Compliances for Private Limited Company in India

“If you’re operating a business registered in India, staying informed about mandatory compliance requirements is crucial, as outlined by corporate laws such as the Companies Act, 2013, Income Tax Act 1961, GST Act, and other applicable acts.

Ensuring compliance with these regulations is paramount for private limited companies. Given that many startups opt for this structure, understanding the annual compliance obligations for a Private Limited Company becomes a key concern for most growing enterprises.

A Private Limited Company offers a unique form of limited liability ownership. Its distinct features, including limited liability for shareholders, separate legal identity, ability to raise equity funds, and perpetual succession, contribute to its popularity. This structure is highly recommended for small and medium-sized businesses, whether family-owned or professionally managed.”

What are the Compliances for Private Limited Company?

“The landscape of compliance for private limited companies has evolved significantly over time.

Navigating the statutory requirements for a private company under the Companies Act of 2013 involves:

  • 1. Commencement of business – Filing of INC-20A

  • “For companies incorporated in India after November 2019 with a share capital, securing the Commencement of Business Certificate within 180 days of incorporation is compulsory.

Failure to do so attracts penalties: a fine of Rs. 50,000 for the company itself, along with Rs. 1,000 per day for directors, for each day of default.”

  • 2. Auditor Appointment – Filing of Form ADT-1

“ADT-1: Within 30 days of incorporation, every Indian registered company must appoint a statutory auditor.”

  • 3. Filing of GST Returns – GSTR 1 & GSTR 3B – Monthly/Quarterly

In India, businesses registered under the Goods and Services Tax (GST) system are required to file various returns to comply with tax regulations. Two key returns are the GSTR-1 and GSTR-3B, which serve different purposes and have different filing frequencies.

  1. 1. GSTR-1:
    • Frequency: Monthly
    • Purpose: GSTR-1 is a monthly return that contains details of outward supplies or sales made by the taxpayer. It includes information such as invoices issued, credit or debit notes issued, and details of exports and supplies to SEZs (Special Economic Zones).
    • Due Date: Typically, the due date for filing GSTR-1 is the 11th of the following month. However, the government may announce extensions or changes to the due dates from time to time.
  2. 2. GSTR-3B:
    • Frequency: Monthly
    • Purpose: GSTR-3B is a summary return that taxpayers use to report their summarized sales and input tax credit (ITC) claims for the month. It is a self-declaration form, meaning taxpayers enter the summary figures directly without invoice-level details.
    • Due Date: The due date for filing GSTR-3B is usually the 20th of the following month.

For certain eligible taxpayers, quarterly filing options are available for both GSTR-1 and GSTR-3B. However, it’s essential to note that while the filing frequency may differ, the information reported in these returns should reconcile.

Businesses must ensure timely and accurate filing of these returns to avoid penalties and maintain compliance with GST regulations. It’s also advisable to stay updated with any changes or notifications issued by the GST authorities regarding filing requirements or due dates.

  • 4. Accounting and Book Keeping Services

  • ⦁ Accounting and bookkeeping services for private limited companies are essential for maintaining financial records accurately and ensuring compliance with regulatory requirements. Here’s some key information about these services:
  1. 1. Scope of Services: Accounting and bookkeeping services encompass various financial tasks, including:
    • ⦁ Recording financial transactions: This involves accurately documenting all financial transactions, such as sales, purchases, expenses, and payments, in the company’s books of accounts.
    • ⦁ Preparation of financial statements: Service providers compile financial statements like the balance sheet, profit and loss statement, and cash flow statement based on the recorded transactions.
    • ⦁ Reconciliation: Reconciling bank statements, accounts receivable, and accounts payable to ensure accuracy and identify discrepancies.
    • ⦁ Payroll processing: Calculating employee salaries, deductions, and taxes, as well as generating pay stubs and filing payroll taxes.
    • ⦁ Inventory management: Tracking inventory levels, valuation, and cost of goods sold (COGS) calculations.
    • ⦁ Compliance: Ensuring adherence to applicable accounting standards, tax regulations, and statutory requirements.
  2. 2. Benefits of Outsourcing: Many private limited companies opt to outsource accounting and bookkeeping services due to various benefits, including:
    • ⦁ Cost-effectiveness: Outsourcing can be more affordable than hiring in-house staff, as it eliminates the need for salaries, benefits, and training costs.
    • ⦁ Expertise: Outsourcing firms often have experienced professionals with expertise in accounting and finance, providing high-quality services.
    • ⦁ Focus on core activities: By delegating accounting tasks to experts, company management can focus on core business activities and strategic decision-making.
    • ⦁ Compliance assurance: Outsourcing firms stay updated with changing regulations, ensuring that the company remains compliant with tax and accounting standards.
  3. 3. Choosing a Service Provider: When selecting an accounting and bookkeeping service provider for a private limited company, consider factors such as:
    • ⦁ Experience and reputation in the industry.
    • ⦁ Range of services offered and customization options.
    • ⦁ Technology and software used for accounting processes.
    • ⦁ Data security measures and compliance with data protection regulations.
    • ⦁ Service level agreements (SLAs) and responsiveness to queries and concerns.

Outsourcing accounting and bookkeeping services can streamline financial management processes, enhance accuracy, and ensure compliance, thereby contributing to the overall efficiency and success of a private limited company.

  • 5. Filing of TDS Returns on Quarterly Basis

Filing Tax Deducted at Source (TDS) returns on a quarterly basis is a critical compliance requirement for entities in India that deduct TDS from certain payments. Here’s some key information about filing TDS returns quarterly:

  1. 1. Frequency: TDS returns are filed quarterly, meaning they are submitted every three months.
  2. 2. Types of TDS Returns: There are different types of TDS returns based on the nature of payments and deductees. The most common ones include:
    • ⦁ Form 24Q: For TDS deducted on salaries.
    • ⦁ Form 26Q: For TDS deducted on payments other than salaries.
    • ⦁ Form 27Q: For TDS deducted on payments made to non-residents.
    • ⦁ Form 27EQ: For TDS deducted on payments made under the provisions of the Income Tax Act other than salaries.
  3. 3. Due Dates: The due dates for filing quarterly TDS returns are as follows:
    • ⦁ For the quarter ending June 30th: July 31st
    • ⦁ For the quarter ending September 30th: October 31st
    • ⦁ For the quarter ending December 31st: January 31st
    • ⦁ For the quarter ending March 31st: May 31st
  4. 4. Information Required: To file TDS returns, entities need to provide details such as:
    • ⦁ TAN (Tax Deduction and Collection Account Number)
    • ⦁ PAN (Permanent Account Number) of deductors and deductees
    • ⦁ Amount of TDS deducted
    • ⦁ Details of payments and deductions made
    • ⦁ Challan details for TDS deposited
  5. 5. Mode of Filing: TDS returns can be filed online through the Income Tax Department’s website using Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). Alternatively, authorized intermediaries or professionals can assist with filing returns on behalf of entities.
  6. 6. Penalties for Non-Compliance: Failure to file TDS returns within the prescribed due dates can result in penalties. The penalty amount varies based on the delay in filing and the nature of the default.
  7. 7. Reconciliation: It’s essential to reconcile TDS returns with TDS certificates (Form 16 and Form 16A) issued to deductees to ensure accuracy and consistency in tax reporting.

