’s Report Work?

An auditor’s report is a penned letter attached to the financial statements of a company that states the opinion on the compliance with standard accounting practices of a company. The Auditor’s report is needed to be filed with a public financial statement of the Company when reporting earnings to the SEC-Securities and Exchange Commission.

However, an auditor’s report is not considered as an evaluation of whether a company is a reliable investment. Also, the audit report is not a study of the earnings performance of a company for the period. Instead, the report is simply a standard of the reliability of the financial statements.

Components of an Auditor’s Report

The Auditor’s letter serves a standard format, as established by GAAS- Generally Accepted Accounting Standards. A report ordinarily consists of three paragraphs.

  1. The first paragraph declares the responsibilities of the directors and Auditor.
  2. The second paragraph holds the scope, stating that a set of practices of standard accounting was the guide.
  3. The third paragraph holds the Auditor’s opinion.

On another function of the entity, an additional paragraph may inform the investor of the results of a separate audit. The investor will pay emphasis on the third paragraph, where the opinion is affirmed.

On the findings by the Auditor, the type of report issued will be dependent.

Below mentioned are the most prevalent types of reports issued for companies.

Unqualified or Clean Report

A clean or unqualified report indicates that the Company’s financial records conform to the guidelines set by GAAP and are free from material misstatement. A majority of audits end in clean or unqualified opinions.

Qualified Opinion

A qualified opinion may be issued in two situations:

  • first, if material misstatements that are not pervasive are present in the financial statements; or
  • second, if sufficient appropriate audit evidence on which to base an opinion is not obtained by the Auditor, but the potential effects of any misstatements material are not pervasive.

For example, a mistake that might have been made in calculating profit or operating expenses. Auditors typically affirm the specific areas and reasons where the issues are present so that the Company can fix them.

Adverse Opinion

An adverse opinion implies that the Auditor has concluded that misstatements in the financial statements are both material and pervasive after obtaining sufficient audit evidence. For a company, an adverse opinion is the worst possible outcome and can have legal ramifications and a lasting impact if not corrected.

Investors and Regulators will reject the financial statements of a company following an adverse opinion from an auditor. Also, corporate officers might face criminal charges if illegal activity exists.

Disclaimer of Opinion

A disclaimer of opinion implies that, for some cause, the Auditor is incapable of obtaining sufficient audit evidence on which the opinion will be base, and the possible effects on the financial statements of undetected misstatements, if present, could be both pervasive and material. Examples can include when an auditor wasn’t allowed access or can’t be impartial to certain financial information.

Opinion Made On The Report On The Audit Of The Financial Statements

The audited and accompanying financial statements, which comprise the balance sheet as of March 31, 2019, and statement of cash flows for the financial year then ended, and the Statement of Profit and Loss and notes to the financial statements, including a summary of additional explanatory information and significant accounting policies.

In such circumstances, the best opinion is to provide the information according to the explanations provided in the aforesaid financial statements give the information needed by the Companies Act, 2013 (‘Act’) in the manner so needed and provide a true and fair prospect in conformity with the accounting principles commonly accepted in India, of the state of affairs of the Company as at March 31, 2019, its cash flows and profit (or Loss) for the year ended on that date.

Foundation for Opinion

As mentioned under Section 143 (10) of the Companies Act, 2013, one should conduct ou audit in line with the auditing criteria indicated. The responsibilities specified of individual companies under those standards are further described in the responsibilities of the Auditor for the audit of the financial statements section of the Company’s report.

In accordance with the code of ethics declared by the Institute of Chartered Accountants of India, people are independent of the Company together with the ethical requirements that are relevant to people’s audit of the financial statements under the rules and the provisions of the Act thereunder, and people must fulfill their other ethical responsibilities in accordance with the code of ethics and these requirements.

People must believe that the audit evidence they have obtained is appropriate and sufficient to provide a basis for their opinion.

Going Concerned And Material Uncertainty Related To It (Include only is Applicable)

If the Company’s net worth is below zero, and the borrowings from financial institutions and banks have been nominated by the lenders as non-performing assets during the year. The succeeding hearing of the consortium banks is supposed to be in June 2019.

To initiate an OTS-One Time Settlement with the banks and improve the performance of the Company, it is also informed in the process of identifying alternative business plans of a Company. Pending submission of the other alternative resolution plans/OTS, a decision is yet to be taken by the lenders regarding the restructuring of the Company’s borrowings.

A significant uncertainty on the Company is cast through those above factors ability to continue as under a going concern. Dealing the resolution of the preceding uncertainties, the Company has developed the aforesaid statement on a going concern basis.

Matters Related To Key Audit

Matters related to Key audits are those matters that, in the professional judgment, were of most significance in the specific audit of the financial statements of the current time. Such matters are addressed in the context of the audit of the financial statements as a whole and in forming the opinion of the Auditor thereon, and auditors do not provide a separate conviction on these matters.

As per SA 701, Key Audit Matters, reporting of key audit matters are not applicable to the Company, which is unlisted.

Information Other Than The Auditors’ Report And The Financial Statements thereon

For the preparation of other relevant data, the Company’s board of directors is responsible. The other information includes the information including Annexures to Board’s Report, included in the Board’s Report, Business Responsibility Report but does not feature the financial statements and the Auditor’s report thereon.

The Auditor’s opinion on the financial statements does not cover the other information, and they do not represent any form of assurance conclusion thereon.

In connection and association with their audit of the financial statements, peoples responsibility is to understand the other relevant information and, in doing so, consider whether the other information is materially inconsistent with their knowledge obtained during the course of the audit or the standalone financial statements or contrarily resembles to be materially misstated.

