CS Sweta Abhishek
This article is an attempt to share my experience and to provide a brief knowledge of Company Incorporation/Formation/Registration procedure not only to my professional colleagues/friends but also to the entrepreneurs looking to set up their businesses in India.
Table of Contents
1. Private company
2. Public company
3. Procedure for incorporation/registration/formation of a company
4. New incorporation method
5. Regular incorporation method
A Company is an Artificial person in the eye of law. A company need to get incorporated/Registered to get a position of legal entity.
As per Companies Act, 2013 Minimum requirement to incorporate a Company requires the following:
Private Company:
A Private Limited Company is a Company limited by shares in which there can be maximum of 200 shareholders, no invitation can be made to public for subscription of share and debenture, there is restriction on transfer of shares and cannot accept deposits from public.
MINIMUM REQUIRMENT
As per Companies Act, 2013, every company shall have atleast one Indian Director i.e. who has stayed in India for a period of 182 days or more in the previous calendar year.
Directors and Shareholders can be the same persons
Minimum share capital shall be Rs. 1,00,000 (INR One Lakh)
Public Company:
A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits.
MINIMUM REQUIRMENT
As per Companies Act, 2013, every company shall have atleast one Indian Director i.e. who has stayed in India for a period of 182 days or more in the previous calendar year.
PROCEDURE FOR INCORPORATION/REGISTRATION/FORMATION OF A COMPANY
Obtain DSC (Digital Signature Certificate)
Obtain a Digital Signature Certificate from Authorized DSC issuing Authority.
Documents required for obtaining DSC :
Obtain DIN
Application to be made in Form DIR-3 for obtaining the DIN no. of the Directors after obtaining the DSC.
Documents required for obtaining Director Identification Number:
1. Scanned copy of Passport-sized photograph (JPEG Format)
2. Identity proof: Scanned copy of PAN card (passport if foreign national) and
3. Address Proof: Driver’s License/Voter ID/ Utilities Bill not more than two months old from the date of filing. Documents should be self-attested.
Note:
if DIN is applied for Foreign national: Details of a valid passport should be filled in form DIR-3 and a certified copy of same should be attached with DIN application. All supporting documents including photograph should be certified by the Indian Embassy or a notary in the home country of the applicant or by the Managing Director / CEO / Company Secretary of the company registered in India, in which applicant is a director. If a foreign director has a valid multiple-entry Indian visa or Person of Indian Origin card or Overseas Citizen of India card, then the attestation could also be done by Public Notary / Gazetted Officer in India or practicing CA / CS / CWA.
Register DSC
After obtaining the DIN No. register the DSC on MCA portal in the name of Director. In MCA portal go to MCA services-DSC Services-Register DSC.
Companies Act, 2013 provides two ways by which a Company can be incorporated:
NEW INCORPORATION METHOD:
MCA has tried to simplify the Incorporation procedure by introducing Form INC-29, an integrated form in which on a one go applicant can apply for the following:
1.Name Availability
Form INC-29 allows to apply for only One name (Make sure that proposed name is available by checking Name availability in MCA portal and adhere to the Companies Act, 2013 and rules thereunder (Naming Guidelines) and Companies (Incorporation) Amended Rules, 2016)
2.Apply DIN for Maximum of 3 Directors
One of the Director of the proposed Company must contain DIN No. before filing and for other Directors (max 3 Directors) of the Company can apply DIN in the integrated form.
Example: if there are 4 Directors in the proposed Company and none of the Director is having a DIN then out of 4 directors, 1 Director should apply DIN by applying in Form DIR-3 and rest of the 3 Directors DIN can be applied in the Form INC-29.