Compliance with TDS provisions and timely filing of TDS returns is crucial to avoid penalties and maintain good standing with the tax authorities in India. Businesses should stay updated with any changes in TDS regulations and ensure accurate filing of returns to fulfill their tax obligations effectively.

  • 6. Filing of Income Tax Return of the Private Limited Company

Filing income tax returns for a private limited company in India is a crucial annual compliance requirement. Here’s some key information about the process:

  1. 1. Filing Deadline: The deadline for filing income tax returns for private limited companies in India is typically October 31st of the assessment year following the financial year for which the return is being filed. However, due dates may vary depending on any extensions granted by the tax authorities.
  2. 2. Preparation of Financial Statements: Before filing the income tax return, the company must prepare its financial statements, including the balance sheet, profit and loss account, and other relevant documents in compliance with the Companies Act, 2013.
  3. 3. Tax Computation: The company must compute its taxable income for the financial year based on the provisions of the Income Tax Act, 1961. This involves adjusting the financial results as per the tax laws, including deductions, exemptions, and allowances available to the company.
  4. 4. Filing Forms: The income tax return for a private limited company is typically filed using Form ITR-6, which is specifically designed for companies other than those claiming exemption under section 11 (Income from property held for charitable or religious purposes) of the Income Tax Act.
  5. 5. Tax Payment: Before filing the income tax return, the company must ensure that any tax liability for the financial year has been paid in full. This includes advance tax payments made during the year and any self-assessment tax paid before filing the return.
  6. 6. Filing Procedure: The income tax return can be filed electronically on the Income Tax Department’s e-filing portal. The company must register on the portal and then upload the necessary documents and information as required by Form ITR-6.
  7. 7. Auditor’s Report: In certain cases, the company may be required to obtain an auditor’s report certifying various details included in the income tax return. This report is annexed to the return while filing.
  8. 8. Penalties for Non-Compliance: Failure to file the income tax return within the specified deadline may attract penalties, including interest on tax due and late filing fees. It’s essential for companies to adhere to the filing deadlines to avoid such penalties.
  9. 9. Annual Compliance: Filing the income tax return is part of the annual compliance requirements for private limited companies in India. Companies must also comply with other regulatory requirements, including annual general meetings, maintenance of statutory registers, and filing of annual financial statements with the Registrar of Companies.

Ensuring timely and accurate filing of income tax returns is essential for private limited companies to meet their tax obligations and maintain compliance with Indian tax laws. Companies may seek the assistance of tax professionals or chartered accountants to ensure proper tax planning and compliance.

  • 7. Statutory Audit under Companies Act, 2013
  1. 1. Mandatory Requirement: Every company registered under the Companies Act, 2013, is required to conduct a statutory audit of its financial statements annually. This includes all types of companies, such as private limited companies, public limited companies, and one-person companies (OPCs).
  2. 2. Appointment of Auditor: The auditor conducting the statutory audit must be a practicing Chartered Accountant (CA) or a firm of Chartered Accountants appointed by the company’s shareholders at the Annual General Meeting (AGM). The appointment is typically made for a term of one year and must be ratified at each subsequent AGM.
  3. 3. Scope of Audit: The statutory audit encompasses a comprehensive examination of the company’s financial records, including the balance sheet, profit and loss account, cash flow statement, and notes to accounts. The auditor verifies the accuracy of financial transactions, ensures compliance with accounting standards and legal requirements, and assesses the company’s internal controls and financial reporting practices.
  4. 4. Audit Report: Upon completion of the audit, the auditor issues an audit report expressing their opinion on the fairness and accuracy of the company’s financial statements. The audit report includes various disclosures, such as the auditor’s opinion, observations, qualifications (if any), and compliance with auditing standards.
  5. 5. Filing of Audit Report: The audited financial statements and the audit report must be filed with the Registrar of Companies (RoC) within 30 days from the date of the AGM. The filing is done electronically on the Ministry of Corporate Affairs (MCA) portal using Form AOC-4.
  6. 6. Penalties for Non-Compliance: Failure to conduct a statutory audit or file the audit report within the specified timeline may result in penalties imposed by the RoC. Additionally, non-compliance with auditing standards or misrepresentation of financial statements can lead to legal consequences for the company and its directors.
  7. 7. Role of the Auditor: The statutory auditor plays a crucial role in providing assurance on the company’s financial statements, enhancing transparency and investor confidence, and facilitating informed decision-making by stakeholders.
  • 8. Filing of Applicable ROC Returns
  • a) Form AOC-4

Form AOC-4 is a document required for the filing of financial statements by companies registered in India, as mandated by the Ministry of Corporate Affairs (MCA). Here’s some key information about Form AOC-4:

