Operating as a business is one of the best ways to work on your terms and gain complete financial independence. But put in a lot of effort to set up your own business. Beginners in this field must develop the right business plan, which involves choosing an appropriate name for the company, planning operations and arranging funds. Aspiring entrepreneurs must also know the difference between LLP and Pvt Ltd to register their business accordingly.
LLP, or a Limited Liability Partnership, is a business entity that offers the advantages of a partnership firm and a private limited company. All partners in an LLP have limited liability towards the firm. The limited liability also applies to their contributions, and one partner may not be held responsible for the liabilities of the other partners. An LLP in India operates as per the guidelines noted under the Limited Liability Partnership Act 2008.
A Private Limited Company or Pvt Ltd is where private investors hold shares, and the public cannot trade those shares on the stock exchange. The shareholders may be different from the owners of a Private Limited Company, and thus the liabilities and profits are shared among the company owners, according to the Companies Act, 2013.
Some major benefits of registering a business as an LLP are:
- Starting and managing an LLP is easier because of its fewer formalities.
- The death of any of the partners does not affect the survival and existence of a limited liability partnership firm as it has perpetual succession.
- The cost of registering an LLP is lesser than registering other forms of businesses or companies.
- You do not require huge capital to start an LLP.
- Partners in an LLP have limited liability.
The benefits of registering a business as a Private Limited Company include the following:
- You do not require a minimum paid-up capital to develop a Private Limited Company.
- Members of Pvt Ltd have limited liability.
- Such companies can raise funds very easily.
- A Pvt Limited Company has a separate legal entity from all its members.
- The company also has perpetual succession.
Now let us have a clear idea of the points of difference between LLP and private limited. They are as follows:
The registration procedure features key differences between LLP and a private limited company.
- You must register for a Pvt Ltd firm as per the Companies Act, 2013, along with the Registrar of Companies. A DIN or Director Identification Number is required to register a Pvt Ltd.
- An LLP is registered as per the Limited Liability Partnership Act, 2008, along with the Registrar of LLP. A DPIN or Designated Partner Identification Number is required to register an LLP.
Speaking of the ownership difference between Pvt Ltd and LLP Company
- A Private Limited Company is more flexible in ownership, and a maximum of 200 shareholders can hold it.
- In the case of an LLP, partners can hold ownership and operate the company without additional directors, share distribution, and shareholders.
There is also a certain level of tax structure difference between Pvt Ltd and LLP in India:
- Though the tax compliance is the same for both business entities, besides the tax on annual income applicable for both, private limited companies need to pay an additional dividend distribution tax when their profits are distributed among the shareholders.
The characteristic points of difference between LLP and Pvt Ltd India are as follows:
- LLP and Pvt Ltd are transferable entities, but the process is easier in the case of a Pvt Ltd firm where the shares can be moved easily to another shareholder.
- Also, private limited companies can hold general and board meetings within specified timelines which does not apply to the LLPs.
- While a private limited company must draft an Article of Association and Memorandum of Association that puts down its business activities, objectives, shareholding details and company information, a limited liability partnership contract suffices for an LLP.
Which is better, Pvt Ltd or LLP?
Coming to LLP vs Pvt ltd company, LLP will be the right fit for you if you plan to operate a small business with limited capital and a partner. However, go for a Private Limited Company if you want to operate a business with substantial funds and aggressive growth.
Why is LLP better than Pvt?
Once you know the difference between a private limited company and LLP, you will find that LLP is better than Pvt mainly because the cost of registering an LLP is lesser as compared to registering a Pvt Ltd. Similarly, there are fewer formalities, and you need to produce fewer documents to register as an LLP.
Can an LLP have employees?
Yes, an LLP can have employees. The Indian government has not barred any individual from business and employment.
Why do people prefer LLP?
you thoroughly review LLP and Pvt ltd differences, you will find that people prefer LLP mainly because it does not expose partners to unlimited liability. Additionally, the partners or members of an LLP company can be sued, or even they can sue an individual, as an LLP is a legal entity.
What is the minimum capital for LLP?
The difference between a Pvt Ltd company and LLP also points out that no minimal capital is needed for LLP, unlike a private limited firm where the minimum capital requirement is Rs. 1 lakh.
Is the GST number mandatory for LLP?
Yes, the GST number is mandatory for all the limited liability partnership firms supplying products and services. They are required to obtain GST registration based on their annual turnover.
What is the minimum tax for LLP India?
The AMT or Alternative Minimum Tax for LLP Indian is 18.5%. However, this tax is levied with other applicable surcharges and cess.
How many partners are required for LLP?
At least two partners are required to establish an LLP. However, the maximum number of partners cannot be restricted to form a limited liability company.
Taxation is the key source of revenue for all Indian states, and this speaks of the importance of income tax. India's perfectly structured tax system uses both proportional and progressive taxation based on income and associated factors. The state and central governments determine income tax in India, and the money thus received is called tax revenue. The importance of tax received from individuals also lies in the fact that the money thus received is used for varied purposes, like public education and healthcare; infrastructure development like bridges, dams, roads and railways; civil services and defence. The main importance of taxation in India is assisting the government in satisfying all its development objectives.
ITR, or Income Tax Return, is a form issued by the government for individuals to declare their annual income, expenditures, exemptions, deductions and taxes paid. Mandatory filing of income tax returns is important for deductions under Sections 80C, 80D and others for individuals who make more than Rs. 2, 50, 000 as income. The deductions together can help bring down the taxable income of a person. Filing income tax returns is not mandatory for individuals with income less than Rs. 2, 50, 000.
The majority of individuals are not aware of the importance of tax returns and consider them to be a time-consuming procedure. Hence, they do not file tax returns. Nevertheless, as a responsible citizen, you must understand tax and its importance and file your returns on time yearly. As a working Indian, follow the tax return filing procedure and reap its benefits. For income tax advisory and filing services,. contact professionals at ADCA.
But before understanding the importance of taxation in India and its benefits, let's get into the features of taxes levied on an individual's income.