There is a misstatement of material of this other information if, based on the work they have performed, and are required to report that fact. They have nothing to report in this regard.

Responsibility Of The Management Regarding The Financial Statements

As declared in Section 134 (5) of the Act, the Company’s board of directors are responsible for the materials declared with respect to the establishment of these financial statements that provide a practically possible and fair view of the cash flows, financial position, and financial performance of the Company in accordance with the standards specified under section 133 of the Act, regarding accounting principles generally accepted in India, including the accounting.

According to the provisions of the Act, this responsibility also incorporates maintenance of adequate accounting records for detecting and preventing frauds and other irregularities and for the safeguarding of the assets of the Company; application and selection of appropriate accounting policies; making judgments and estimates that are prudent and reasonable; and design, maintenance and implementation of adequate internal financial controls, that for ensuring the accuracy and completeness of the accounting records were operating effectively, relevant to the presentation and preparation of the financial statement that gives a practical and fair prospect and is free from material misstatement, whether due to error or fraud.

Management is completely responsible for assessing the ability of the Company to continue as a going concern, as appropriate, matters related to going concerned, disclosing, in the preparation of the financial statements and by employing the going concern basis of accounting unless management either intends to cease operations or to liquidate the Company or has no realistic alternative but to do so.

The board of directors for overseeing the Company’s financial reporting process also holds responsible.

Responsibility Of The Auditor Regarding The Audit Of The Financial Statements

The Auditor’s objectives are to obtain reasonable confidence about whether the financial statements as a combination are free from material misstatement, irrespective of due to fraud or error, and to issue an auditor’s report that includes their opinion. Reasonable assurance is a crucial level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always disclose a material misstatement when it happens to exist. Misstatements can result from error or fraud and are regarded significant if, and only if, the following conditions are met: in the aggregate or individually, they could plausibly be expected to affect the economic decisions of users registered on the basis of these financial statements.

In accordance with an audit with SAs, the Auditor maintains professional skepticism and exercise professional judgment throughout the audit. Auditors also:

Auditors also:

  • Assess and indicate the risks and hazards of material misstatement of the financial statements, whether due to fraud or error, perform and design audit procedures responsive to those risks, and procure audit documentation that is comprehensive and substantial to create a foundation for the auditor opinion. The risk of not finding a material misstatement emerging from fraud is higher than for one rising from error, as fraud may involve forgery, intentional omissions, misrepresentations, collusion, or the override of internal control.
  • They gain an understanding of internal control related to the audit that is reasonable under the situations in order to create audit processes. They are also obliged, under section 143(3)(i) of the Companies Act, 2013, for conveying their view on whether the business has the operating competence of such controls and an appropriate internal financial controls system in place.
  • Assess the appropriateness of the Companie’s used accounting policies and management’s made the reasonableness of accounting estimates and related disclosures.
  • Settle on the appropriateness of management based on the audit evidence obtained, and their use of the going concern based on accounting and, whether a material uncertainty endures relevant to conditions or events that may form significant doubt on the ability of the Company to continue as a profitable concern. If the Auditor concludes that material exists uncertainty and is required to draw the attention of the Auditor in the Auditor’s report to the related disclosures in the financial statements or, if such financial disclosures are unsatisfactory, to modify the Auditor’s opinion. The Auditor’s final verdicts are based on the audit evidence obtained up to the date of the Auditor’s report. However, future conditions or events may cause the Company to cease to maintain as a going concern.
  • Evaluate the overall structure, content, and presentation of the financial statements, including the disclosures, and whether the underlying transactions and events are in a manner represented in the financial statements that achieve fair presentation

Auditors communicate with those charged regarding governance, among other matters, the planned timing, and scope of the audit and significant audit findings, also covering any significant deficiencies in internal control that auditors identify during their audit.

Auditors also give a statement that we have complied with relevant ethical requirements regarding independence to those who are charged with governance and to interact with them about any relationships and other issues that may be deemed to be particularly relevant to their independence and related safeguards where applicable.

From communicating relevant matters with those charged with governance, auditors also determine those matters that were of most utmost importance in the audit of the financial statements of the current period and, therefore, the matters related to the key audit.

Auditor describes these matters in their Auditor’s report unless regulation or law precludes public disclosure about the matter or when, under exceptionally uncommon particular instances, auditors also determine that a matter should not be communicated in their report because the unfavorable outcomes of doing so would rationally be expected to surpass the public interest benefits of such communication.

Report On Other Regulatory And Legal Requirements

The terms of the Companies (Auditor’s Report) Order, 2016 (“the Order”), as per sub-section (11) included under section 143 of the Act, issued by the Central Government of India is not applicable to the Company since

  • It is not a holding or subsidiary company of a public company;
  • Its paid-up reserves and capital and as of the balance sheet date, the surplus is not more than Rs.1 Crores;
  • Its total borrowings from financial institutions and banks at any time during the year are not more than Rs.1 Crores; and
  • Its gross turnover for the year is not higher than Rs.10 Crores during the year.

OR

As ordered by the Companies (Auditor’s Report) Order, 2016 (“the Order”), as per sub-section (11) of section 143 of the Act, issued by the Central Government of India, the government provide in the Annexure “A,” a specific statement on the events particularised in paragraphs 3 and 4 of the Order, to the extent relevant.