  1. 1. Purpose: Form AOC-4 is used for filing financial statements with the Registrar of Companies (RoC) in India. These financial statements typically include the balance sheet, profit and loss account, cash flow statement, and notes to accounts.
  2. 2. Applicability: Form AOC-4 is applicable to all types of companies registered under the Companies Act, 2013, including private limited companies, public limited companies, and one-person companies (OPCs).
  3. 3. Filing Timeline: Companies are required to file Form AOC-4 within 30 days from the date of the annual general meeting (AGM) at which the financial statements are adopted. In case the AGM is not held, the financial statements must be filed within 30 days from the date on which the AGM should have been held.
  4. 4. Contents of Form AOC-4: The form includes various details about the company’s financial performance and position, including:
    • Balance Sheet: Details of assets, liabilities, and equity as of the reporting date.
    • Profit and Loss Account: Summary of the company’s revenues, expenses, and net profit or loss for the financial year.
    • Cash Flow Statement: Information about the company’s cash inflows and outflows during the financial year.
    • Notes to Accounts: Additional explanations and disclosures related to items in the financial statements.
  5. 5. Auditor’s Report: Form AOC-4 may also include the auditor’s report, which provides an independent opinion on the fairness and accuracy of the financial statements.
  6. 6. Mode of Filing: Form AOC-4 is filed electronically on the MCA’s portal. Companies are required to register on the portal and upload the necessary documents and information in the prescribed format.
  7. 7. Penalties for Non-Compliance: Failure to file Form AOC-4 within the specified timeline may result in penalties imposed by the RoC. Additionally, non-compliance with filing requirements can lead to legal consequences for the company and its directors.
  • b) MGT-7A (small companies and OPC), MGT-7 (others)
  1. 1. MGT-7A (For Small Companies and One Person Companies – OPC):Purpose: MGT-7A is specifically designed for small companies and One Person Companies (OPCs) to file their annual returns with the Registrar of Companies (RoC).Applicability: Small companies and OPCs, as defined under the Companies Act, 2013, are required to file MGT-7A.
  2. 2. Filing Timeline: Companies must file MGT-7A within 60 days from the conclusion of the annual general meeting (AGM) of the company.
  3. 3. MGT-7 (For Other Companies): Purpose: MGT-7 is used by companies other than small companies and OPCs to file their annual returns with the RoC.
  4. 4. Applicability: All types of companies registered under the Companies Act, 2013, except small companies and OPCs, are required to file MGT-7.
  5. 5. Filing Timeline: Companies must file MGT-7 within 60 days from the conclusion of the AGM of the company.
  • 8. Filing of Other Forms like ADT-1, DIR-3 KYC, DPT-3, MBP-1, MSME-1 and other applicable forms.
  1. 1. ADT-1 (Appointment of Auditor):
    • Purpose: ADT-1 is filed for the appointment of auditors by companies.
    • Filing Timeline: Within 15 days from the date of appointment of the auditor at the company’s general meeting.
  2. 2. DIR-3 KYC (Director’s KYC):
    • Purpose: DIR-3 KYC is filed to update and verify the KYC details of directors of companies.
    • Filing Timeline: Annually, by April 30th of the financial year for which the KYC is to be updated.
  3. 3. DPT-3 (Return of Deposits):
    • Purpose: DPT-3 is filed to furnish details of deposits accepted by the company.
    • Filing Timeline: Annually, by June 30th of the financial year for which the return is being filed.
  4. 4. MBP-1 (Disclosure of Interest by Directors):
    • Purpose: MBP-1 is filed by directors to disclose their interest in any contract or arrangement entered into by the company.
    • Filing Timeline: Whenever there is any change in the director’s interest or at the first board meeting of the financial year.
  5. 5. MSME-1 (Initial Return for Outstanding Dues to MSMEs):
    • Purpose: MSME-1 is filed to report outstanding dues to Micro, Small, and Medium Enterprises (MSMEs).
    • Filing Timeline: Within 30 days from the end of each half-year (April to September and October to March).

Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Instances of such events are:

  • ⦁ Change in Authorised or Paid up Capital of the Company.
  • ⦁ Allotment of new shares or transfer of shares
  • ⦁ Giving Loans to other Companies.
  • ⦁ Giving Loans to Directors
  • ⦁ Appointment of Managing or whole time Director and payment of remuneration.
  • ⦁ Loans to Directors
  • ⦁ Opening or closing of bank accounts or change in signatories of Bank account.
  • ⦁ Appointment or change of the Statutory Auditors of the Company.

Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.

In summary, keeping up with all the rules and regulations for private limited companies is super important. It’s like following a roadmap to make sure everything runs smoothly and stays legal. From paying taxes to doing audits and filing paperwork, it’s all about staying on top of things.

With laws changing now and then, it’s crucial for these companies to keep an eye out for any updates. This isn’t just about following the rules – it’s also about being honest and responsible with the company’s actions.

By making sure everything is done right, these companies not only avoid trouble but also gain trust from customers, investors, and others. So, while it might seem like a lot of work, staying compliant is key to running a successful and trustworthy business in today’s world.

Union Budget-2023-24 – Amendments in GST

Here is a summary of amendments proposed by the Union Budget in GST :

1. ITC Denied on goods or services procured for Corporate Social Responsibility (CSR)

  • ⦁ Union budget, 2023-24 has proposed to restrict the ITC on goods and services procured for Corporate Social Responsibility.
  • ⦁ However, so far, companies are entitled to take such ITC unless the same is restricted under any other clause.

2. Amendments on offenses and Compounding provisions

  • ⦁ Following offenses has been decriminalized under section 132 of CGST Act:
    • ⦁ obstructs or prevents any officer in the discharge of his duties under this Act;
    • ⦁ tampers with or destroys any material evidence or documents;
    • ⦁ fails to supply any information which he is required to supply under this Act
  • ⦁ The minimum and maximum amounts for compounding of offences reduced to 25 per cent and 100 per cent of tax involved, respectively.

3. Penalties on e-commerce operators (Section 122 of CGST Act)

  • ⦁ Specific penalty provisions has been incorporated for e-commerce operator if it:
    • ⦁ Allows supply of goods or services by unregistered person through it, other than persons who are specially exempted, or
    • ⦁ Allows inter-State supply of goods or services or both by a person who is not eligible to make such supply; or
    • ⦁ Fails to furnish correct information in TCS return
  • Defaulting e-commerce operator shall be liable to pay penalty of higher of following amounts:
    • ⦁ INR 10,000; or
    • ⦁ Amount of tax involved

4. Maximum time limit specified to file GST Returns

  • ⦁ Till date, a registered person is allowed to file pending GST returns (GSTR-1, GSTR-3B, GSTR-9, GSTR-9C or any other GST returns) with applicable interest and penalties without any limit of period.
  • ⦁ Union budget has proposed to impose time limit of 3 years from due date for filing of following returns:
    • ⦁ GSTR-1: Return of outward supplies
    • ⦁ GSTR-3B: Return of summary of outward and inward supplies and corresponding tax payable
    • ⦁ GSTR-9: Annual return
    • ⦁ GSTR-9C: ITC Reconciliation
    • ⦁ GSTR-8: TCS Return
  • ⦁ Such a period of 3 years can be further extended by the government.

5. Extension of Composition Scheme to taxpayer selling through e-commerce operator

  • ⦁ As per Section 10(2) and (2A) of CGST Act, a registered person engaged in making supply of goods through e-commerce operators is not entitled to opt for composition scheme.
  • ⦁ Union budget has proposed to extend the facility of composition scheme to such dealers as well.