Some of the main features of income tax in India are:
Income tax in India is levied as per entry No 82 of a list I or Union List of the Seventh Schedule to the Article 246 of the Constitution of India.
Income tax is chargeable by the Central Government of India on all forms of income except agricultural income. The state government charges income tax on agricultural income.
Since the liability to pay income tax and its burden are on the same person, the kit is a direct tax.
Also, it is an annual tax as it is an individual's income of a specific year that is tax chargeable.
Income tax is the tax on the income earned by an individual. This "individual" can be any person, firm, local authority, company, the body of the individual, association of person, Hindu Undivided Family or any other artificial juridical individual. Individuals covered under income tax are known as assessees.
Income tax is a tax on house property income, salary income, capital gains, business or professional income and other earning sources. On that note, a few incomes are specifically exempted from income tax.
Income made during a specific financial year is duly assessed to tax in the following immediate financial year.
There is a prescribed rate at which income tax is charged. Tax rates prescribed under Income Tax Act include 20% for taxes on long-term capital gains, 15% for taxes on short-term capital gains on shared covered under STT and 30% taxes on income made from lotteries.
The Central Government (Ministry of Finance) administers income tax in India in coordination with the income tax department with branches nationwide.
Income tax applies throughout India, including Jammu and Kashmir.
Here are a few benefits of taxation that you must know about:
Regular filing of tax returns makes it easier for individuals to process loans from different banks.
It also helps individuals to claim their carried forward losses.
Any form of tax paid by an individual helps build a nation. The money generated through tax contributes to the government's cash flow, and the government further uses this amount to build infrastructure.
Regular tax payment also helps people with their credit card and visa applications. It improves their eligibility for such documents.
Filing regular taxes is one of the major prerequisites for obtaining a tax clearance certificate, especially when selling or transferring assets.
ITRs make an individual eligible to undertake all kinds of government assignments.
The most basic purpose of taxation is to fund all government expenses. While earlier taxes from individuals with taxable income were used to raise armies, build defences and support the ruling classes, they are now used to encourage the development of a more equitable society. On the other hand, higher taxes on certain products and services, like gasoline and tobacco, have been put in place to avoid further consumption.
The Income Tax Act features a total of 23 chapters and 298 sections. Considering this huge amount of information in place, it is extremely difficult to go through all the chapters and sections. However, there are five income tax important sections that every individual with taxable income should know about. Clear knowledge of these five sections can be useful when deciding to invest their corpus in any of the investment tools. Also, if you do not understand income tax sections very well and require help with income tax audits in Bangalore, get straight to https://adca.in/income-tax-audit.php, where you can find the best assistance possible. The main sections of income tax are:
Section 80C allows for deductions on an individual's investments in specific instruments. The two most well-known options in this category include Tax Saving Fixed Deposits and Tax Saving Mutual Funds.
Section 80CCC provides income tax deduction to pension funds under Chapter VI- A from the total gross income of the taxpayer for that specific financial year. This section enables taxpayers to invest in pension funds.
Section 80CCD offers income tax deductions for all NPS or National Pension Scheme contributions. The maximum deduction individuals can claim from this section is 10% for salaried individuals and 20% of total gross income from the self-employed.
Section 80TTA of the Income Tax Act (Chapter VI-A) allows individuals to claim deductions of up to Rs. 10, 000 annually from the interest earned through savings accounts deposits held in cooperative societies, post offices and banks.
Section 80TTB of the Income Tax Act gives senior citizens above 60 years of age the flexibility to claim tax breaks in the interest income made from deposits they hold.
Taxpayers can considerably bring down their taxable income by using the different income tax exemptions and deductions allowed under the Income Tax Act.
How many types of tax returns are there?
There are 7 forms of tax returns for individuals. These are ITR 1, ITR 2, ITR 3, ITR 4, ITE 5, ITR 6 and ITR 7. Companies and firms can file their income tax returns using ITR-5, 6 and 7.
Who is eligible for ITR?
According to the Income Tax Law in India, individuals with an annual income exceeding Rs. 2, 50, 000/ 3, 00, 000/5, 00, 000 are mandated to file income tax returns. This will be their way of informing the government to operate the country's financial sectors smoothly.
What's a simple tax return?
A simple tax return is the income tax filed using IRS form 1040 without attaching any schedules or forms.
Who is not required to file an income tax return?
Individuals with income less than Rs. 2, 50, 000 and people above 80 years of age not making professional income or income from regular business are not required to file income tax returns.
Who is exempted from filing ITR?
As per section 194P of the Income Tax Act, senior citizens above 75 years of age, senior citizens with "resident" status in the previous year and those with interest and pension income only are exempted from filing ITR.
Which tax savings is best?
Life insurance, pension plans, mediclaim or health insurance, tax saving mutual funds and NPS are the best tax savings offering maximum benefits.
Global expansion offers businesses exciting opportunities, and establishing a foreign subsidiary is one of the most effective ways to enter international markets. A foreign subsidiary is a distinct legal entity operating in another country, owned partially or wholly by a parent company. While this structure offers various benefits like local tax incentives and risk mitigation, it also involves navigating compliance requirements and significant investments.
This blog delves into the procedure for foreign subsidiary company registration in India, compliance mandates, and the advantages of foreign subsidiaries, offering insights for businesses considering this route.
Setting up a foreign subsidiary company in India requires adherence to specific legal and procedural steps:
Digital Signature Certificate (DSC) and Director Identification Number (DIN):
At least two directors must apply for DSC. The remaining directors must secure DIN.
Company Name Approval:
Apply for a unique company name through Form INC-1 on the Ministry of Corporate Affairs (MCA) portal.
Document Submission:
Provide supporting documents such as the resolution of the foreign company, NOC, trademark (if applicable), and apostille copies.
Filing Incorporation Forms:
Submit Forms INC-7, DIR-12, and INC-22 for incorporation, fees, and stamp duties.
Verification and Certification:
The incorporation certificate is issued upon approval and verification by the Registrar of Companies (ROC).