As ordered by Section 143(3) of the Act, which reports that:

  • Auditors have obtained and sought all the explanations and information which, to the best of the Auditor’s belief and knowledge, were essential for the purposes of their audit;
  • In any auditors opinion, proper books of account as needed by law have been kept by the Company so far as it seems from the Auditor’s examination of those books;
  • The balance sheet, the cash flow statement, and the statement of profit and loss must be dealt with the help of this report which is in agreement with the books of account;
  • In any auditors opinion, the aforesaid statements of finance must comply with the accounting standards defined under Section 133 of the Act, and one must read with rule 7 of the Companies (Accounts) Rules, 2014;
  • Based on the written descriptions taken on record by the board of directors and have been received from the directors as of March 31, 2019, then in terms of Section 164 (2) of the Act, none of the directors is disqualified from being appointed as a director as of March 31, 2019;
  • Since the Company’s gross turnover as per last audited financial statements at any time during the year, is less than Rs.50 Crores and its borrowings from financial institutions and banks are less than Rs.25 Crores, the Company in terms of the effectiveness of the Company’s internal financial controls over financial reporting is exempted from getting an audit opinion, and the running effectiveness of such vide controls notification dated June 13, 2017; and

OR

With respect to the sufficiency of the controls on internal finance over financial reporting of the Company and the operational sustainability of such controls, refer to in a separate Report in “Annexure B.” The report expresses an unmodified conclusion on the operating effectiveness and adequacy of the internal financial controls over financial reporting of a Company;

(g) In accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, Concerning the other elements to be specifically mentioned in the Auditor’s Report, which states that it is the best information according to the explanations provided;

The Company would impact its financial position if it does not have any pending litigations;

OR

The Company on its financial position in its financial statements has disclosed the impact of pending litigations to the financial statements;

The Company did not hold any contracts which were long-term, including derivative contracts for which they had face any foreseeable material losses; and

OR

The Company has made terms and requirements, as required under the accounting standards or applicable law, for losses of foreseeable material, if any, including derivative contracts on long-term contracts; and

There should be no delay in transferring amounts needed to be transferred to the Protection Fund and Investor Education by the Company

OR

While there has been zero delay in transferring expenses needed to be transferred to the Protection Fund and Investor Education by the Company, due to technical issues, the related shares could not be transferred. People must be informed that the Company is exercising the required steps in this regard.

The Independent Auditor’s Report: Annexure “A”

In regard to the fixed assets of a Company:

(a) The Company has sustained proper records registering full particulars, including situations and quantitative details of fixed assets.

(b) The Company’s fixed assets were physically checked in full during the year by the management. According to the explanations and information are given to the people, and as examined by auditors, no material discrepancies must be regarded on such verification.

OR

(b) The Company, in a phased manner over a period of three years, holds a verification program to cover all the items of fixed assets, which, as of the Auditor’s opinion, is completely fair in light of the size and nature of the Company’s assets.

Following the program, certain fixed assets must be physically verified by the management team during the year. According to the explanations and information provided to auditors, no material discrepancies must be marked on such verification.

OR

(b) The Company holds a verification program in a phased manner over a period of three years to cover all the items of fixed assets, which, in the Auditor’s opinion, is reasonable having regard to the size and the nature of the assets of the Company. However, the management should not carry any physical verification during the year. Accordingly, the Auditor must not be prevented from commenting on whether any material discrepancies were marked on such verification and whether those discrepancies are properly dealt with in the financial statements.

(c) According to the explanations and information provided to the Auditor, the records examined by the Auditor, and they will report that the Company does not contain any freehold, are contained in favor of the Company as of the date mentioned in the balance sheet. In regard to immovable properties of building and land that have been disclosed as fixed assets or taken on lease mentioned in the financial statements, the lease agreements must be in the name of the Company.

OR

(c) According to the explanations and information provided to the Auditor, the records examined by the Auditor, and based on the examination of the conveyance deeds provided to the Auditor, they will declare that the title documents, which include all of the immovable possessions of buildings and land which are freehold, are accommodated in the name of the Company as at the date mentioned in the balance sheet.

In respect of immovable properties of building and land that have been taken as fixed assets or taken on lease disclosed in the financial statements, the lease agreements remain in the name of the Company.

  1. The inventory must be physically verified by the management team during the year. According to the Auditor’s opinion, the frequency of such verification must be reasonable. According to the explanations and information provided to the Auditor, and as examined by the Auditor, no material discrepancies must be noticed on such affirmation.
  2. According to the explanations and information provided to the Auditor, the Company, must not grant any loan unsecured or secured to firms, limited liability partnerships, companies, or other parties covered in the register needed under Section 189 of the Companies Act, 2013. Subsequently, paragraph 3 (iii) of the Order will not be applicable.

OR

According to the explanations and information provided to the Auditor, the Company has already granted unsecured to firms, limited liability partnerships, companies, or other parties covered in the register needed under Section 189 of the Companies Act, 2013.

According to the Auditor’s opinion, the rate of interest and other conditions and terms of such loans are not primarily prejudicial to the interest of the Company.

In regard to the aforesaid loans, the principal amounts must be presented as stipulated by the parties that are repaying the amount and, where applicable, are also regular in payment of interest.

In regard to the aforesaid loans, in the circumstances where the overdue amount is higher than 90 days, then according to the Auditor’s opinion, reasonable measures have been implemented by the Company for the successful recovery of the principal amounts, and interest must be applied.

According to the Auditor’s opinion, and according to the explanation and information provided to the Auditor, the Company must not grant any loans or give any security or made any investments or provide any guarantees to which the provision mentioned under section 185 and 186 of the Companies Act, 2013. Subsequently, paragraph 3 (iv) of the Order shall be not applicable.

OR

According to the Auditor’s opinion, and according to the explanation and information provided to the Auditor, in respect of investments, guarantees, security, and loans, the Company must comply with the provisions mentioned under sections 185 and section 186 of the Companies Act, 2013.