6. Other Amendments:

  1. 1. It has been clarified that Entry No. 7, High seas sales, and Entry No. 8, supply of goods from bonded warehouses before clearance for home consumption, are effective from 01.07. 2017 itself. Further, no refund shall be granted of tax collected in pursuance of such entries so far.
  2. 2. In definition of “online information and database access or retrieval services’ (‘OIDAR’), condition of “essentially automated and involving minimal human intervention” has been removed.
  3. 3. Where both supplier and recipients are located in India, place of supply In case of transportation of goods to outside India was “designation of goods”. Such provision has been omitted and now in such case, place of supply will be:
    1. a. B2B Supplies: Location of Recipient of service
    2. b. B2C Supplies: Place where goods are handed over for transportation
  1. 4. Power granted to prescribe the manner and conditions for computation of interest in case of delayed refunds.
  2. 5. Power is granted to the GST portal to share information provided by taxpayers with other systems notified by the Government. Such details to be shared post obtaining consent of supplier/recipient as applicable. 

The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Union Budget – FY 2023-24 – Income Tax Amendments

Union budget 2023-24 has proposed various amendments in the Income tax act such as Change in slab rates, extended benefits to MSME Enterprises, relaxation in tax audits threshold limits, Relaxations for cooperative societies etc.

During the budget, every person, from a big corporation to a small businessman, looks after amendments in Income tax because it does not only impact pockets of taxpayers but also decides on compliances a business needs to carry out. Every extra compliance leads to an increase in cost and have other impacts as well.

In this article a detailed discussion is made of amendments proposed in Income Tax Act, 1961 by Union Budget FY 2023-2024.

1. Amendments in Personal Income Tax

  • ⦁ Union Budget, 2023-24 has proposed amendment in slab rates under section 115BAC (i.e., New Tax Regime) within an objective to reduce income tax liabilities.
  • ⦁ Following are the new slab rates:
Income RangeIncome Tax Rate
Upto INR 3,00,000NIL
INR 3,00,000 to INR 6,00,0005% on income above INR 3,00,000
INR 6,00,000 to INR 9,00,00015000+ 10% on Income above INR 6,00,000
INR 9,00,000 to INR 12,00,00045,000 + 15% on income more than INR 9,00,000
INR 12,00,000 to INR 1500,00090,000 + 20% on income more than Rs 12,00,000
Above INR 15,00,000150,000 + 30% on income more than Rs 15,00,000
  • ⦁ Further, tax rebate under section 87A has been increased from INR 12,500 to INR 25,000 under the new regime. Therefore, the threshold limit of exempted income has been increased from INR 5,00,000 to INR 7,00,000.
  • ⦁ Highest slab of surcharge has been reduced from 37% to 25%. Therefore, the highest rate of income tax has been reduced from 42.744% to 39%.
  • ⦁ New tax regime shall be the default scheme and if the taxpayer wants to opt for the old regime then he has to specifically opt the same.

2. Enhancement in Threshold limit of Presumptive Taxation

  • ⦁ Presumptive income allows ad hoc deduction of expenses for small business and professionals.
  • ⦁ Threshold limit to avail benefit of presumptive taxes has been enhanced:
Nature of BusinessExisting Threshold limit to avail presumptive taxationProposed Threshold limit to avail presumptive taxation
Eligible BusinessINR 2 CroresINR 3 Crores
Eligible ProfessionalINR 50 LacsINR 70 Lacs
  • ⦁ However, the benefit of enhanced threshold limit shall be provided where atleast 95% of receipts and payments are made through non-cash methods.

3. Amendment in TDS & TCS Provisions

  • ⦁ As per Section 194N, cash withdrawal from a bank exceeding INR 1 Crores is subject to TDS @ 2%. The Union Budget has proposed to enhance the threshold limit of INR 1 Crore to INR 3 Crores where the recipient is a Co-operative society.
  • ⦁ TDS on winning from online games shall be deducted at rates in force without any threshold limit. TDS shall be deducted at the time of withdrawal of funds or at the end of the Financial year.
  • ⦁ Interest to listed debentures has been brought under TDS ambit. TDS shall be deducted @ 10%.
  • ⦁ TDS on withdrawal of funds from employees provident funds (EPF) shall be deducted @ 20% in case of non-furnishing of PAN. Earlier TDS was required to be deducted at maximum marginal rate.
  • ⦁ Refund of TDS Deducted across Financial years
    • ⦁ Taxpayers generally face addition with respect to income disclosed in ITR of a year and TDS on such income is deducted by the counterparty in subsequent financial year.
    • ⦁ Union budget has provided that in such cases, assessee can make an application in prescribed form to the Assessing officer to claim benefit of such TDS.
    • ⦁ Such an application can be filed within 2 years from the end of the financial year in which TDS has been deducted.
    • ⦁ Further, the provisions of rectification shall also apply and the assessee also can make an application for rectification. For the purpose of rectification, a period of 4 years shall be reckoned from the end of the financial year in which such tax has been deducted. 
  • ⦁ As per Section 206AB, TDS shall be deducted at higher rate from specified persons, i.e., persons who have failed to file income tax returns. Union budget has excluded following persons from specified persons list:
    • ⦁ a non-resident who does not have a permanent establishment in India;
    • ⦁ a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf.

4. Deductions to be allowed on payment basis

  • ⦁ In order to provide more security to MSME, the union budget has amended Section 43B to provide that deduction of sum payable to Micro, Small and Medium Enterprises (MSME) shall be allowed only on payment basis.
  • ⦁ So far, deduction for deposit taken from NBFC is permitted during the Financial year in which payment is made. Now, Government shall prescribe the list of NBFCs for Section 43B.

5. Lower rate of Income Tax for manufacturing cooperative societies

  • ⦁ A new section 115BAE is proposed to be inserted, which provides that following reduced rates of income tax shall apply:
    • ⦁ Manufacturing co-operative societies (established on or after April 1st, 2023, and commencing production on or before March 31st, 2024): Income tax shall be charged at 15% (plus surcharge of 10% & cess)  [provided that specified incentives or deductions are not availed]. 
    • ⦁ Income not derived or incidental to manufacturing or production: Income shall be charged at 22%.