Post-Incorporation Steps:
Obtain a PAN and GST registration for the subsidiary.
For businesses seeking assistance, professionals at ADCA can guide you through the foreign subsidiary company registration in India, ensuring seamless compliance.
Operating a foreign subsidiary in India requires adherence to several compliance requirements:
Taxation Compliance:
Foreign subsidiaries are taxed at 40% of their income in India.
Statutory Audits:
Regular audits must ensure compliance with the Companies Act 2013.
FEMA Regulations:
Adhere to the Foreign Exchange Management Act (FEMA) for foreign investments and remittances.
Annual Filings:
File annual returns and financial statements with the ROC.
Transfer Pricing Compliance:
Transactions with the parent company must follow Indian transfer pricing regulations.
Labor Laws:
Comply with local labor laws for employee benefits and workplace standards.
By following these guidelines, businesses can avoid penalties and ensure smooth operations for their foreign subsidiary in India.
Establishing a foreign subsidiary offers numerous benefits:
Market Expansion:
Enables businesses to enter new markets and cater to local consumers effectively.
Reduced Tax Liability:
Many countries offer tax incentives and lower rates for foreign investments.
Risk Mitigation:
A subsidiary operates as a separate legal entity, limiting liability exposure for the parent company.
Access to Local Resources:
Employing local talent and resources improves operational efficiency and compliance.
Increased Revenue Potential:
Expanding to foreign markets can lead to revenue growth and diversification.
Government Incentives:
Several countries offer free trade zones, fast-track incorporation, and economic incentives for foreign subsidiaries.
The advantages of foreign subsidiaries make them attractive for global businesses aiming to scale effectively.
The incorporation of a subsidiary of a foreign company in India requires meticulous planning and execution:
Legal Structuring:
Decide on the structure (wholly-owned or partially-owned) based on business needs.
Documentation:
Collect required documents, including Articles of Association (AOA), Memorandum of Association (MOA), and board resolutions.
Regulatory Approvals:
Obtain necessary approvals from the MCA and comply with FEMA regulations.
Local Representation:
Appoint Indian resident directors as required under the Companies Act 2013.
Tax Registrations:
Register for PAN, TAN, GST, and other relevant tax identifications.
Bank Account:
Open a corporate bank account in India for transactions.
For businesses unsure about the incorporation process, consulting experts like ADCA ensure efficient execution and compliance.
A foreign subsidiary is a distinct legal entity with compliance obligations in the host country, whereas a foreign company operates as a branch or liaison office.
The primary objective is to expand the parent company's market reach, generate revenue, and reduce operational risks through local operations.
No, foreign subsidiaries are not eligible for start-up benefits under the Start-Up India scheme.
Foreign subsidiaries in India are taxed at a rate of 40%.
Expanding globally through a foreign subsidiary offers significant growth opportunities, risk reduction, and access to local markets. However, understanding the foreign subsidiary company registration in India and ensuring compliance is critical for success.
At ADCA, we specialize in providing tailored services for incorporating and managing foreign subsidiaries in India. From legal structuring to compliance management, our experts ensure your business expansion is smooth and efficient.
Contact ADCA today for expert guidance on establishing and managing foreign subsidiaries in India!
NRIs or non-resident Indians with warnings abroad and even in India face several finance management problems. They also find it difficult to track different bank accounts while repatriating money to their home accounts. NRO and NRE accounts come to the rescue here. An NRI opens a bank account in India to manage their foreign earnings, which is an NRI account.
NRIs or non-resident Indians with warnings abroad and even in India face several finance management problems. They also find it difficult to track different bank accounts while repatriating money to their home accounts. NRO and NRE accounts come to the rescue here. An NRI opens a bank account in India to manage their foreign earnings, which is an NRI account.
On the other hand, an NRO account is a bank account that an NRI opens in India to park earnings made in India. Such incomes include dividends, rent, interest and pension and must be initiated by filing Form 26QB. If an NRI books an apartment in India and pays money from a bank account, it is important for them to file Form 26QB online. TDS form 26QB can be filed separately.
Form 26QB is a return-cum-challan form used for paying TDS or Tax Deducted at Source to the government for all deductions made under Section 194-IA of the Income Tax Act, 1961. This section handles transactions involving the sale of immovable property and applicable TDS. Submitting a duly filled-in TDS form 26QB within 30 days of transferring immovable property is important. Some of the most critical requirements to file form 26QB are as follows:
- Seller and buyer address
- Seller and buyer PAN
- Property details
- Seller and buyer contact details
- Tax deposit information
- The amount credited or paid
The Income Tax Act 1961 lays out a few important rules about the sale and purchase of the immovable property. In these transactions covered under Section 194-IA, the property buyer, also called Deductor, needs to deduct TDS if the value of the transaction is above Rs. 50 lakhs. Next, the buyer must also issue form 16B to the seller. Essential requirements to file form 26QB, as listed under Section 194-IA of the Income Tax Act, 1961, are as follows:
- When completing the transaction, the buyer should deduct TDA at 1% interest of the total sale amount.
- The buyer doesn't need to deduct TDS on immovable properties valued at less than Rs. 50 lakhs. TDS is generally deducted from the entire transaction amount for transactions below this limit.
- TDS u/s 194-IA does not apply to transactions that involve agricultural land.
- TDS is deducted proportionately on each instalment if the payment is made in instalments.
- The property buyer doesn't need to get a TAN or Tax Deduction Account Number for deducting and depositing TDS. Nevertheless, PAN is crucial for the property buyer and seller if a TDS deduction occurs using form 26QB.
- The property buyer should present a TDS certificate to the seller after deducting and depositing TDS. This should be done within 15 days of the transaction in lieu of the tax deducted and deposited to the government.
- Lastly, the property buyer should get form 16B and present the same to the seller.
Failure to deduct TDS, issue form 16B, or file form 26QB under Section 194 IA of the Income Tax Act may attract penalties and interests. These include:
- A penalty of 1% interest will be levied on the amount not deducted for TDS in case of non-deduction of TDA on the part of the property buyer.