  1. According to the Auditor’s opinion, and according to the explanation and information provided to the Auditor, if the Company has not received any deposits and subsequently, paragraph 3 (v) of the Order will not be applicable.

OR

According to the Auditor’s opinion, and according to the explanation and information provided to the Auditor, the Company must comply with the provisions of Sections 73 to 76 or any other relevant guidelines of the Act and the rules framed, as mentioned under the directives of the Reserve Bank of India.

According to the Auditor’s opinion, and according to the explanation and information provided to the Auditor, no Order must be passed by the National Company Law Tribunal or Reserve Bank of India or Company Law Board or any other Tribunal or any Court on the Company in honor of the aforesaid deposits.

Under sub-section (1) of section 148 of the Act, the Central Government of India shall not prescribe the maintenance of charge records for any of the activities of the Company, and subsequently, paragraph 3 (vi) of the Order will not be applicable.

OR

Under section 148 of the Act, it broadly states that the reviewed books of account maintained by the Company agreeable to the rules made by the Central Government for the maintenance of expense records and are of the opinion that primarily faced, the prescribed records and accounts must be made and maintained.

In respect of statutory dues:

According to the explanations and information provided to the Auditor on the basis of their examination of the records of the Company, amounts accrued/deducted in the books of account in regard of dues that are considered including income tax, sales- tax, service tax, provident fund, employees’ state insurance, goods, and service tax, the duty of customs, value-added tax, cess, other material statutory dues and the duty of excise have generally been regularly deposited by the Company with the appropriate authorities during that specific year.

According to the explanations and information provided to the Auditor, regarding no undisputed amounts payable in regard to income tax, sales- tax, service tax, provident fund, employees’ state insurance, goods and service tax, the duty of customs, value-added tax, cess, other material statutory dues and the duty of excise dues were in arrears as at March 31, 2019, for a period longer than six months from the date they matured payable.

OR

According to the explanations and information provided to the Auditor, regarding no undisputed amounts payable in regard to income tax, sales- tax, service tax, provident fund, employees’ state insurance, goods and service tax, the duty of customs, value-added tax, cess, other material statutory dues and the duty of excise dues were in arrears as at March 31, 2019, for a period longer than six months from the time they became accountable for paying, except few details like:

  • Name of the statute
  • Nature of dues
  • Period to which the amount relates
  • Amount due
  • Due date
  • Date of payment

According to the explanations and information provided to the Auditor, and the records of the Company provided by them when examined by the Auditor, and if there are no dues of sales- tax, service tax, GST, the duty of customs, duty of excise and value-added tax, income tax, which not been deposited on account of any dispute.

According to the Auditor’s opinion, and according to the explanation and information provided to the Auditor, and the Company has no outstanding dues to any banks or any government or any debenture holders or financial institutions during the specific fiscal year. Subsequently, paragraph 3 (viii) of the Order will not be applicable.

OR

According to the explanations and information provided to the Auditor, and the records of the Company provided by them when examined by the Auditor, which states the Company has failed in repayment of all the dues to financial institutions, banks, and government as detailed in Appendix – I. During that specific year, the Company does not have any dues to debenture holders.

  1. If the Company has not raised any money by means of an initial public offer or by a further public offer (including debt instruments) and during that year, has not taken any term loans. Subsequently, paragraph 3 (ix) of the Order will not be applicable.

OR

The term loans secured during the year have been implemented for the purposes for which those are raised, then the Company shall not raise any money by way of an offer of initial public or offer of the further public (including debt instruments).

  1. To the best of an auditors’ knowledge and according to the explanations and information provided to the Auditor, no fraud by the Company or no material fraud on the Company by its employees or officers has been reported or noticed during the year.
  2. If the Company is a private limited company, and hence the provision mentioned under Section 197 read with Schedule V of the companies Act will not be applicable. Subsequently, paragraph 3(xi) of the Order will not be applicable.
  3. If the Company is not a Nidhi Company, and then subsequently, paragraph 3 (xii) of the Order will not be applicable to the Company.
  4. According to the explanations and information provided to the Auditor and the records of the Company provided by them when examined by the Auditor, transactions made with the related parties are in agreement with Sections 177 and 188 of the Act, where the details of such transactions have been published in the financial statements as claimed by the applicable accounting standards.
  5. According to the explanations and information provided to the Auditor and the records of the Company provided by them when examined by the Auditor; the Company should not make any private placement or preferential allotment of shares or partly or fully convertible debentures during the year. Consequently, paragraph 3(xiv) of the Order will not be applicable.

OR

According to the explanations and information provided to the Auditor and the records of the Company provided by them when examined by the Auditor, must state that the Company has carried out any private placement or preferential allotment of shares or partly or fully convertible debentures during the year and in regard of which the Company must comply with Section 42 of the Act and raised amount has been applied for the objectives for which the funds are raised.

  1. According to the explanations and information provided to the Auditor and the records provided by the Company when examined by the Auditor, must state that the Company has not entered into non-cash transactions with persons or directors connected with them. Subsequently, paragraph 3(xv) of the Order will not be applicable.
  2. According to the explanations and information provided to the Auditor and the records provided by the Company when examined by the Auditor, must state that the Company is not obliged to be legally registered under Section 45-IA of the Reserve Bank of India Act 1934.

The Independent Auditor’s Report Annexure “B”

Under section ‘Report on other legal and regulatory requirements, the Auditor’s Report to the Members of a Private Limited Company.

As per clause (i) of subsection 3 of section 143 of the Companies Act, 2013 (“the Act”), reports were made on the internal financial controls over financial reporting.

The audited report regarding the internal financial controls over financial reporting of a Private Limited (“the Company”) as relevant on March 31, 2019, in conjunction with the audit of the financial statements of the Company made by the Auditor for the year ended on that date.