6. Income tax on maturity proceeds of Life Insurance Policy

  • ⦁ Section 10(10D) provides that the amount received on maturity of life insurance policies is exempted from income tax subject to given conditions.
  • ⦁ Union budget has proposed to withdraw such exemption on insurance policies, other than unit linked insurance policies, issued on or after 01.04.2023 if the amount of premium payable exceeds INR 5 lacs for any of the previous year during the term of policy.
  • ⦁ In case of more than one life insurance policies, other than ULIP, threshold hold of INR 5 Lacs shall be checked for all premiums paid during the year.
  • ⦁ However, such exemption is not withdrawn on the sum received on death of a person.
  • ⦁ Amount received on maturity, net of non-tax deducted premium, shall be taxed under head “Other Incomes” in the year of receipt.

7. Exemptions to Newly established Units in Special Economic Zones (Section 10AA)

  • ⦁ Section 10AA provides for 100% and 50% deduction of profit derived from the export by newly set-up units in SEZ.
  • ⦁ As per amendments, deduction under section 10AA shall be provided only if return is filed within the due date specified u/s 139(1).
  • ⦁ Further, Deduction shall only be allowed if the proceeds from the sale of goods or provision of services are received within 6 months from the end of the previous year or within such further period as the competent authority may allow in this behalf.

8.  Amendments in Capital Gain

  • ⦁ Similar to goodwill, cost of acquisition and cost of improvement of self-generated intangible assets and rights shall be considered as “NIL” while computing capital gains on sale of such asset.
  • ⦁ Capital gain arise on transfer or redemption or maturity of Market Linked Debenture shall be considered capital gains arising from the transfer of a short-term capital asset. Further, while computing such capital gain, no deduction shall be allowed in respect of securities transaction tax.
  • ⦁ Investment under Section 54 and Section 54F has been capped for INR 10 Crores. Therefore, if cost of new asset exceeds INR 10 Crores, the amount exceeding INR 10 Crores shall not be taken into account.
  • ⦁ The transformation of physical gold into Electronic Gold Receipts and vice versa by a Vault Manager registered with the Securities and Exchange Board of India (SEBI) shall not be considered as a transfer for purposes of capital gains taxation. 
  • ⦁ While computing cost of acquisition of the asset or the cost of improvement, no additional shall be made of interest expense for which deductions are already claimed u/s Section 24(b) or or Chapter VI-A of Income Tax Act.

9. Other Amendments

  • ⦁ Benefit of Section 115BAC (i.e., new tax regime) is proposed to be extended to Association of Persons (AOP) (other than co-operative societies), Body of Individuals (BOI) and Artificial Judicial Persons (AJP). This will help in reduction of Income tax liabilities. 
  • ⦁ For the purpose of claiming deductions under section 80-IAC, incorporation date of eligible start-ups is proposed to be extended from 1st April, 2023 to 1st April, 2024.
  • ⦁ The exemption can be claimed by trusts or institutions only if return of income is furnished within time limit prescribed under section 139(1) or 139(4).
  • ⦁ Government has provided for a new appellate authority, the Joint Commissioner (Appeal), for specific categories of taxpayers, such as individuals and HUFs, to speed up the resolution process in appeal proceedings.

The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

How to Determine the Taxability of Foreign Resident in India?

According to the provisions of the Income Tax Act, 1961; all the foreigners or individuals who belong to a different country but staying and working in India or individuals who belong to India but working in any other part of the world, have to pay income tax, as the Income Tax Act, 1961 provides for taxability depending upon the residential status of a person. Here in this article, we are going to discuss all the details related to tax by NRI and foreigners.

This tax is levied regardless of the individual’s status of citizenship, or intention of staying in India. However, the extent of taxability may vary depending upon the residential status of the person. 

There could be some tax deduction at source on income earned in India, though the person will be entitled to take credit of such amount while filing the income tax return. However, if Income tax payable is less than tax deducted at source, then balance amount can be claimed as refund.

Tax By NRI and Foreigners- How is a foreign national’s or expatriate’s income taxed after becoming a resident of India?

In India, the taxability of income of a foreign national solely depends on the person’s residential status. The following can be the different scenarios of taxability based on residential status:

  1. 1. Resident and Ordinary Resident: For a person who is a resident and ordinary resident in India as per Income Tax Act, 1961 then the total income earned by such person anywhere in the globe, including India, is taxable in India. This includes even if the income is earned in the country of citizenship and taxed there.
  2. 2. Non-Resident (NR) and Resident But Not Ordinary Resident (RNOR): In case the expatriate is a Non-Resident (NR) or Resident but Not Ordinarily Resident (RNOR) as per Income Tax Act, only the income earned, i.e, Income accrued or deemed to be accrued in India or Income received or deemed to be received in India, is taxable in his hands in India. 

So the first thing is you need to find out your residential status to ensure what tax is levied on your income. 

As per the Income Tax Act, residential status rules, the first 2 years of a foreign national’s arrival to India will put the person into RNOR (Resident but Not Ordinarily Resident) status and he/she will pay tax for only the income earned in India.

However, there are certain other criteria given under Income Tax Act to determine whether a person is NRI (Non-Resident), RNOR (Resident but not Ordinary Resident), or ROR (Resident and Ordinary Resident) and then only one can check tax by NRI.

How to check Residential Status?

To determine residential status, Income Tax Act, 1961 defined 2 stages wherein first we need to determine whether a person is resident or not and if a person is found resident then it is further determined whether he is an ordinary resident (ROR) or not (RNOR).

Let’s have a look at criteria given by the Income Tax Act, 1961 to determine residential status:

1. Resident

The first step is to determine whether a person is a resident or not for the relevant previous year or not. As per Section 6 of the Income Tax Act, if he satisfied either of the following condition:

  1. The concerned individual has been in India for more than 182 days during the relevant previous year; or 
  2. The concerned person has stayed in India for 365 days or more for 4 years immediately preceding the relevant previous year and has stayed in India for 60 or days during the relevant year. 

As per explanation to Section 6(1), if any person who is an Indian Citizen or person of Indian Origin and staying outside India and he comes to India for a visit in any Previous year then in the second option period of instead of 60 days, period of 182 days shall be considered.

Let’s understand the same with an example. Mr A has the following different scenarios of stays in India for F.Y. 2019-20:

Stay in India During F.Y. 2019-20Stay in India During F.Y. 2015-16 to F.Y. 2018-19Residential status
200 days600 daysResident. Criteria A satisfies. So, we are not required to check Criteria B.
200 days 30 daysAlso regarded as Resident. Criteria A satisfies. So, we are not required to check Criteria B.
150 days600 daysResident. Criteria A doesn’t satisfy. Criteria B satisfied
40 days600 daysNon-Resident. No criteria satisfied.