3. First Directors of the Company
4. Incorporation of Company
5.Situation of Registered office
6.Application of PAN
7.Application of TAN
8.Employer Registration under ESIC
Incorporation Documents to be attached in Form INC-29:
1. MOA (Memorandum of Association)
The Memorandum of a company shall be adopted in the specified form of Schedule I (Table A,B,C,D,E as applicable) of the Companies Act, 2013
2. AOA (Article of Association)
Article of the Company shall be adopted in the specified form of Schedule I (Table F,I,J as applicable) of the Companies Act, 2013
3. Identity proof and Residential Proof of the Directors who applied for DIN
4. Identity proof and Residential Proof of the Subscribers
5. Proof of Registered Office
1.No Objection Certificate from the Owner
2.Rent Agreement/Lease Agreement etc.
3.Utility Bill (Not more than 2 months old from the date of filing)
6. Declaration by Professional- INC -8
7. Affidavits and Declaration by the First Subscribers and Directors:
Note: The Memorandum of a company shall be adopted in the specified form of Schedule I (Table A,B,C,D,E as applicable) of the Companies Act, 2013 and Article of the Company shall be adopted in the specified form of Schedule I (Table F,I,J as applicable) of the Companies Act, 2013.
Subscriber Sheet of MOA & AOA: Last page of MOA and AOA consist of Subscriber sheet in which the following details of the subscribers to the MOA and AOA need to be mentioned:
“I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given); further I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in”
Payment of ROC Fee & Stamp Duty
After Uploading the Form INC-29 , one need to make payment of RoC fees and Stamp Duty electronically as per the Authorised Capital of the Company .
Verification of Documents
RoC scrutinises all the documents and forms and may suggest few changes as per the requirement. In such case, required changes has to be made by the Applicant and resubmit the form .
Incase of INC-29, only two resubmissions are allowed. If after two resubmission still some changes were found by RoC then fresh form need to be submitted along with RoC fee and Stamp Duty again.
Issue of Certificate of Incorporation
RoC approves the Incorporation of the proposed Company, when after scrutiny, RoC is satisfied with the Form and its attachments and issues "Certificate of Incorporation". Once the Incorporation Certificate is received , Company can start its Business.
REGULAR INCORPORATION METHOD
1. DIN Application
Obtain Director Identification Number for all the Directors of the proposed Company. Apply In Form DIR-3.
2. Name Approval (FORM INC-1)
Apply in Form INC-1 for Name approval of the Proposed Company after drafting the Main Object/ nature of Business of the proposed Company. Maximum Six names can be given in order of preference. RoC will approve the available and suitable name among the given names for the proposed Company.
Note:
Name should be selected as per the Companies Act, 2013 and Rules made thereunder. Applicants can themselves check the available names in MCA Website under the head MCA Services: Check Company Name. Name of the proposed Company should not fall under "Undesirable names" as mentioned in Companies (Incorporation) Rules, 2014 and Companies (Incorporation) Amendment Rules, 2016 .
Once name of the proposed Company is approved, it remains valid for 60 days from the date of approval. Within the said period of 60 days, Company has to be incorporated otherwise again name approval in Form INC-1 is required to be filed with MCA.
3. Draft MOA & AOA
Before Incorporation, MOA (Memorandum of Association) and AOA (Article of Association) of the proposed Company is drafted and printed. The Memorandum of a company shall be adopted in the specified form of Schedule I (Table A,B,C,D,E as applicable) of the Companies Act, 2013 and Article of the Company shall be adopted in the specified form of Schedule I (Table F,I,J as applicable) of the Companies Act, 2013.
Subscriber Sheet of MOA & AOA: Last page of MOA and AOA consist of Subscriber sheet in which the following details of the subscribers to the MOA and AOA need to be mentioned:
“I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given); further I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in”
4.Incorporation of Company
For incorporation of the Company, applicant is required to submit Form INC-7(Application for Incorporation of Company), Form DIR-12 (Appointment of Directors) & Form INC-22 (Situation of Registered Office of the Company) together.
