Startup entrepreneurs in India mostly working with business
format of Company or Limited Liability Partnership (LLP) needs to be more particular
on accounting, taxation and compliance procedures for better valuation. Most
startups think that since they have no business transactions or accumulated losses,
they do not need to file their tax returns. Every company / LLP in India has to
comply with basic compliances irrespective of its business situation or profit
/ loss status.
1. Book Keeping and
Accounting Procedure:
Recording the transactions and preserving bills and invoices to
back financial statements is something that most business owners dread.
Avoiding this leads to serious repercussions. For example, at the time of
incorporation, a company pays the registration fees, name approval fees and
stamp duty to RoC. Further, the promoters of the company also hire a
professional firm to guide them through the entire incorporation procedure,
which again involves cash outflow.
These expenditures, though pre-incorporation in nature, provides
tax-saving benefits to the company, to the extent of one-fifth of such expenses
every year. Further, invoices carrying break-ups of VAT and service tax is a
boon, as far as claiming credit for both is concerned. The company should keep
records of all expenses made specifically for business, since these are
deductible against business revenues. Even if the company is suffering losses,
it is advisable to maintain records in order to raise the losses and set it off
with future profits.
In case of non-compliance, persons responsible shall, in respect
of each offence, be punishable with imprisonment for a term which may extend to
one year or with fine which shall not be less than Rs. 50,000 but which may
extend to Rs. 5,00,000 or both in case of companies.
2. Income Tax Return
& Compliance Filing
Filing of income tax return is the most authentic proof of the
income earned as all are required to file it. But many do not file tax
returns as they are unaware of the procedure. Startups should appoint a tax
consultant who will help them avail the benefits of filing tax return in time.
Some of the benefits include:
· A business having losses can carry it forward and get it set-off
with future profits.
· For making an investment, filing income tax return on time is
essential.
· Tax refunds can be claimed only when income tax return is filed.
.Timely filing of ITR is necessary for smooth bank / debt funding for project.
The due date for filing Income Tax return is September 30 each year. Various
procedures of penalty and interest are applicable for delayed filings.
3. Statutory Audit
It is mandatory to get accounts audited annually for all
companies, whereas LLP has certain financial limits for statutory audit
compliances. The LLP Act provides that the partners of such LLP if decided not
to get audit of the accounts of the LLP then such LLP shall include in the
Statement of Account and Solvency a statement by the partners to the effect
that the partners acknowledge their responsibilities for complying with the
requirements of the Act and the Rules with respect to preparation of books of
account and a certificate in the Form 8. However no such relaxation is provided
to companies.
4.
Registrar of Companies Compliances & LLP Act
Every company (having or not having share
capital) and LLP has to file its financial reports with the Ministry of
Corporate Affairs annually. It constitutes a component of ‘Annual RoC Filing’
mandated by Companies Act, 2013. As a part of annual filing, Companies
incorporated under the Companies Act 2013, are required to file the Balance Sheet, Profit & Loss
Account and Annual return in prescribed format thru e-forms with the RoC. The
penal provisions of RoC are so stringent that companies have been shut down due
to this. The additional fees can be as high as upto 12 times of normal fees.
Further, there also provisions where huge penalties are laid per day on officers
as well as the companies simultaneously.
As a part of Annual Filing, LLPs are required to file Statement of
Account & Solvency and Annual Return of LLP thru e-forms with the RoC. Surprisingly, there are no slabs for late
filing fee for LLPs. In this regard, the straight rule of computation of late
filing fee is Rs 100 per day of delay in filing. The number of days of delay in
filing is calculated from the due date of filing to the actual filing date.
As mentioned earlier, these compliances have to be adhered to
irrespective of your business situation. Non-compliance of these provisions has
the capacity to shut down a full-fledged business.
Authored by :
CA Yogesh
Director
BWPM Co.
Director
BWPM Co.
visit us at : www.Yogesh-CA.blogspot.com
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