- A monthly penalty of 1.5% of the deducted amount will be levied on non-remittance of TDS to the government.
- In case of a delay in filing TDS returns, a penalty of Rs. 200 per day for each day of default shall be levied.
The process of filling out form 26QB online is very easy. Just go for form 26QB, download and start filling in the form. The steps for the 26QB form download and filling in are as follows:
- Get to https://www.tin-nsdl.com/.
- Next, click on Services- epayment: Pay Tax Online.
- Go to Proceed in the TDS on Property section and start filling in form 26QB by providing all relevant details. Ensure you have all details, like PAN details of seller and buyer; communication details of seller and buyer; property details; tax deposit details and details of the amount credited or paid.
- Submit the form, and you will get a confirmation screen. You will also get two options on the screen. They are Print Form 26QB and Submit to the Bank. You will also get an exclusive acknowledgement number to note down.
- Now click on the option that says Print Form 26QB and then click on Submit to the Bank.
- The next step is to make the payment through internet banking, and once you complete the payment, you will get a challan with payment details, bank name and CIN. This challan is proof of your payment.
You can make form 26QB payment either online or offline. The steps you need to follow for form 26QB online payment include the following:
- Get to onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
- Now click on Form 26QB.
- Choose 0020 if you are a corporate taxpayer; otherwise, click 0021.
- Fill in all the empty blanks and then click on Proceed.
What is the use of 26QB?
The main purpose of form 26QB is to pay the TDS or Tax Deduction at Source to the government for all deductions made under Section 194-IA of the Income Tax Act, 1961.
How to generate a 26QB form?
Form 26QB must be generated at TRACES or TDS Reconciliation Analysis and Correction Enabling System. It is an online platform for managing and implementing TCS and TDS. The steps include:
- Logging into TRACES by providing user ID, password, PAN and specified captcha.
- Getting to the justification report download where you get form 26QB.
- Entering required details along with CIN details.
- Next, you will get a success message
- Now navigate to the requested downloads and provide the requested date or number
- The last step is to download the file and open it using the password "PAN of the Buyer" in capital letters.
Who needs to file 26QB?
Property buyers should file form 26QB for every exclusive buyer-seller combination for their respective shares. Fill two forms if there are two sellers and a single buyer. Alternatively, four forms should be filled in if there are two sellers and two buyers.
What happens if TDS is not deducted on the purchase of property?
If TDS is not deducted on property purchase, an interest of 1% is levied for every part of the month or every month from the date on which the TDS was deductible till the date on which the TDS was deducted. This penalty can range to Rs. 1 Lakh under Section 271H. You can avoid this penalty by paying the TDS, the late payment fee, and the interest amount as soon as you get a tax notice.
Who will claim TDS on the sale of a property?
While the buyer needs to deduct TDS on the property and deposit it to the government during the property sale, the seller avails credit of the same or claims TDS on the sale of the property.
What is the stamp duty value for the property in form 26qb?
Section 194-IA of the Income Tax Act, 1961, read with Rules 30, 31, and 31A of Income Tax Rules, states that the stamp duty value of 1% shall be deducted for all transactions made during property purchase at the time of making a sale payment consideration.
Can we claim a TDS refund on the property purchase?
Yes, claiming a TDS refund on a property purchase is possible. The property seller has the right to do so, while the buyer needs to deduct TDS on the property and deposit the same with the government during the property sale.
Is 26QB refundable?
Yes, taxpayers can submit a refund request for form 26QB on TRACES if they meet criteria like:
- PAN of the taxpayer matches TAN Master and TRACES profile.
- Deductor has registered the DSC of the Authorised Person on TRACES.
Form 15CA and 15CB are integral to the Indian taxation system, especially for NRIs, OCIs, PIOs, and expatriates involved in foreign remittance. These forms ensure compliance with tax regulations and help streamline transferring funds abroad. Governed by Section 195 of the Income Tax Act of 1961, these forms are vital in avoiding penalties and ensuring smooth transactions.
Form 15CA is a declaration made by the remitter for foreign remittances. It is used to report payments made to non-residents and ensure taxes are deducted at the source when required. This form is crucial for the Income Tax Department to monitor foreign remittances and their tax implications.
Key Points:
Filed by the person making the payment.
Includes details of the remitter, remittee, and payment type.
Mandatory for most foreign payments exceeding ?5 lakh in a financial year.
Form 15CB is a certification issued by a Chartered Accountant (CA). It certifies the remittance is in accordance with Income Tax regulations and the Double Taxation Avoidance Agreement (DTAA). This form ensures that the remittance complies with Indian tax laws.
Key Points:
A CA certification ensures proper tax compliance.
Certifies that TDS has been deducted, if applicable.
Required for remittances exceeding ?5 lakh in a financial year.
Form 15CA and 15CB are applicable based on the following conditions:
When Required:
Payments exceeding ?5 lakh in a financial year.
Remittances that are taxable under Indian laws.
When Not Required:
Remittances not taxable under the Income Tax Act.
Payments falling under the exempt list as per the RBI.
Personal remittances for expenses like travel or education.
Remittances covered under the specified exemption list.
Payments for imports that are not taxable under Indian law.
For the Remitter:
Name, address, and PAN.
Bank details, including BSR code.
Status and purpose of remittance.
For the Remittee:
Name and address.
Country of residence.
Details of remittance amount and currency.
Visit www.incometax.gov.in and log in using your credentials.
Go to "E-File" and select "Income Tax Forms." Choose Form 15CA or 15CB as applicable.
Attach the digitally signed Form 15CB from your CA.
Provide details about the remitter, remittee, and the purpose of remittance.
Submit the form and verify using an OTP or digital signature.
Anil D’Souza and Associates (ADCA) specialize in tax compliance and advisory services. Here's how ADCA can assist:
Expert Advisory: Guidance on tax implications of remittances.