Document to be attached in Form INC-7 (Application for Incorporation of Company)
1. MOA (Memorandum of Association)
2. AOA (Article of Association)
3. INC -8-Declaration by Professional(CA/CS/CMA)
4. INC-9-Affidavit from the Subscriber to the Memorandum (MOA)
5. INC-10-Verification of Signature of subscribers
6. Affidavit under Circular 11/2013
7. Identity proof and Residential Proof of the Subscribers
8. PAN Card of the subscribers
Document to be attached in Form DIR-12 (Appointment of Directors)
1. DIR-2-Consent to become a Director of the said Company
2. INC-9-Affidavit from the First Director in the AOA
Document to be attached in Form INC-22 (Situation of Registered Office of the Company)
1. No Objection Certificate from the Owner
2. Rent Agreement/Lease Agreement/ Sale Deed
3. Utility Bill (Not more than 2 months old from the date of filing)
NOTE:
5.Payment of ROC Fee & Stamp Duty
After Uploading the Form INC-7, INC-22 & DIR-12 , applicant need to make payment of RoC fees and Stamp Duty electronically as per the Authorised Capital of the Company .
6.Verification of Documents
RoC scrutinises all the documents and forms and may suggest few changes as per the requirement. In such case, required changes has to be made by the Applicant and resubmit the form .
7.Issue of Certificate of Incorporation:
RoC approves the Incorporation of the proposed Company when after scrutiny RoC is satisfied with the Form and its attachments and issues "Certificate of Incorporation". Once the Incorporation Certificate is received, Company can start its Business.
Legal Disclaimer:
The information/articles & any reply to the Comments in this blog are provided purely for informational and educational purpose only and purely based on my understanding/Knowledge. They do not constitute legal advice or legal opinions.
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Central Board of Excise and Customs had vide order no 1/2016- Service Tax Dated 25.04.2016 has extended due date for filing ST-3 Return for the period Oct to March 2016 period from 25.04.2016 to 29.04.2016. There has been difficulties in accessing return filing website www.aces.gov.in due to which this extension has been given.
Government has vided notification no 30/2016 dated 29.04.2016 has revised the due date for filing TDS statement by deductors as follows :
|
Sl No |
Quarter Ending |
Due date |
|
1 |
June 30. |
July 31st of Financial Year |
|
2 |
September 30. |
October 31st of Financial Year |
|
3 |
December 31. |
January 31st of Financial Year |
|
4 |
March 31. |
May 31st of following Financial Year |
Limited Liability Partnership (LLP) is combination of Partnership and Company and is governed by Limited Liability Partnership Act, 2008. LLP is a special partnership that gives protection to each partner against any negligence on the behalf of the other partners.
Table of Contents
1. Advantages of LLP
2. Procedure of LLP Incorporation
3. Documents required for obtaining DSC
4. Documents required for obtaining Director Identification Number
5. Incorporation Method
6. Requirements for filing LLP Form 1
7. Proposed monetary value of partner's contribution
8. Drafting of LLP Agreement
9. Filing of Form 3 – LLP Agreement
Advantages of LLP
1. Liability Protection: The liability protection that comes with a LLP is a big advantage. The individual partners are not held personally responsible for any company debts or obligations. Any lawsuit or claim against the company cannot be held against the partners, protecting personal assets.
2. Flexibility: Partners have flexibility within business ownership under a limited liability partnership. Each partner in the business has the ability to decide how much they want to contribute and how much of a partner they truly want to be in the business. They are also not obligated to participate in business meetings or consultations with anyone that they do not feel the need to.
3. Tax Advantages: The individuals in the partnership are liable for filing their personal income taxes as well as self employment taxes for the Internal Revenue Service. The partnership is not held responsible for paying these taxes. The credits and deductions of the company are divided among the partners according to the amount of interest in the company.
Procedure of LLP Incorporation
MINIMUM REQUIRMENT
Obtain a Digital Signature Certificate from Authorized DSC issuing Authority.
Documents required for obtaining DSC :
Proof of Identity
Proof of Residence
One self attested passport size photograph
Obtain DIN
Application to be made in Form DIR-3 for obtaining the DIN no. of the Directors after obtaining the DSC.
Documents required for obtaining Director Identification Number:
Register DSC
After obtaining the DIN No. register the DSC on MCA portal in the name of Designated Partner/Director. In MCA portal go to MCA services-DSC Services-Register DSC.
