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).

• ⦁ Other Event Based Compliances

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.