Accurate Filing: Preparation and submission of Forms 15CA and 15CB.
Regulatory Compliance: Ensures compliance with RBI and Income Tax regulations.
End-to-End Support: Assists with tax calculations, certifications, and documentation.
Form 15CA and 15CB are essential for ensuring compliance with Indian tax laws during foreign remittances. Authorized representatives under GST support taxpayers by representing them in complex proceedings and ensuring compliance. Understanding authorized representatives' qualifications, limitations, and procedures helps taxpayers choose the right individual or professional for their representation needs. For expert assistance in GST compliance and representation, consult ADCA (Anil D’Souza and Associates), one of Bangalore's most trusted chartered accountancy firms .
Form 15CA is a declaration for foreign remittances, while Form 15CB is a certification issued by a CA for compliance with tax regulations.
A Chartered Accountant (CA) files Form 15CB on behalf of the remitter.
The charges vary based on complexity but typically range from ?1,000 to ?5,000.
It is mandatory for remittances exceeding ?5 lakh in a financial year.
The audit limit varies; for individual CAs, it is 60 audits annually.
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The culture of running small businesses and startups is reigning supreme in India. As per NASSCOM reports, India is in the 3rd position on the international front with more than 4200 startups. Health tech, hyper-local eCommerce, analytics and IoT of the Internet of Things are some of the most preferred choices of young entrepreneurs with startup ideas. Large-scale growth of startups in a country can lead to the betterment of society on the whole and economic development as well. The Indian government is not late to realise this fact and has thus announced the Startup India campaign. The government has also proposed several tax-related and regulatory benefits in this campaign to generate the interest of young individuals.
Amongst these diversified government proposals that encourage startups in India, GST or Goods and Services Tax is the most critical one as far as indirect tax perspectives are concerned. The Indian government has implemented GST with the sole motive of changing the complex tax structure in India. The GST concept goes by the slogan “One Nation One Tax” to make the complaint process more seamless, intuitive and transparent. Here, we will go through GST benefits for startups and small businesses in India.
GST benefits for startups are innumerable. Let us go through them:
Among the most important benefits of GST to business entrepreneurs in India is the ease of operating several businesses with a single registration. In the pre-GST era, businesses had to register time and again, which was quite frustrating. GST implementation has centralised and standardised the process of business registration in India. Under the GST regime, it is no longer necessary for businesses to acquire different VAT registrations. One solitary GST registration would be fine for them to operate across India.
Speaking of the benefits of GST registration, companies with a turnover of less than Rs. 40 lakhs per year do not need to opt for GST registration. This will help the startups grow manifold as they do not need to file any GST returns.
One of the most crucial benefits of GST regime is making interstate movement more affordable for businesses by replacing state-border taxes at the check posts. This can save businesses's time in goods transportation and resolve several problems at the check borders. As per reports, GST implementation in India has reduced business logistics costs by approximately 20%. Thus, GST is a boon for all those startups that do not have huge capital to use in transportation initially.
The benefits of GST in India are not limited to just cost reduction and single registration for multiple businesses. GST implementation has also subsumed several taxes making it easier for startups to calculate their taxable income with less paperwork. Small enterprises and startups can benefit from this new indirect GST tax regime that accompanies fewer compliance expenses. Under GST, the following taxes have been subsumed and made into a single tax:
- Service charge
- Central taxes
- CVD or additional traditions obligation
- Central excise duty
- Central additional charges
- Special additional duty of customs or SAD
- CST or central sales tax
- VAT or value added tax
- Purchase tax
- Entry and Octroi tax
- Luxury tax
- Entertainment taxes
- Taxes on betting, wagering and lottery
- State additional taxes
The One India, One Market model, is a major opportunity for startups and small businesses to maintain huge logistics and distribution networks because of minimal state-level tax requirements. One common market model across India is the perfect fit for startups and small businesses looking for a larger national footprint without major investment.
Earlier, businesses like restaurants and computer dealers selling merchandise and offering benefits as a pack had to comply with Service Tax and VAT guidelines. For such businesses, it was critical to identify taxes on supply because different tax rates applied to other products. However, the difference between Goods and Services is wholly refined with GST execution, making compliance procedures under the GST framework simpler. Even invoicing has become easier for startups because of a single tax rate on all goods and services.
Furthermore, the centralised digital system has made it easier for businesses to file returns without the need to address varied tax entities for the registration procedure. It has also waived off the complex w.r.t to manual workflow, making GST return filing .super easy for startups.
In the pre-GST era, industries like textiles and construction did not operate under any tax regulation. However, GST ensures all-inclusive tax implementation across all sectors of the industry. Revamped payment and compliance structures under GST boost the trading potentials of such firms, making them accountable for the misconduct of tax liabilities.
A startup is a company or venture focused on a single service or product the founder looks to introduce in the market. Startups typically do not feature a completely developed business structure and even lack sufficient capital needed to move to the next business stage. Most startups are funded by their founders initially and then operate through funding from friends, family and different venture capitalists. Startups generally use seed capital for research and development plans that help them determine the demand for their goods or services in the market.
These companies are yet to be incorporated or registered and are necessarily formed to bring innovation in specific areas or for the sole profit of the owners. Startups have several business registration options, which include:
- LLP Registration
- Private Limited Company Registration
- Partnership Firm Registration
- Sole Proprietorship. Registration
- One Person Company Registration
Individuals looking to form a startup need to apply for Startup India Certificate, which offers several benefits to such companies.
GST, or Goods and Service Tax, is based on an indirect taxation system. It is a destination-based, multi-stage tax structure that supplanted many indirect taxes across India, like excise duty, service tax, VAT, etc. The introduction of GST is a shift from the old tax structure to a centralised system that offers several benefits to taxpayers, especially startups and small businesses. GST startup is levied on all sources that create value through products and services, and GST for startups applies to all points of sale. Note that all inter-state sales are also chargeable to Central and State GST.
GST registration for startups is applicable in varied cases, which include:
- GST for startups in India is mandatory for all companies with pre-GST tax registrations.