Amendments by Finance Act, 2020.

However, with an objective to stringent provisions related to residential status, the Finance Act, 2020 has proposed to change the period of 182 days, in explanation to section 6(1), to 120 days in case where total income of a person, other than income from foreign sources, exceeds INR 15 lacs. Therefore, If concerned individuals have stayed in India for more than 120 days during the relevant financial year then he shall qualify as resident.

2. Resident and Ordinary Resident (ROR)

Once it is determined that a person is a resident for a financial year then it is determined that whether such person Ordinary Resident (ROR) or Not Ordinary Resident (RNOR). 

To get the status of ROR, an expatriate must have to meet the following 2 conditions simultaneously:

  • ⦁ Such a person is Resident In India during 2 or more Financial years out of 10 financial years immediately preceding relevant Financial year; and
  • ⦁ Such persons have resided in India for a total duration of 730 days or more during 7 financial years prior to the relevant Financial Year.

3. Resident but not Ordinary Resident (RNOR)

If a person fails to satisfy the above-mentioned conditions then he will be considered RNOR.

Let’s understand the same with an example. Mr. A has qualified as Resident for FY 2019-20. Now following are the different scenarios to check his status as ROR and RNOR:

No of years during which Mr. A was resident during F.Y. 2009- 2010 to F..Y. 2018 -2019Stay in India During F.Y. 2012-13 to F.Y. 2018-19Status
1 Year720 DaysRNOR.
1 year740 daysSame
3 years720 DaysSame
3 years740 daysROR

Amendments by Finance Act, 2020

Finance Act, 2020 has proposed to replace the period of 2 years to 4 years. Therefore, to qualify as ROR, you have to qualify as a resident for 4 or more out of 10 immediately preceding financial years.

4. NR (Non-Resident)

If a person fails to satisfy either of the condition given for residential status then he shall be considered as Non-Resident for the purpose of Income Tax Ac, 1961.

You can refer to the table below to understand better and determine your residential status,

Basic conditionsRORRNORRNORNR
A.1. Your total stay in the country is 182 days (120 days from F.Y, 2020-21 onwards) or more during the relevant financial year. Or,2. stay is 60 days or more in India in the relevant financial year and total stay is 365 days or more during the last 4 financial years.YesSameSameNo
Additional ConditionsRORRNORRNORNR
B.Your cumulative stay in India is 730 days or more during 7 financial yearsYesYesNoNA
C.You were an Indian resident for at least 2 (4 years or more from F.Y. 2020-21 onwards)  of the last 10 financial yearsYesNoYesNA
  • ⦁ If you satisfy all the conditions i.e. condition A, B, and C then you qualify as a ROR.
  •  If you satisfy condition A and any of conditions B and C then you qualify as an RNOR.
  • ⦁ But if you do not satisfy condition A then you qualify as NR. Therefore, the condition B and C does not apply in this case.

What are the factors in determining the Tax liability of a Foreign National in India?

As we’ve already mentioned, the tax liability of a foreign individual depends only on the residential status which can be outlined as follows-

  • ⦁ Resident and Ordinary Resident: Expatriates who have qualified to be a resident of India, need to pay tax on the total income earned throughout the globe. This income may also include the amount of remuneration which is paid to them in their own country. 
  • ⦁ Non-Resident (NR) or Resident but Not Ordinary Resident (RNOR): Foreign individuals who qualify to have the status of an NRI or RNOR, are liable to pay tax on the income which is accrued or deemed to be accrued in India or received or deemed to be received in India Only.  

What type of incomes of Foreign Nationals are taxable in India?

Foreign nationals residing in India are liable to pay tax for the following types of incomes- 

  • ⦁ Employment Income
    • ⦁ Reimbursements
    • ⦁ Cash compensations
    • ⦁ Salaries
    • ⦁ Wages
    • ⦁ Allowances
  • ⦁ Non-Employment Income
    • ⦁ Income generated through the investments made abroad but sent directly to a bank account in India
    • ⦁ Royalties received from an Indian individual
    • ⦁ Capital gained through the selling of Indian based assets
    • ⦁ Interest payments on the infrastructure bill funds in India


In the case of residents, income earned in India or outside India is liable to Income Tax in India and in case of non-resident, income earned in India is taxable. 

However, there are certain cases where an expatriate may get assigned to pay tax two times [in India and another country] for the same Income. 

To avoid such instances, the Government of countries enters into an agreement with the Government of other countries. To avoid double taxation of Income and these agreements are known as facilities of the Double Tax Avoidance Agreement (DTAA).

DTAA or Double Tax Avoidance Agreement is a particular agreement that two countries have made to help the foreign individuals in avoiding taxation of his/her total income in both the countries. 

By availing the benefits of DTAA, one can easily avoid paying tax two times on such income which is taxable in India and another country as well. 

DTAA set out different conditions which help in determining the tax amount by foreigners.

Documents required by Foreign Nationals to file ITR in India –

Certain documents that you are mandatory to have or required to be provided by a foreign national while filing Income Tax Returns (ITR) in India. These are- 

  • ⦁ Form 16- Form 16 is a certificate issued under the Income Tax Act, 1961 which shows Tax deducted by the payer on salary. For the purpose of claiming credit for such TDS, the person needs to furnish a copy of his Form 16. Please note that Form 16 is applicable as per the Income Tax laws of India. Such credit of TDS will get reflected in 26AS of the assessee also.
  • ⦁ Form 16A: Similarly to Form 16, Form 16A represents TDS deducted on Incomes other than Salary and this certificate consists of information related to the amount of tax which has been deducted at source and also other details of deductor. 
  • ⦁ Bank Statements- Expatriates have to provide bank statements mandatorily, that contains the detail of transactions made with the purpose of income accrued, investments, and expenditure owing to a taxation year.
  • ⦁ Investment Proofs- If an expatriate has certain investments that don’t show up in Form 16 then he requires to provide the proof separately for the same. 
  • ⦁ Details of Property- If any property or asset of a foreign individual is sold in India, the capital gain tax will be levied on the income that came from the sale. The details of selling the property or asset must be presented at the time of filing Income tax Returns. 

Note – The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Process to Change the Name of a Private Limited Company

Change Name of Private Limited

The process to Change the Name of a Private Limited Company under the Companies Act, 2013 –

Changing the name of the company requires amending the AOA and MOA of the Company. The Name of a company is its unique identity, and the same is also found in the first clause of the MOA (also known as the Name Clause). 