Incorporation Method
Name Approval (Form 1)
Apply in Form INC-1 for Name approval of the Proposed LLP after finalizing the nature of business of the proposed LLP. Maximum Six names can be given in order of preference. CRC will approve the available and suitable name among the given names for the proposed LLP.
Note: Applicants can themselves check the available names in MCA Website under the head MCA Services: Check LLP Name.
Once name of the proposed Company is approved, it remains valid for 3 months from the date of approval. Within the period of the said 3 months, LLP has to be incorporated otherwise again name approval in LLP Form 1 is required to be filed with MCA.
Requirements for filing LLP Form 1
Proposed business activity filled in LLP form 1 will be prefilled in LLP Form 2 i.e incorporation form. Applicants are advised to finalise the business activity of LLP before filing LLP Form 1.
Proposed monetary value of partner's contribution
Once proposed monetary value of partner's contribution has been filled and filed in Form 1, the monetary value of contribution in Form 2 should not be less than the value mentioned in form 1.For example: if partner's contribution in Form 1 was mentioned as Rs. 20 Lacs and after approval of Form 1, partners want to change and reduce the LLP contribution to Rs. 10Lacs, is not permissible. The Contribution can be more than the contribution stated in LLP Form 1 but cannot be less than contribution mentioned in LLP Form 1.
In case the Designated Partner is nominee of a body corporate, select the type of body corporate. Enter the corporate identity number (CIN) or foreign company registration number (FCRN) or Limited Liability Partnership Identification number (LLPIN) or Foreign Limited Liability Partnership Identification number (FLLPIN) or any other identification number, as applicable.
Details of minimum two designated partners of the proposed LLP, one of them must be a resident of India, is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.
Ensure that correct details have been provided as the same shall be automatically pre-filled in Form 2 for incorporation of LLP.
LLP Form 2 (Incorporation Document and Subscriber's Statement)
LLP Form 2 within 3 months from the date of approval of LLP Form 1
Mention Total Number of Partners and Designated Partners. Fill up details of same. Enter the amount of proposed monetary value of partner’s contribution in figures and system will automatically display the amount in words. Attach details in respect of names of partners/ nominees/ witnesses and their signatures in the format as Subscribers’ sheet attachment. Attach proof of register office address of LLP. An individual has to give prior consent to become a designated partner and LLP to file consent in format prescribed. Select the state and office of registrar in which registered office of the proposed LLP is to be situated.
In case the name includes banking, insurance, venture capital, mutual fund, stock exchange, Chartered Accountant, Company Secretary, Cost Accountant, Advocate, CA, CS, CWA, asset management, non banking financial, architect, merchant bankers, chit fund, securitization and reconstruction etc, a copy of the in-principle approval of the regulatory authority or council governing concerned profession should be attached with Form 2
Pay the prescribed registration fee as per LLP Rules, based on the total monetary value of contribution of partners in the proposed LLP
On submission of complete documents the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act will register the LLP and will issue a certificate of incorporation
Drafting of LLP Agreement
LLP agreement has to be drafted line with LLP Act. It is not mandatory to file LLP agreement at the time of registration and same can be file within 30 days. Designated partners are responsible for doing all acts, matters and things that are required to be done for complying with the provisions of the LLP act. They are liable to all penalties imposed on the LLP. So it is very important to draft LLP agreement with professional help.
The following clauses are important to be incorporated in agreement:
Filing of Form 3 – LLP Agreement
The LLP agreement has to be uploaded. Once it gets approved all the formalities for registration gets completed.
Note: Form 3 has to be uploaded within 30 days of incorporation of LLP otherwise penalty is Rs. 100/- per day.