The Responsibility Of Management Regarding Internal Financial Controls:

The Company’s board of directors is entirely responsible for building and maintaining internal financial controls on the basis of the criteria mentioned for internal control over financial reporting, which is established by the Company acknowledging the essential components of internal control declared in the ‘Guidance Note on Audit of Internal Financial Controls Over Financial Reporting’ published by the Institute of Chartered Accountants of India.

These responsibilities incorporate the implementation, maintenance, and design of adequate internal financial controls that were functioning effectively for ensuring the efficient and orderly conduct of its business, the prevention and detection of frauds and errors, the safeguarding of its assets, the completeness and accuracy of the accounting records, and the timely establishment of reliable financial information, as claimed under the Companies Act, 2013.

Responsibility Of The Auditors:

The Auditor’s responsibility is to represent an opinion on the internal financial controls across financial reporting of the Company on the basis of their audit. The Auditor’s conducted their audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) published by the Institute of Chartered Accountants of India and the auditing standards prescribed under Section 143 (10) of the Companies Act, 2013, to the extent applicable to an audit of internal controls of finance. Those standards and the guidance note demand that the Auditor must comply with the plan and perform with ethical requirements and obtain reasonable assurance of the audit whether adequate internal financial controls over financial reporting were built and maintained and if before-mentioned controls are effectively operated in all material respects.

Their audit involves performing procedures to obtain audit evidence about the adequacy of their operating effectiveness and the internal financial controls system over financial reporting. Their audit of internal financial controls over financial reporting involved obtaining a conclusion of internal financial controls protecting financial reporting, evaluating the risk that a material weakness may exist, and testing and assessing the design and based on the assessed risk, obtaining the operating effectiveness of internal control. The procedures picked depend on the judgment of the Auditor, including the estimation of the risks and hazards associated with material misstatement in the financial statements, whether due to error or fraud.

The Auditor only believes the audit evidence that they have obtained, which is appropriate and sufficient to provide a base for their audit opinion on the internal financial control system over financial reporting of the Company.

Definition Of Internal Financial Controls Over Financial Reporting:

The internal financial control of a company over financial reporting is a process created to provide reasonable assurance concerning the preparation of financial statements for external purposes and the reliability of financial reporting in accordance with regularly accepted principles of accounting.

The internal financial control of a company over financial reporting includes these procedures and policies:

(i) related to the upkeep of the records that, in understandable detail, fairly and accurately reflect the dispositions and transactions of the company assets;

(ii) grant feasible assurance that transactions are recorded as essential to permit preparation of financial statements in line with generally accepted principles of accounting and that expenditures and receipts of the Company are being implemented only in accordance with authorizations of directors and management of the Company; and

(iii) grant logical assurance regarding timely detection or prevention against unauthorized acquisition, disposition or use, of the Company’s assets that could have a material impact on the financial statements.

Opinion:

According to the explanations and information provided to the Auditor and the records of the Company offered by them when examined by the Auditor, must state that the Company has, in all respects of material, possess an adequate control system of internal financial over financial reporting, and such controls on internal financial over financial reporting must be operated effectively as of March 31, 2019, based on the internal control over financial recording criteria settled by the Company acknowledging the fundamental components of internal control declared in the ‘Guidance Note on Audit of Internal Financial Controls Over Financial Reporting’ published by the Institute of Chartered Accountants of India.

Limitations of internal financial controls over financial reporting:

Because of the intrinsic limitations of internal financial controls over financial reporting, including improper management of override of controls, material misstatements due to any sort of discrepancy or fraud may occur and not be detected or the possibility of collusion. Also, predictions of any evaluation of the internal financial controls over financial reporting to future time periods are subject to the risk that it may become that the degree of compliance with the policies or inadequate because of changes in conditions or procedures may deteriorate performed in the internal financial control over financial reporting.

Final Words:

One part of the Auditor’s report declares that “accompanying financial statements present fairly, the financial position of the company as of XXX, in all material respects.”

It is necessary to note that it states that the financial statements are displayed “fairly” – it does not state that they are presented “precisely” or “accurately.” It implies that there are certain areas where policy choices and professional judgment were made, and between the judgments of different auditors, differences could exist. Furthermore, “in all material respects” is also a significant phrase. Materiality is the concept that specific changes are substantial enough to improve the investment decisions of potential investors and investors potentially. It indicates that concerns that only deal with a small division, i.e., 1% of net income, is not material.

Material misstatements are the primary concern of Auditors, which include omissions or other errors that in the aggregate or individually would reasonably be assumed to influence the user’s economic decisions. Materiality is crucial in the field of an audit and affects what kind of report the Auditor will result in.

List of Documents Required Incorporating Company

List of Documents Required while Incorporating a Company

Leave a Comment / Finance / By / February 16, 2024

List of Documents Required Incorporating Company: While establishing a company or a business in India, one needs the Directors or Founders to stay engaged in the ‘legal game’. The first and foremost measure one should seek to establish their Company is to ensure documents needed for company registration in India. Any error in documents needed for new company registration in India will establish all the struggles in vain. There are a number of legal formalities essential to be performed for the registration of a company. It has been already discussed the most important documents in this article that will help an individual during the process of company registration in India.

What does the Structure of a Business Mean?

The Process of SPICe Private Limited Company Incorporation Filing is an integrated individual point application for Allotment of DIN for Directors and Incorporation, Reservation of Company Name of a New Company along with allotment of Tax Collection and Deduction Account Number (TAN) and Permanent Account Number (PAN) to the New Company.