- GST on startups applies to companies with an annual turnover of Rs. 40 lakhs and more and Rs. 20 lakhs in the North-Eastern states of Uttarakhand, Jammu & Kashmir and Himachal Pradesh.
- Startup GST registration is required for startups paying taxes under RCM or Reverse Change Mechanism.
- GST registration is important for startups supplying services or products on eCommerce portals or to eCommerce aggregators.
- Casual taxable individuals.
- TCS/TDS deductors
- Non-resident taxable individuals looking to start a business in India should go for GST registration.
- Data recovery or access service providers
- GST registration also applies to startups that sell goods and services at exhibitions and events that do not require any fixed business location. Such dealers should pay GST based on a 90-day sales estimate.
- GST registration is also necessary for input service providers and supplier agents looking to carry forward the advantage of ITC or input tax credit.
GST is instrumental in the evolution of startups in India, and It is also a boon for the small and medium-scale industries. Nevertheless, as with every new system, GST also carries some barriers. GST impact on startups is as follows:
- According to GST laws, businesses with a yearly turnover of Rs. 20 lakhs and above must go for GST registration. This excludes several startups with a turnover of less than Rs. 20 lakhs. This is a major impact of GST on startups, as the new taxation limits can be a respite to the startups.
- GST execution eliminates the requirement for startups to visit the tax offices to file returns and registrations. The simple registration procedure helps startups save a lot of time and resources.
- With GST, new businesses can enjoy the advantages of eliminating limitations on inter-state goods movement. This will be majorly valuable for startups supplying goods across India.
- Standard tax process for the eCommerce industries by way of GST registration is leading to more eCommerce platforms available for buyers.
- Well, manufacturing startups might face the negative impact of GST. With GST in place, manufacturing businesses with a turnover of Rs. 20 lakhs and more need to pay excises. This ultimately has the manufacturing companies paying more as taxes than the earlier turnover limit, which was 1.50 crores for the manufacturing businesses.
ADCA or Anil D’Souza & Associates is an experienced team of professional and competent GST consultants in Bangalore. If you are a startup in India, initially, it can be a bit tricky to comply with GST laws because of the lack of domain expertise on payrolls. In that case, you must opt for the services of ADCA for efficient GST return filing. So, why should you choose ADCA?
- ADCA is one of the most prestigious GST service providers in Bangalore, with Indian and overseas businesses as its major clients.
- You can always depend on the professional and efficient GST services of ADCA.
- ADCA is a GST expert with a separate department for this purpose.
- Hiring the GST experts at ADCA saves resources and time.
- Full-proof compliance with GST rules and greater efficiency
- Frees up the attention and time of essential company executives
- Cost-Effective services
The experienced and skilled workforce at ADCA prepares and files GST returns regularly. The professionals know their job inside out, and startups can always trust their professionalism and efficiency.
Why register a startup for GST?
Registering a startup for GST offers several benefits, including that your company will be officially recognised as a legitimate business entity. GST registration status will also keep your firm legally updated.
What is the main purpose of GSTIN Number?
GSTIN or Goods and Service Tax Identification Number consists of 15 letters with numbers. The government produces this document after the successful GST registration of a company.
What is the process of GST registration?
GST registration procedures are easy and speedy with the availability of the online portal for this purpose. You need to produce all required documents online and instantly get a GST registration number for your startup.
What are the documents required for GST registration?
The documents needed for GST registration include:
- PAN Card of the person or business.
- Identity proof
- Bank account proof
- Address proof
Globalisation is all the rage in this modern world. Hundreds and thousands of people migrate to different countries for better work and living opportunities. India ranks right on top in the list of countries with the highest number of nationals living and working in foreign nations. As per reports, 1.3 crore People of Indian Origin and Non-Resident Indians were estimated to be residing abroad in 2021. Indians living abroad cannot transact through normal savings accounts legally.
Special accounts, such as NRO and NRE, are in place for individuals and transactions. These accounts are the safest options for NRIs looking to save their earnings in India. If your total earnings include income made in India and you want to manage it within the country, you must choose an NRO account. However, if you want to transfer foreign earnings to India without tax liabilities, you must opt for an NRE account. Both these accounts are variations of savings accounts, but it is important to know the difference between NRE and NRO account.
The main points of difference between NRE and NRO accounts include:
A major NRE and NRO account difference is the taxation policy. While an NRE account is free of income tax, wealth tax and tax gifts in India, an NRO account holder must pay wealth and gift tax. Nevertheless, NRO account holders can enjoy reduced tax benefits under the Taxation Avoidance Agreement. Note that the interest accumulated from credit balances and an NRO account falls in the respective tax bracket.
Another major NRE NRO account difference is the transferability of funds. NRE account holders can freely transfer the money in their accounts, both principal amount and interest earned. However, that’s not the case with funds in an NRO account, with a limitation of up to $ 1 million on fund transfers in a financial year, along with applicable taxes levied post payment.
There is a huge NRO vs NRE difference in the holding structure of both accounts. NRIs can open joint NRO accounts with one or more Indian citizens or NRIs. But, there can be joint NRE accounts only with another NRI.
Yet another vital point of difference between NRE and NRO is in the currency used for withdrawals and deposits. NRE account holders can deposit money in any foreign currency and withdraw the same in the Indian rupee without hassle. However, individuals need to deposit and withdraw money in Indian currency or rupee denomination with an NRO account.
NRE and NRO difference also lies in the varied rules of money deposit for both accounts. Any income generated in India cannot be deposited in an NRE account, whereas an NRO account does not allow overseas income deposits.
The suitability of both accounts is considered another key NRE NRO difference. People looking to hold and maintain their foreign earnings in Indian currency should go for an NRE account. Such accounts are also suitable for individuals willing to keep their savings in liquid form.
But with an NRO account, you can save only the earnings made in India and Indian currency. This can be income from the sale of property, rent or dividend.