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1. INCREASE IN THRESHOLD LIMIT FOR TDS UNDER VARIOUS SECTION IS AS FOLLOWS :
|
Present Section |
Heads |
Existing Threshold |
Proposed Threshold Limit |
|
1 92A |
Payment of accumulated balance due to an employee |
30,000 |
50,000 |
|
194BB |
Winnings from Horse Race |
5,000 |
10,000 |
|
194C |
Payments to Contractors |
Aggregate annual limit of 75,000 |
Aggregate annual limit of 1,00,000 |
|
194LA |
Payment of Compensation on acquisition of certain Immovable Property |
2,00,000 |
2,50,000 |
|
194D |
Insurance commission |
20,000 |
15,000 |
|
194G |
Commission on sale of lottery tickets |
1,000 |
15,000 |
|
194H |
Commission or brokerage |
5,000 |
15,000 |
2. REVISION IN TDS RATES :
|
Present Section |
Heads |
Existing Rate |
Proposed Rate of |
|
194DA |
Payment in respect of Life Insurance Policy |
2% |
1% |
|
194EE |
Payments in respect of NSS Deposits |
20% |
10% |
|
194D |
Insurance commission |
Rate in force (10%) |
5% |
|
194G |
Commission on sale of lottery tickets |
10% |
5% |
|
194H |
Commission or brokerage |
10% |
5% |
3. EXEMPTION FROM REQUIREMENT OF FURNISHING PAN TO NON RESIDENTS:
Section 206AA provide that in case deductee doesnot furnish PAN, tax need to be deducted @ 20%. This provisions were applicable to payments to non resident and foreign companies as well. Hence taxes were required to be deducted @20 % on foreign remittance though DTAA provided for lesser rate as invariably the foreign companies did not have PAN. Amendment to section 206AA provides much sort exemption to Non Residents and Foreign Companies from requirement of furnishing PAN. This exemption has come into effect from June 1st, 2016.
4. Form 15G/ 15H made applicable to TDS on Rent under section 194I.
Till now a person receiving interest income was entitled to furnish form 15G/ 15H to payer of interest to avoid deduction of TDS on interest. 15G/ 15H is declaration stating that total income of payee for the year will be below the threshold limit of income subject to tax and hence there will not any income tax liability.
From June 1st form 15G / 15H has been made applicable to deduction of tds u/s 194I, the receiver of rent can provide a declaration in form 15G/15H to payer of rent and claim exemption from deduction of tds from rental receipts.
5. CHANGES IN DUE DATES FOR FILING OF TDS RETURN AND ISSUE OF TDS CERTIFICATES :
This changes is effective for TDS return due after June 1st, 2016
6. TCS PROVISIONS EXTENDED TO SALE OF GOODS AND SERVICES :
TCS @ 1% has been made applicable to below from june1st 2016:
a. Sale of Motor vehicle of the value exceeding Rs 10 lakhs whether amount is received in cash, cheque or any other mode.
b. Sale in cash of any goods ( other than Bullion and Jewellery) or providing of any services ( other than payments on which tax is deducted at source under tds provisions) of value exceeding Rs 2 lakh, where sale consideration has been received in cash .
The revised tcs chart with effect from June 1st 2016, is as follows :
|
Nature of Goods |
TCS Rate |
|
Alcoholic liquor for human consumption |
1% |
|
Tendu Leaves |
5% |
|
Timber obtained under a Forest Lease |
2.5% |
|
Timber obtained by any mode other than Forest Lease |
2.5% |
|
Any other Forest produce not being forest timber or tendu leaves |
2.5% |
|
Scrap |
1% |
|
Minerals being Coal or Lignite or Iron ore |
1% |
|
Parking Lot, Toll Plaza, Mining and Quarrying |
2% |
|
Where ANY amount of consideration is received in cash on sale of :- Bullion (consideration exceeds Rs. 2 Lakhs), Jewellery (consideration exceeds Rs. 5 Lakhs), and with effect from June 1,2016,Any other goods and services (exceeding Rs. 2.00 Lakh) if TDS Provision is not applicable |
1% |
|
Where amount is received by cheque or any other mode on sale of :- Motor vehicle of the value exceeding Rs. 10.00 Lakh (applicable from June 1,2016) |
1% |
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The learned author identifies the amendments introduced by the finance act 2016 which impact corporate sector. he discussion is not confined only to provisions exclusively applicable to companies. some provisions which apply to companies and non company assessees have also been discussed.
