Tax and regulatory compliances which Startups can not afford to ignore

Top Tax and regulatory compliances which Startups can not afford to ignore be in their very early starting up days or at the time of scaling up.

Taxmantra has come up with the top Tax and regulatory compliances which Startups can not afford to ignore while performing their tax compliances. The most common reason and logic behind this is their unawareness regarding the development of their business. Actually, incorporating a business only depends on the investment made by the entrepreneur but running it smoothly and hassle free requires a lot of labour and proper guidance. To remain hassle free and for healthy business; every business owners should follow the correct compliances like Service tax, TDS, Return Filling, ROC etc. Here, are these tax compliances which startups should follow seriously and should not be ignored at any cost. The list is explained below: Application for PAN or Permanent Account NumberIt is mandatory for startups to have PAN Number to run either a Company or LLP. It is mandatory requirement for all registrations, opening bank accounts, income tax return filing, TDS Return Filing and many more. Thus, a company or LLP cannot operate without PAN. Application for TAN or Tax Deduction and Collection Account NumberIt is required to be obtained by all persons who are responsible for deducting or collecting tax. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates. IEC or Importer Exporter Code Registration IEC Registration is not at all mandatory for Companies or LLPs. It is normally required by manufacturers and companies for international trade but with this new RBI ruling, the hundreds and thousands of freelancers, programmers, web designers and small companies who depend on PayPal for foreign payment will also have to apply for an IE code. Accounting and Book Keeping Section 209 of the Companies Act, 1956 requires every company to maintain proper books of account with respect to; (a) Money received and expended by the company; (b) All sales and purchases of goods by the company; (c) The assets and liabilities of the company; (d) In the case of a company engaged in production, processing, manufacturing or mining activities, etc. But, the startups are unaware of this provision and maintain their books manually on an excel sheet, which creates a lot of confusion at the time of finalizing their books at the year end. So, it is always a best suggestion for all startups to hire a professional who will help them to run their business smoothly. Tax professionals, such as accountants and Chartered Accountant, can assist them throughout the year with proper tax planning. Income Tax Return Compliances: – Filing of Income Tax return is the most authentic proof of the income earned wherein all are required to file their tax returns within the due date showing all the income earned by them.  But, many of us do not file tax returns, the reason of which is very simple i.e. “Unawareness of the fact”. In this regard too, a proper tax consultant should be appointed who will help the startups in availing the benefits of filing tax return in time. Some of the benefits are as under:

  • Filing timely returns saves one from the assessments of Income by the income tax officials.
  • A business having losses can carry forward their losses and get it set-off with future profits.
  • For making an investment, filing of income tax return on time is essential.
  • Tax Refunds can be claimed only when income tax return is filed. 

Advance Tax Compliances: Advance Tax which is applicable only if the total tax liability of an organization exceeds Rs. 10,000. Everyone does not have to pay advance tax. So, the applicability of such provisions is required to be understood by every startup as they are unaware of such facts. For, this, every entrepreneur is required to hire a professional. There are other taxes which are required to be paid on a quarter basis to the government. Prior, to the payment of such taxes, proper computation are required to be done by an experts or by professionals. Payment of such taxes is required, if the appropriate conditions are applied on the startups which in turn depends on the type of the form of organization selected by them.       For example: Provision of service tax gets applied if the total gross turnover exceeds Rs. 10lacs.  Tax Deducted at Source: – TDS or Tax Deducted at Source is one of the modes of collecting Income-tax from the assessee in India and paying the same to the Government. TAN is mandatory to be applied for proper collection and deduction of taxes. Most of the startups do not know even when and why to follow such compliances. They are totally unaware about the various sections of TDS in which taxes are deducted. So, a proper guidance is required, which will assist them in running their business smoothly. Registrar of Companies Compliances: – The legal compliances of ROC depend on what type of form of organization is selected by an entrepreneur. There are various types of forms available in Ministry of Corporate Affairs which depends on the type of business. As a part of Annual Filing, Companies incorporated under the Companies Act 1956, are required to file the following e-Forms with the Registrar of Companies (ROC):

  • Form 23AC: For filing Balance Sheet by all Companies;
  • Form 23ACA : For filing Profit & Loss Account by all Companies;
  • Form 20B : For filing Annual Return by Companies having share capital;
  • Form 66 : For filing Compliance Certificate by Companies having paid up capital of Rs. 10 lacs;
  • Form 21 A : For filing Annual Return by Companies not having share capital;
  • Form 11: Annual Return of LLP;
  • Form 8: Statement of Accounts and Solvency for LLP;

Non filing of such forms will attract huge penalty as mentioned by the Companies Act. So, for proper compliances to get followed, every startup requires a professional who assist them in performing all such compliances. They should hire experts in order to remain hassle free. Statutory Audit under Companies Act, 1956 Section 224 of the Companies Act, describes the appointment and remuneration of the auditors. It says that every company should appoint an auditor or a number of auditors in every annual general meeting until the conclusion of the next annual general body meeting and shall within seven days of the appointment, give intimation to every auditor appointed in that manner. Also, a company or LLP is required to undergo Tax Audit u/s 44AB by a Chartered Accountant mandatory if the turnover of such company or LLP exceeds a threshold limit of Rs 1 crore (for company) or 40 Lacs (for LLP concern).Non compliance of the provisions of this Act shall attract penalty u/s 271B. You can like to visit our Tax and Regulatory Service Page for more on this. Thanks for reading for this article. Please feel free to write to us, We want to hear it all!Suggestions? Complaints? Feedback? Requests?  at [] or call us at +91 88208208 11. We would be more than happy to assist you.