The difference between NRE and NRO account RBI also lies in how account holders can transfer funds. NRE account holders can transfer funds to other NRE accounts and even NRO accounts. However, NRO account holders can transfer funds only to an NRO account and nothing else.
NRE and NRO account holders should also know about the effect of exchange rate fluctuations on their accounts. While NRO accounts do not risk changing currency value against foreign currency, NRE accounts can risk conversion loss because of fluctuations in exchange rates.
A non-resident Rupee or NRE account is an Indian currency account that offers complete security. You can hold this account as current, savings, fixed or recurring deposit. The foreign currency you deposit into your NRE account gets converted into Indian currency. As an NRE account holder, you can transfer your money, both the principal amount and the interest, to any foreign account without restrictions and complications. But make sure the amount you deposit in this account is earned in some foreign country, not India.
The international debit card will help you deposit and withdraw money into your NRE account 24/7. At the same time, mutual fund investments will become instant and effortless if you link your NRE account to your investment account. You can use your NRE account for personal banking, investing in India and operating a business.
A non-Resident Ordinary Rupee or NRO account is a current or savings account held by non-resident Indians in India to manage the income they make in India. As an NRO account holder, you can deposit and manage your accumulated money in Indian currency without complications. Your NRO account gives you the flexibility to receive money either in Foreign or Indian currency. Note that the interest you earn on the principal amount held in your NRO account is subject to TDS or Tax Deducted at Source.
NREvs.NRO account
comparison table goes like this:
|
Basis of NRE account vs. NRO account |
NRE Account |
NRO Account |
|
Acronym |
Non Resident External Account |
Non Resident Ordinary Account |
|
Meaning |
NRI account to transfer overseas earnings in India. |
NRI account to manage earnings made in India. |
|
Taxability |
Non-taxable interest |
Taxable interest |
|
Repatriability |
Can repatriate |
Interest amount repatriable but limitations on principal amount repatriation. |
|
Joint Account |
Two NRIs can open |
Only an NRI along with another NRI or Indian Citizen can open |
|
Deposits and Withdrawals |
Foreign currency deposits and Indian currency withdrawals |
Deposits in Indian and foreign currency but withdrawals only in Indian currency |
|
Exchange Rate Risks |
Risks involved |
No risks |
ADCA or Anil D’Souza & Associates is a chartered accountants agency in Bangalore managed and operated by an able group of experienced and competent company secretaries, chartered accountants, tax consultants and corporate financial advisors. With over 15 years of experience in tax, advisory, audit, outsourcing and legal services, the company has successfully added value to its clients. It is one of the top 10 CA agencies in Bangalore that you can contact if you want any help regarding NRE and NRO accounts. It will be a good idea to get the services of ADCA as the company:
- Has a young team of experienced professionals who understand present-day requirements.
- Separate departments for varied services to deliver quality right on time.
- Different teams specialized in varied service areas offering required expertise.
- Client satisfaction and client value addition are top priorities at ADCA.
- Affordable Solutions
- Use of advanced technology to deliver top-quality service
- Different statutory compliance solutions under a single roof.
What is the significance of an NRE account?
The main significance of an NRE account is it converts foreign currency into Indian rupees. If you deposit your foreign earnings in your NRE account, they will convert into INR instantly.
What is the most crucial difference between an NRE and NRO account?
One of the most important differences between an NRE and an NRO account is the currency used for withdrawal. NRO account holders cannot transfer funds without limitations. Dissimilar to an NRE account, the interest accrued on NRO account deposits is a 30% taxable rate deductible at the source. Indians living in a foreign country can transfer funds up to $1 million in a financial year once they pay all applicable taxes.
Which is the better account: NRO or NRE?
Going for an NRE account is always better, especially for individuals looking to hold and maintain their foreign earnings in Indian rupees. These accounts also work for people looking to keep their savings in liquid form, and the NRO account is best suited for people who want to save their Indian earnings in Indian rupees.
Should people send money to NRO or NRE?
The NRE account is completely repatriable and free of tax, while the NRO account requires the holder to pay taxes on the repatriated amount. This critical difference makes an NRO account the better solution for those looking to save their money in India.
NRI or non-resident Indian is an Indian citizen who has spent less than 183 days of a financial year or tax year in India. For the uninitiated, the financial year starts from 1st April to 31st March in the succeeding year. A non-resident Indian is a citizen of India, but he or she does not pay any taxes in India. And thus, they struggle to make investments in India.
NRI money investment is allowed in real estate, mutual funds, and other industries. Nevertheless, suppose you want to know who is non-resident Indian in detail. In that case, you must understand that NRIs need to follow certain regulations under the FEMA or Foreign Exchange Management Act for all investments they make in the stock market.
Here, you will get a clear idea of the different options you have to make NRI investments in India.
As a non-resident Indian looking to invest in India, it is quite likely for you to have several questions on your mind, like the NRI investment policy in India and the options available to you. You might also want to know the process of investing in India as an NRI.
To start with, the investment policy in India for the NRIs entails several products. These include:
- IPO
- Secondary market transactions or trades in the SEBI registered stock markets in India.
- Mutual funds
- Derivative trading
- PMS or Portfolio Management Services
- Bonds
- AIF or Alternative Investment Funds
- Real Estate
However, an NRI needs to have a savings bank account before investing in India. There are two different varieties of bank accounts that the NRIs can operate in India based on their earnings:
- NRO Bank Account or Non-Resident Ordinary Bank Account for income from India
- NRE Bank Account or Non-Resident External Bank Account for income out of India
Both are savings bank accounts maintained in Indian currency. As an NRI, you can remit your foreign earnings from outside India to your NRE bank account, which is completely repatriable. Your income in India is parked in the NRO bank account that is partially repatriable.
The financial market in India has greatly evolved over the years. And with this evolution, the financially savvy investors in India now have an assortment of long-term and short-term investment options to consider. The different types of investments in India are as follows:
Stocks: Investments in stocks or the equity markets offer avenues for creating wealth for a very long time. Stock investment in India offers good returns based on risk appetite.