The management of the company desiring to change the Company Name would need the consent of its shareholders and the approval of the CRC(MCA) and ROC. Alteration in the name clause is provided under sections 13 (2) and 13 (3) of the Companies Act, 2013. Change in the name has no impact on its legal entity or its existence as a corporate entity.

It will not result in the creation of a new company or entity.

Step I: Board resolution of the Company

The very first step is the drafting of the Board resolution for the Change in Name of a Private Limited Company. Notice has to be issued at least 7 days, according to the provisions of Section 173(3) of the Companies Act, 2013. Board Members should give their principle approval for the change in the name of the Company. They will suggest proposed new names for the Company and will set the agenda for the Meeting of shareholders. They can pass the resolution regarding:

  • ⦁ Proposed new names for the company;
  • ⦁ Authorizing any Director or Practicing Company Secretary for making an Application with the Registrar of Companies for the approval of a new name as decided by the Board;

Step II: Check whether the name is available or not

In the second step, regarding the checking of name availability with the MCA & Trademark for Change in Name of a Private Limited Company. When the resolution is passed, we have to check whether the proposed name is available or not. You have to submit RUN (not e-form) along with the fee prescribed, i.e. Rs. 1,000 only.

The proposed name should be in consonance with the name guidelines given in Rule-8 of the Companies (Incorporation) Rules, 2014, like it should not be identical with any other existing company’s name, should not violate trademark, does not include offensive words, it should be in consonance with the principal object of the companies, etc.

Step III: Approval of the new name by the CRC (MCA) of the company

After CRC approves the name availability, they will issue a Name Approval Letter with respect to approval for the availability of the name for the company. It must be taken care that the proposed name cannot be made available for a period exceeding 60 days from the date of approval and this approval does not grant any kind of right of privilege. The name is liable to be withdrawn at any time before approval of the name change if it is found later on that the name ought not to have been allowed.

Step IV: Notice for EGM & passing of Member’s resolution for changing the name of the company

When the name is approved by CRC, the company should call an EGM to pass a special resolution in favor of changing the name of the company. The board has to then issue a notice to all shareholders, Directors, and Stakeholders of the company in accordance with Section 101 of the Companies act 2013. It should accompany an explanatory statement (102) stating the reasons for the change in name in the interest of the director. The notice should be issued at least 21 days before the meeting. If 95% of the shareholder’s consent, then EGM can be conducted on shorter notice.

The following resolutions have to be passed at the Meeting:

  • ⦁ Change of name of the Company and alteration of MOA and AOA of the company subsequently.
  • ⦁ If the name is changed due to a change in the business activity or the object of the company, then the main object in MOA also has to be changed.
  • ⦁ Delete any other object in the object clause of the MOA of the company.
  • ⦁ The liability clause of the MOA has to be amended.
  • ⦁ New AOA and MOA have to be adopted, which are consistent with the Companies Act 2013.

Step V: Application for approval of company name change

Once the special resolution is passed in EGM in step IV, the company has to file the resolution so passed with the Registrar of Companies within 30 days of the passing of the resolution. Form MGT-14 has to be filled with filling resolution to the registrar with the following documents attached:

  • ⦁ Notice issued for EGM along with explanatory statements
  • ⦁ A certified true copy of Special resolutions and Board Resolution;
  • ⦁ Altered MOA and AOA.
  • ⦁ Minutes of the extraordinary general meeting;
  • ⦁ Consent letter to shareholders, in case the extraordinary general meeting is convened on shorter notice.

The company also has to submit form INC-24 to obtain approval from the Central Government for the change of the company’s name within 30 days of the passing of the special resolution. You have to attach the following documents:

  • ⦁ Notice of extraordinary general meeting along with the explanatory statements;
  • ⦁ A certified true copy of Special resolutions and Board resolutions;
  • ⦁ Altered Memorandum and Articles of Association;
  • ⦁ Minutes of the extraordinary general meeting;
  • ⦁ Consent letter to shareholders, in case the extraordinary general meeting is convened on shorter notice.
  • ⦁ SRN of the Form MGT-14

Step VI: Issue of new Certificate of Incorporation.

Jurisdictional ROC will check and review the forms and documents filed by the company. If he is satisfied with the forms and documents given by the Company, then Registrar will issue the New Incorporation certificate stating the new name of the company. The name will be effective from the date of issue of the certificate.

So these above steps which you have to follow to change in Name of a Private Limited Company.

For Which Company, Change in Name is not allowed?

  1. 1. Companies which not filed annual returns to register.
  2. 2. Companies that failed to pay or repay matured deposits or debentures or interest thereon.

Note: Both the Form MGT-14 and Form INC-24 is Non-STP Form. Generally, it will take 20-25 days for the entire process.

Practicing CAs issue various certificates at the request of their clients and authorities take them as documentary proof to support a transaction

One of the certificates which are generally asked for by Banks and financial institutions is End Use Certificate. It is part of the banks’ monitoring process after the loan amount’s disbursal.

Utmost care is required from the professional in issuing these certificates. A CA should satisfy himself with documentary proof before the issue of such certificates. There should not be any chance of tolerable error.

It’s beneficial in accepting the assignment if CA knows the level of integrity of the client. The basis of certification and management explanations should be included in the relevant work papers.

#CACertificate #Audit #CompanyAudit #StatutoryAudit #TaxAudit #StockAudit #InternalAudit

Specified Person u/s 206AB (TDS) & 206CCA (TCS)

CBDT has notified Section 206AB (TDS) & 206CCA (TCS) on 1st July 2021 for deducting a higher rate of TDS & TCS for persons not filed their Income Tax Returns for the last 2 assessment years to which the due date for filing ITR has been expired, provided that this provision will apply only when the TDS & TCS credit of that person during those assessment years are more than Rs. 50,000 each.

The rate of TDS will be: (Higher Rate of the following) – TDS

  1. 1. 5% (or)
  2. 2. Twice the original rate specified in the respective sections.

The above provisions are not applicable to:

  • ⦁ 192 – TDS on Salary Payments
  • ⦁ 192A – TDS on Provident Fund Withdrawals
  • ⦁ 194B – TDS on Lottery (or) Crossword Puzzle Payments
  • ⦁ 194BB – TDS on Horse Races Winnings
  • ⦁ 194LBC – TDS on Income of Investment Securitization Trust
  • ⦁ 194N – TDS on Cash Withdrawal

Amendment in Finance Act, 2022 (From 1st April 2022):

CBDT has bought down the conditions to last one assessment year instead of 2, i.e., TDS & TCS has to be deducted at a higher rate as specified above if a person has TDS & TCS credit of more than Rs. 50,000 and doesn’t file his ITR for the last assessment year to which the due date for filing ITR has expired. The higher rate of TDS mentioned above remains the same as before.