One must pick the proper company structure for their business before declaring the documents needed for company registration in India. The owner of the business should sensibly pick the company structure as it will enable the Company to perform efficiently as well as meet the fancied targets for profitability. One can definitely choose any of these business structures for starting a company in India:

What are Different Types of Business Structures?

  • OPC-One Person Company: If there is only one owner/founder of the business, an OPC probably is an ideal option for the registration of the Company. Registering for OPC will allow the sole owner to be a member of the corporate framework and bring on their work further. The registration of a Person Company needs documents such as DSC, address proof, ID proof of both Director and shareholder, PAN Card, and DIN accompanying with rent agreement (if any) and address proof of the company.
  • Sole Proprietorship: A business structure that is under the control of a single owner is known as a Sole Proprietorship. This business structure is ideal for businesses with limited investment or small businesses. The owner of an individual proprietorship business structure themself owns all the property and assets. A Sole Proprietorship registration may claim documents such as PAN Card, Aadhar Card, bank account details and registered office proof.
  • Partnership: A partnership means a business structure that has two or more owners. The owners of such a business structure are acknowledged as partners. The business profits are shared among the partners based on a written agreement. The documents needed for Partnership formation include address proof of partners and firm, Partnership Deed, GST registration, bank account details, and, most importantly, a PAN Card.
  • Private Limited Company: From the core founders, the law holds a company as a separate legal entity. After a company becomes registered, it will have company stakeholders/shareholders and officers/directors. Each person in a Private Limited Company grows and is regarded as the Company’s employee. The documents wanted for registering a Private Limited Company include DSC, PAN Card, address proof, residence proof, DIN, Articles of Association and Memorandum of Association.
  • PLC- Public Limited Company: PLC- Public Limited Company is a type of business that has a voluntary association of members under company law. A PLC has a distinct legal existence. The liability is restricted to the shares they own for the members of a PLC. The documents for registering a PLC-Public Limited Company include address proof, PAN Card of all Directors and shareholders, identity proof, DIN, DSC, Utility Bill, NOC from the landlord, Articles of Association and Memorandum of Association.
  • LLP- Limited Liability Partnership: A business structure formed for providing limited liability to its partners is popularly known as a Limited Liability Partnership. The law acknowledges this business structure as a corporate organisation. Such business structures got granted the right to manage their own affairs by the Act of 2008. The documents demanded registering an LLP incorporate address proof of partners and office, ID proof of partners and DSC.

What are the Documents Needed for Registration?

Under the process of SPICe, the following are the documents needed for the Incorporation of a Private Limited Company.

Documents from Shareholders and Directors:

  1. Identity Proof
    1. PAN- Permanent Account Number Card
    2. Passport / Voter Identity Card / Driving License / Aadhaar Card
  2. Address Proof
    1. Mobile Bill / Telephone Bill
    2. Water Bill / Electricity Bill
    3. Bank Passbook / Bank Statement with the latest transaction (Anybody of the Documents not older than two months)
  3. Photographs of Passport size – 3 each

Notes:

  • The applicant must Self Attest all the Copies of documents.
  • Mobile Bill/Electricity Bill / Bank Account Statement / Telephone Bill must be in the name of the applicant, which should not be older than two months.
  • If the provided documents are not in English, then all of them should be translated into English.

Documents that must be Signed by DIRECTORS:

  • Form DIR-2: Consent to Act as Director
  • Details required for DIN
  • Declaration of DIN (If DIN is assigned already)

Documents that must be Signed by SHAREHOLDERS:

  • Application for DSC- Digital Signature Certificate
  • INC-9: Declaration by Director & Subscribers

Documents from Trademark Owner / Company / LLP, if any:

  • Trademark / Formal authorisation for use of Name / Board Resolution
  • Authorisation for accomplishment Documents from LLP / Company

Note:- These shall be confirmed by the concerned on their Letterhead

Registered Office – Address

  • A letter of No-Objection from the Owner of Address to utilise the registered address of the office of the Company.
  • Address Proof – must be in the name of the Owner
  • Telephone Bill (Fixed Line Only), Water Bill or Gas Bill (Not older than two months), Electricity Bill; – To be approved by the of the Owner of Premises

OR

Tax Paid Copy or Receipt Registered Sale Deed- To be approved by the provider of the Shared Office Service.

Note: If the Address facility is availed from a provider of Shared Office Service, a copy of the Tax Receipt / Electricity Bill with a copy of Lease Agreement with specific powers to issue or sublease NOC letters for the use of premise under Companies Act as Registered Office address is also required.

Kinds Meetings Companies Act 2013

Different Kinds of Meetings under Companies Act of 2013

Leave a Comment / Companies Act / By / February 16, 2024

Kinds Meetings Companies Act 2013: A meeting is generally a gathering of the members of a company; a meeting plays a vital role in the overall functioning of a company. A meeting must be constituted by two persons at least, but under exceptional circumstances, it can be done by one.

‘Company Meeting’ is generally a coming together of at least two persons to either transact any ordinary or special business for the purpose of the law. These meetings are classified based on who holds the meeting, which is further discussed in this article.

Meetings Held by Shareholders

Statutory Meeting

Every public company with a share capital must convene a general meeting of the shareholders within not less than 1 month and not more than 6 months after the date on which it is authorised to commence its business. This is the first meeting of the company’s shareholders, and it is held once in the company’s whole life.

Annual General Meeting

In Section 96 of Companies Act 2013, the Annual General Meeting of companies, every public or private company other than a one-person company shall conduct an annual general meeting other than any other form of meeting, and the company shall ensure that there is no gap of 15 months or more between two annual general meetings.

It is required to convene the first AGM within 9 months from the end of the first financial year to decide the overall progress of the company as well as to plan future courses of action.