Certificate of Deposit: A certificate of deposit is a money market tool issued against the funds deposited by an investor. Certificates of Deposit are deposited in banks in de-materialised form for a specific period.
Bonds: Bonds are one of India's most popular types of debt investment. The investors offer money to the issuer organisation in exchange for a bond, and in return for the bond, the issuer must pay interest on the principal amount.
Real Estate: Real estate investments involve buying commercial or residential properties allowing your capital to generate regular rental earnings.
FDs or Fixed Deposits: Fixed Deposits are provided by non-banking financial organisations or NBFCs and banks. They come as excellent options for growing funds while maintaining the highest levels of safety.
Mutual Funds: Investing in mutual funds involves investing in market-associated instruments like bonds, stocks or a blend of both debt and equity instruments.
PPFs or Public Provident Fund: PPFs are considered the safest option among India's different varieties of investment options. PPFs come from the government, and investments can be made in PPFs by opening an account with any post office or bank.
NPS or National Pension System is yet another investment policy in India supported by the Indian government. It involves long-term savings, making it the perfect addition to an individual's retirement investment plan.
ULIP or Unit Linked Insurance Plans: ULIP or Unit Linked Insurance Plans are investments added with tax benefits.
SCSS or Senior Citizens' Savings Scheme: These are government-supported investment schemes where residents above 60 years of age can open an SCSS account and invest in this policy for five years.
The majority of the investors want good returns on their invested money without any danger of losing their principal amount. That's one of the reasons why many investors are on the lookout for the best investment opportunities in India. Further, they look for the top investment ideas in India that can enable them to double their amount in just a few months or years without any risk.
Nevertheless, the low-risk and high-return combination does not exist. The reality is that returns and risks have a direct link, which means that the risks are more if the returns are higher and vice versa. One of the best investment strategies in India is choosing the right investment avenue and then matching your risk profile with the related risks of the products before investing.
Different investment schemes in India come with high risk but can produce greater inflation-adjusted returns compared to various long term asset classes. However, you can also find low-risk investment opportunities that bring lower returns. For the best and safe investment in India, it is important to make it a point to invest in both financial and non-financial assets.
Now that you have an idea of the different options for USA NRI investment in India, here are the reasons why NRI should invest in India:
To avail good returns: Regardless of what an NRI invests as per their pocket, it will result in the growth of India. The best thing for an NRI is that the more money they invest in the right direction at present will bring more money in hand when they need it.
For retirement planning: NRIs can secure their future by investing in India. NRI investments in India help NRIs in getting ready for old age. Investing in India is a secure and safe option for NRIs who want to stay close to their family members after retiring from work.
To create financial assets: Making the right investments in India can help the NRIs grow their financial wealth and eventually build up their financial assets. For example, NRIs can create financial assets by buying properties in India.
To get money in hand for the family: Extra NRI investments in India come to the rescue of the NRIs if they need to send money to their families back home. This offers extra money in the pockets of the NRIs, thus giving them the scope to help their families financially.
Speaking of the different NRI investment options in India, there are many. The best NRI investment options are as follows:
NRI fixed deposit accounts are India's most common form of NRI investment. With NRI fixed deposits, the NRIs can deposit money into their accounts, and the money is kept safe for a pre-determined period. NRI funding for projects in India is also available depending on the interests the NRIs are willing to pay for the available funding.
NRI investment in mutual funds is also a good medium for the NRIs to invest money in India. Mutual funds are massive pools of money made through the investors' money and are managed by certified and qualified professional finance managers. Speaking of NRI mutual fund taxation, NRIs do not have to pay any taxes on investments in equity funds, while they have to pay 20% tax when they sell debt funds after owning them for more than three years.
NRI bonds come with certain risks, but they also serve as the top investment option in India. The tax-free bonds in India for NRI include perpetual bonds and PSU or Public Sector Undertakings Bonds. There are no taxes on perpetual bonds, but with PSU bonds, the NRIs need to pay 20% tax if they sell the bonds after owning them for more than three years.
The pension scheme for NRI in India is one of the most reliable and best long term investment options backed by the government. By way of this scheme, the NRIs can invest either in debts, equities, or both. National Pension Scheme in India is for people between the ages of 18 and 60. The NRO and NRE bank accounts are generally used when investing in National Pension Scheme.
LIC schemes for NRI are compulsory savings leading to wealth creation. As these schemes mature, the family members of the NRIs and even the NRI policyholders can use the funds for different purposes like marriage, education of a child, repair of existing homes or acquisition of new homes and construction.
Can NRI invest in SIP? If this question is lurking in your mind, you must know that the NRIs do not require any special permission to invest in SIP. SIP investment for NRI allows the NRIs to invest small fixed amounts of money regularly in their chosen or desired mutual funds. A certain fixed amount is deducted per month from the bank account of the investor NRI and invested in his or her preferred mutual fund for activating a SIP.
If you are thinking about how can NRI invest in the Indian stock market, then you must know that aggressive investors can find it quite beneficial to invest in the Indian stock market. So, how NRI can invest in the Indian share market? NRIs need to have an NRO or NRE bank account, trading account and Demat account to invest in the Indian stock market.
There are large scale benefits of being NRI, but the best of NRI benefits in India is that you get the best of two worlds.
- You get a special bank account from an Indian bank.
- The earnings you make outside India are tax-free, provided you have paid all the concerning taxes in your country.
There are some of the greatest investment options available for NRIs in India. NRIs might be living outside India, but they can easily be a part of the economy back home through different investment options.
Can NRI invest in PMVVY?
Yes, NRIs can invest in Pradhan Mantri Vaya Vanadana Yojana as there are no specific eligibility requirements for PMVVY except that the subscriber should be a senior citizen.
How to invest dollars in India?
The RBI has released proper guidelines under LRS or Liberalised revenue Scheme permitting Indian residents to invest dollars in India without special permission.
Can NRI invest in PPF?
No, NRIs cannot make investments in PPF, and PPF investments are only for Indian citizens.
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