List of Sections to which S. 206AB & 206CCA are not applicable:

  • ⦁ 192 – TDS on Salary Payments
  • ⦁ 192A – TDS on Provident Fund Withdrawals
  • ⦁ 194B – TDS on Lottery (or) Crossword Puzzle Payments
  • ⦁ 194BB – TDS on Horse Races Winnings
  •  194-IA – TDS on transfer of Immovable Property other than Agricultural Land
  •  194-IB – TDS on rent by certain individuals (or) Hindu Undivided Family
  • ⦁ 194LBC – TDS on Income of Investment Securitization Trust
  •  194M – TDS on Payment of Contract, Commission, Professional Charges, or Fees for Technical Services by certain individuals (or) Hindu Undivided Family
  • ⦁ 194N – TDS on Cash Withdrawal


  1. 1. Provisions of 206AB – up to 31st March 2022 & After 1st April 2022
  2. 2. Provisions of 206CCA – up to 31st March 2022 & After 1st April 2022
  3. 3. Other Notifications & Circulars for 206AB & 206CCA – Circular No. 11 of 2021 dated 21st June 2021 & Notification No. 1 of 2021 dated 22nd June 2021 (Directorate of Income Tax – Systems).

Thanks for reading! Have a Good Day!

Chartered Accountant in Pimpri Chinchwad

New Labour uniform codes

Labour uniform codes

As per the information gathered by me from news/media/notifications, etc on new 4 labour uniform codes- few provisions are being implemented w.e.f. 1-7-22 by Central Govt and rest shall be notified by States as per their “State – Reforms of Labour Code” and dates for implementation shall be as per their state’s gazette notification, the central rules are as under: (Attaching latest booklet on the matter)

*W.e.f 1.7.2022*

1. Working hours can be varied from 10 to 12 hours but an aggregate 48 hours exists so can do 4 day week and three days layoff/weekly off – as per requirement. The Government is also working on the work from home concept.

2. Basic is mandatory 50% of CTC. So pf in any case 12% on Basic that is 50% of CTC.

*Important Note:* Basic can not be less than 50% of CTC but in Minimum wages – that consists of Basic + DA as part of basic therefore for those employees who are getting minimum wages can not be further bifurcated.

NEW LABOUR LAW REFORM CODES: (total 29 existing labour laws merged in 4 new Reform Codes)

The central government has notified four labour codes, namely,

1. the Code on Wages, 2019, on August 8, 2019; (amalgamated 4 laws)
2. the Industrial Relations Code, 2020, (amalgamated 3 laws)
3. the Code on Social Security, 2020, (amalgamated 9 laws) and
4. the Occupational Safety, Health and Working Conditions Code, 2020 on September 29, 2020. (amalgamated 13 laws)


The statutory minimum wage is based on the gross wage payable for a normal working week, i.e. before overtime payments.


1. the basic wage agreed in your contract;
2. performance-related payments and allowances for shift work, irregular hours, etc.;
3. weekly or monthly fixed payments for the turnover you generate;
4. work-related payments by third parties, e.g. tips or payments agreed between you and your employer;
(The total of these amounts may not be lower than the minimum wage.)


Some income components are not included in the calculation of the minimum wage:

1. overtime pay;
2. leave allowance;
3. profit shares;
4. special payments, e.g. incidental payments received for reaching sales targets;
5. future payments you receive subject to certain conditions (e.g. pension and saving schemes to which the employer contributes);
6. expense allowances;
7. end-of-year allowances.


Your gross minimum wage depends on how many hours you work. If you work part time the gross minimum wage is proportionately lower.

Therefore, you are requested to be in touch with experts on the subject for implementing dates of Labour Codes state wise because our company works pan-India.

Read our other blog – Latest Taxation, GST and Other Updates

Chartered Accountant in Pimpri Chinchwad

Windfall tax: Will India impose it too?

This question has been a buzz in Indian media for the past few weeks. But what is this windfall tax that Indian media is going on about?

What is the windfall Tax?

When a company benefits from something that they are not responsible for and, as a result of that, enjoys the financial gain, that gain is referred to as windfall profits.

Governments, typically, levy a one-time tax over and above the normal rates of tax on such profits, and that is called windfall tax.

Why Now?

So what’s happening is global oil and gas prices are at a peak level due to the Russia-Ukraine conflict. If we take the example of any Indian upstream oil companies, say ONGC, or Oil India. They declared an all-time high net profit in the fiscal year 2021-22.

ONGC declared that its net profit grew by 258% to reach ₹40,306 crores. While the Oil India announced a net profit of ₹3,887.31 crore, which is 123% higher than in the preceding year.

As the Indian government has recently gone for the cut in Central Excise Duty and considering that it is spending more on food and fertilizer there is the requirement of any alternate levy to full fill this gap and one of the solutions could be levying a windfall tax on oil companies.

Countries like Italy and the UK have already imposed a windfall tax over the past couple of weeks.

Will such tax increase the Price of the Fuel?

Very unlikely, as this tax is not part of the input or output cost, but levied only on profit.

Is India really considering such a levy of tax?

While there is no formal denial by the government, upstream oil companies have said they have heard nothing about this.

Let me know your thoughts on whether you believe that such a tax should be levied or not?


Chartered Accountant in Pimpri Chinchwad

Test of Control (TOC) vs Test of Details (TOD)

In a process of Statutory Audit, the Test of Control and Test of Details are two important stages and it also makes an important question from the interview pov.

I have discussed a comparison of both gathered from my experience.

TOC is a type of audit procedure we perform to evaluate whether a client’s internal control works effectively. Thus, we perform the test to obtain evidence of effectiveness before we can rely on controls. In case controls are weak, we will need to increase our substantive tests.

So, we take out the samples from SCOT (Significant class of Transactions), test various assertions, capture the details of the given sample, and match them with supporting documents. The sample size depends on the population and frequency of control.

Based on the TOC, we determine the extent of TOD. Test of Details is a substantive procedure used to collect evidence to verify individual transactions or balances.

So, after a combined assessment of risk and control (CRA), we define the tolerable error (TE) for deviations and obtain the samples for transactions to do the testing. The goal here is to confirm that supporting docs match with each other and the source.

I have only explained the surface of it and there are a lot of other things done throughout this.

I hope it was worth a read! Do add your learnings in the comments.