  • Venue: Such meeting is held at a Registered Office of the Company or any other such place in the city where such Registered Office is situated.
  • Timings: The meetings are held between 9.00 am – 6:00 pm and not on any public holiday declared by the Central or State Government.
  • Quorum of the Meeting:
    • For a Public Company: The quorum of the company shall be 5 directly present in the event if the overall number of members at the meeting date does not surpass 1000, 15 in the case of more than 1000 but less than 5000, and 30 in the event of more than 5000 members at the meeting date.
    • For a Private Company: Only 2 members can make up the quorum of the meeting if they are directly present.
  • Time Difference Between Meetings: The gap between the two consecutive meetings should not be more than 15 months. After conducting the first AGM, the subsequent AGMs need to be conducted within 6 months from the end of the financial year. If any urgent circumstances or emergencies arose when the company wasn’t able to perform the AGM, the Tribunal then may grant the extension of 3 months but said extension is not available in the first AGM. Therefore, the first AGM must be conducted within 9 months from the end of the financial year.
  • NCLT’s Powers: May call or direct to conduct such meeting u/s 97 of CA’13 when an application is filed by a member if meeting not conducted in due time.
  • Penalty for Defaulters: Under section 99 – For Company and every such defaulting Officer – Rs. 1 Lakh, and if the default continues, then Rs. 1000 per day.

Extraordinary General Meeting

A statutory meeting and an annual general meeting of a company are called ordinary meetings.

Any meeting other than these meetings is called an extraordinary general meeting which can be called under section 100 of CA’13. It is held to transact some urgent or special business that cannot be postponed until the next annual general meeting.

It can be called through the following ways –

  1. By Board: On a Suo-moto basis, the same can be held in any part of the country.
  2. By requisition of eligible members: If the company has Share Capital, then members holding at least 1/10th of such Share Capital, and if not having Share Capital, then members holding at least 10% of the total voting powers in that company can request to call for such meeting. Such notice has to be well written and specify the nature of business, and duly signed by all the members or anyone authorised person acting on behalf of all. And Board needs to call a meeting within 21 days of getting such request or a maximum of 45 days by giving such notice to such members before 3 days of conducting such meeting.
  3. By Requisitionists (provided if Board fails to do so): If Board failing to conduct meeting within 45 days, then the members can call for a meeting within 3 months from the original request made to Board at first instance, and here the members have all the rights to have their name on the main list of members and Board can’t deny this, and also need to accept such changes that might have occurred between 21st to 45th day of the date of the notice provided to Board at first instance.
  4. By Tribunal under section 98: In which it can conduct the meeting on its own or any request received by the member of such company.

Venue: At Registered Office or any such place in the city where such Registered Office is situated.

Class Meeting

Under the Companies Act, 2013, various kinds of shareholders and creditors hold class meetings under different circumstances. Such meeting is convened by a particular class of shareholders only and only if they think that their rights are being altered or if they want to vary their attached rights, as mentioned under section 48 and 232 of CA’13 also if, under the Mergers and Amalgamation scheme, meetings of particular shareholders and creditors can be convened if their rights or privileges are being varied to their interests in any such company.

Meetings Held by Directors

Meetings of Board of Directors

The directors of a company exercise most of their powers in a joint meeting called the meeting of the Board.

In the case of every company, a meeting of the Board of Directors must be held:

  • At least once in every three months, and
  • At least four such meetings shall be held every year. [Sec. 285]

In other words, no three months should pass without directors’ meetings being held, and no year should expire without at least four directors’ meetings having been held in it.

The object of this section is to ensure that the Board meetings are held at reasonably frequent intervals so that the directors may be in touch with the management of the company’s affairs.

Meetings of the Committees of Directors

The Board of Directors form certain committees and entrust some of its powers to them. These committees consist of only directors. The delegation of powers to such committees is to be authorised by the Articles of Association and should be according to the provisions of the Companies Act, 2013.

In a large company, routine matters like Allotment, Transfer, and Finance are handled by the Board of directors’ sub-committees. The meetings for such committees are held in the same way as those of Board Meetings.

Meetings Held by Creditors

The meetings of the creditors are held when the company proposes to make a scheme for an arrangement with the company’s creditors. Section 391 to 393 of the Companies Act 2013 gives powers to the company to compromise with the creditors and lay down the procedure of the action.

Meetings Held by Debenture Holders

Meetings of the debenture holders are held as per the conditions contained in the debenture trust deed. These meetings are called from time to time where the interests of debenture holders are involved at the time of reorganisation, reconstruction, amalgamation, or winding up of the company.

The rules and regulations entered in the trust deed relating to the notice of the meeting, the appointment of a chairman of the meeting, passing the resolutions, quorum of the meeting and the writing and signing of minutes.

Employees Provident Fund Act 1952

All About Employees Provident Fund Act, 1952

Leave a Comment / EPF / By / February 16, 2024

Employees Provident Fund Act 1952: Established in 1952, the Employees Provident Fund was known as the Employees Provident Fund & Miscellaneous Provisions Act, 1952, which excluded Jammu and Kashmir and extended to the whole of India.

Employee Provident Fund (EPF)

The Employees Provident Fund is a welfare scheme for the benefit of employees. Under this scheme, the employer pays the entire amount, but the employer and the employee contribute their part. The employer subtracts the employee’s share from the salary of the employee. The provident account of the employees gets credited with the interest earned on this investment. At the time of retirement, if certain conditions are fulfilled, the employee receives the accumulated amount.

Applicability of the Act

It is applicable when:

  1. Every factory involved in any industry mentioned in Schedule 1 employs 20 or more people;
  2. Every other institution notified by the Central Government which employs 20 or more people;
  3. Other institutions are notified by the Central Government even if they employ less than 20 people.