1.Introduction
Corporate sector is an integral part of the company of a country and india can be no exception. this sector, besides contributing substantial revenues to the Govt.'s kitty, also enriches the GDP of the country year-after-year. Hence, its natural that each year's Finance acts have number of provisions concerning Corporates. In later paragraphs, an account of the provisions contained in the Finance act 2016, specifically applicable to companies are discussed and measures also applicable to companies.
2.Finance act provisions concerning corporate sector
These, in brief, are us under
(1)Lower tax rate for companies
In the previous year's budget ,the FM had announced that in a period of next 4 years, he would bring down the rate of corporate tax to 25% from 30%. He has made a beginning for this year's budget. the proposal is that new manufacturing companies incorporated on or after march 1, 2016 will have an option either to adopt a reduced corporate tax of 27.55%(Where the income exceeds Rs. 1crore but does not exceed Rs. 10crore)or 28.84% (where income exceeds 10crore) provided such companies do not claim profit linked /invest linked deduction or do not avail of investment allowance and accelerated depreciation. The new startup companies who do not wish to claim any exemption can straight away claim tax rate of 25%. The conditions to avail of 25% rate are:
(a)The company should be set up and registered on or after 1st day of march, 2016;
(b) the company should be engaged in the business of manufacture or production of any article or thing and is not engaged in any another business;
(c)the company while computing its total income has not claimed any benefit under section 10AA, benefit of accelerated depreciation, benefit of additional depreciation, investment allowance, expenditure on scientific research and any deduction in respect of certain income under part-C of chapter 6-A Other than the provisions of section 80JJAA; and
(d) the option is furnished in the prescribed manner before the due date of furnishing the return of income.
The issue is as to how the corporates will react to such proposals. The initiative seems to have been taken to give a boost to the manufacturing units in the country and make in india programme of the P M a success. But, the scheme is not expected to be enthusiastically welcomed in view of the fact that heavy capital is needed for manufacturing units and they may not like to continue with higher rates with incentives , which effectively bring down the rates to nearly 24%.
(2)Other amendments
(1)new startups, involving innovation development , setup before april1,2019 will get 100% deduction of profits for a period of 3 years out of 5 years (subject to satisfaction of certain conditions ). However, the MAT would be applicable on such startups. some conditions have already been started earlier . Others relate to benefit -under section 54E&54GB.
(2)Effective corporate tax rate for small companies having turnover less than 5crore is reduced to 31.96%. the reduced corporate is expected to lead growth of such companies.
(3)the act taxes long term capital gains in the hands of non residents @10% which arise from the transfer of unlisted shares of a company in which public are not substantially interested, i.e. private companies. this ensures taxability of gains arising from transfer shares of unlisted companies and likely to incentivize corporate reorganization in india.
(4)If an assessee purchases a luxury car exceeding the price of Rs.10lakhs or purchase goods or avails of services exceeding 2lakhs in cash, tax at source is to be collected @1% This measure is intended to provide money trail and give clues regarding black money invested in such assets.
(5)The existing provision of sub-section (1A) in section 32AC of the act provides for investment allowance at the rate of 15% on investme4nt made in new assets (plant and machinery) exceeding Rs.25crore in a previous year by a company engaged in manufacturing or production of any article or thing subject to the condition that the acquisition and installation has to be done in the same previous year. this tax incentive is available up to 31-3-2017.
The dual condition of acquisition and installation can cause a genuine hardship in cases in which assets having been acquired could not be installed in same previous year . Hence sub section (1A ) in section 32AC has been amended so as to provide that the acquisition of the plant $machinery of the specified value has to be made in the previous year. However installation may be made by 31-03-2017.
The dual condition of acquisition and installation can cause genuine hardship in case in which assets have been acquired could not be installed in same previous year. Hence sub section (1A) of section 32AC has been amended so as to provide that the acquisition of the plant &machinery of the specified values has to be made in the previous year .however , installation may be made by 31-03-2017 in order to avail the benefit of investment allowance of 15%. It is further provided that where the installation of the new asset in a year or other than the year of acquisition, the deduction under this sub section shall be allowed in the year in which the new asset is installed.
(6) A person resident in india or a non resident having a permanent establishment in india , making payment exceeding in aggregate Rs.1lakh in a year towards online advertisement to a non resident, who does not have a permanent establishment in india would have to withhold tax at 6% of gross amount paid ,as an equalisation levy which is to discharged by way of withholding this provision is intended to bring alignment of domestic tax law with OECD recommendation on BEPS on digital economy . this provision would impact the income of non resident e-commerce giants providing online advertisement services (such as Google, yahoo, etc...)or other services to the companies in india
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Section 2 (42A) provides that short term capital asset means a capital asset held by an assessee for not more than thirty six months immediately preceding the date of its transfer.
It is provided that in the case of a security ( other than a unit) listed in a recognised stock exchange in indiaor a unit of the unit trust of india established under the Unit Trust of India Act, 1963 or a unit of an equity oriented fund or a zero coupon bond, the provisions of this clause shall have effect as if for the words " thirty Six Months" the words " twelve months" had been substituted.
The Finance Act, 2016 has inserted a third proviso to section 2 (42A) from the assessment year 2017-18 so as to provide that in the case of a share of a compnay ( not being share listed in a recognised stock exchange in India), the provisions of section 2 ( 42A) shall have effect as if for the workds " thirty Six Months" the words " Twety Four Months " had been substituted.
The advertisement charges for advertising on google, facebook, Linkedin and other digital advertising platform are usually paid out of india in foreign currency, though entire advertising activity happens in india, and escapes any taxation in India.
The Indian Finance Minister Sri Arun Jaitly has introduced the equalization levy with effect from june 1, 2016. The provision for equalization are provided in Chapter VIII of the Finance Act 2016.
Brief summary of Provisions are as follows :
Rate of tax and Services Covered :
The equalization levy would apply @ 6% on amount paid or payable for Online advertisement, any provision for digital advertising space or any facility service for the purpose of online advertisement or any other service as may be notified later by government. Levy is applicable on amount paid or payable for above services to non-resident.
The scope of the levy may be expanded to cover a wider range of digital goods and services as time progresses.
Equalization levy is aimed at taxing business-to-business (B2B) e-commerce transactions. Levy is not applicable where payment is not for the purposes of carrying out business or profession.
Levy is not applicable if aggregate of payment to a non resident during the financial year does not exceed Rs 1 lakh.
Collection and deposit and filing of return :
The said tax of 6% is required to be deducted from the amount paid or payable to non-resident for specified services.
Tax so deducted is required to deposited on a monthly basis within 7th of following month. Interest at the rate of 1 % per month or part of month is applicable for delayed deposit of taxes.
Annual statement with respect to levy is required to filed with specified period form end financial year in which service are provided. To rectify any mistake or omission in the statement filed revised statement can be filed within 2 years from end of financial year in which service is provided. Statement will be processed and intimation for any demand or refund will be sent with in end of 1 year from the end of financial year in which statement is filed. Any mistake in such intimation can be rectified within one year from the end of financial year in which intimation was issued.
Penalty :
Non deduction of equalization of levy would attract penalty equal to amount of equalization levy in addition to payment of equalization levy and interest on delayed payment.
Where Equalization Levy is deducted but not deposited with government would attract penalty of Rs 1,000 per every day during which such failure continues. This penalty is subject to maximum limit of equal to amount of equalization levy.
Non filing of annual statement would attract penalty of Rs 100 for each day during which the failure continues.
No penalty shall be imposed where assessee proves to the satisfaction of the Assessing Officer that there was reasonable cause for the said failure.
Chapter provides for appeal to Commissioner ( appeals) and to Income Tax Tribunal against order levying penalty.
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