Every employee, as well as the one employed by a contractor (but apart from an apprentice engaged under the Apprentices Act or the standing orders of the institution and casual labourers), who receives wages of up to 6,500 rupees per month, will be suitable to become a member of the fund. The condition is three months’ continuous service or 60 days of actual work for members of the scheme.

Taxability of Provident Fund

Under Section 80C, the deduction for the Provident Fund can be claimed while calculating the Income Tax. After retirement, when the employee withdraws the Provident Fund and interest amount, the Provident Fund and interest are not taxable.

If any employee is unemployed for more than two months, they can withdraw their accumulated Provident Fund. After the withdrawal of 75% of the Provident Fund, the employee chooses whether they want to continue with the Provident Fund account or wish to withdraw the entire amount.

Income Tax Liability on the withdrawal of the Provident Fund

  1. If an employee withdraws an amount that is less than Rs 50,000 before completing their five years of continuous service, then no TDS is taxable, but while filing, the return amount of the provident fund will be shown.
  2. If an employee withdraws an amount that is more than Rs 50,000 before the completion of their five years of continuous service, then TDS is taxable @ 10% if PAN is furnished. If Form 15G/15H is provided, then TDS is not taxable.
  3. If EPF is withdrawn after continuous service for five years, then TDS is not taxable, and there is no need to mention the return of income as the amount is not taxable.
  4. When the Provident Fund is transferred from one account to another due to a change in the employee’s job, the return of income amount should not be mentioned since the amount is not taxable.
  5. Before finishing the five years of continuous service, if an employee gets terminated due to ill health, then the employer’s business is discontinued, or the reasons for the withdrawal are beyond the employee’s control, then TDS is not taxable. Furthermore, the employee should not offer the same in the return of income since the withdrawal is exempted from tax.

What are the Types of Provident Fund?

  1. Statutory Provident Fund (SPF)
  2. Public Provident Fund (PPF)
  3. Recognized Provident Fund (RPF)
  4. Unrecognized Provident Fund (URPF)

Statutory Provident Fund (SPF)

Registered under the Provident Fund Act of 1925, SPF is a type of provident fund which is also known as a government provident fund. Government employees, semi-government employees, universities, or educational institutions affiliated with a university established under a specified institution are qualified for this respective fund.

Public Provident Fund (PPF)

The Public Provident Fund Act of 1968 covers PPF. Any public member, whether employed or not, can invest in PPF. Rs 500 per annum is the minimum contribution, and Rs 1,50,000 per annum is the maximum contribution for this fund. The present rate of interest under the scheme is 8% per annum, and all the contributions made to the scheme along with interest are repayable after 15 years unless it is extended.

Recognized Provident Fund (RPF)

Registered under the Employee’s Provident Funds and Miscellaneous Provisions Act of 1952, RPF is a project that, along with the Act, states that any organization employing 20 or more employees is under an obligation to register themselves under this Act. Even if they have less than 20 employees, any such organization can voluntarily register themselves under this Act.

Unrecognized Provident Fund (URPF)

The scheme started by the employer and the employees in an organization that is unapproved by the Commissioner of Income Tax is called URPF.

What is the Provident Fund Contribution Rate?

The employer and the employee contribute 12% to the Provident Fund account (basic pay + dearness allowance + retaining allowance). Any organization which employs less than 20 people should be restricted to contributing 10% for both employee and employer contributions.

Employees receiving a salary that is less than Rs 15,000 per month, it is voluntary for them to become members of EPF. Employees whose salaries are more than Rs 15,000 per month at the time of joining are not required to make Provident Fund contributions. If they are interested in becoming a member of EPF, then they need the consent of the employer and Assistant PF Commissioner to become one.

The entire 12% of the employee’s contribution goes into their EPF account along with 3.67% (out of 12%) from their employer. The remaining 8.33% from their employer’s side is diverted to their EPS (Employee’s Pension Scheme), and the balance goes into their EPF account.

Breakup of EPF Contribution

12% of the employee’s salary goes to the EPF.

Whereas the contribution of the employer is divided as below:

  1. For EPF, 67% contributed.
  2. For EPS, 33% contributed.
  3. For EDLI, 5% is contributed.
  4. For EPF administration charges, 1% is contributed.
  5. For EDLI administration charges, 0.1% is contributed.

Therefore, 13.61% is the employers’ contribution. The employer pays for the management and premium charges. The maximum limit is 0.5% of Rs 15,000.

Universal Account Number (UAN)

A 12-digit number known as UAN is allotted to the employees who contributed to EPF to help with the easy transfer and withdrawal of claims. Throughout the life of the employee, the number remains unchanged.

Even if the job changes, the number remains the same. Based on UAN, SMS service on every deposit contribution and online KYC update can be provided along with the service of Online Passbook. But before all these, UAN needs to be activated on the EPFO portal.

If any member cannot withdraw from the Provident Fund for any reason, they can withdraw it without the employer’s consent. For EPS and EPF, they can submit FORM 19 and FORM 10C, respectively, with the testimony of any one of the following officials to the EPFO office where their EPF account is maintained:

  1. The Magistrate
  2. Any gazetted officers
  3. The Post or Sub Postmaster
  4. President of the Village Panchayat where Union Board is not present
  5. President of the Village Union
  6. Secretary or Member or Chairman of the District or Municipal Local Board
  7. Head of an Educational Institution recognized by the government.
  8. Member of Parliament or Legislative Assembly.
  9. Manager of the Bank where your savings bank account is maintained currently.
  10. Any authorized official approved by the commissioner.