To establish your business successfully in India, there are a few basic compliances that you need to meet. This will make sure that your business’ foundation is legally secure and you can continue to grow to meet your short term as well as long term goals. Let us take a look at the various compliances that need to be fulfilled under various categories.
- Accounting: Businesses in India, like in anywhere else in the world are needed to keep a track of their accounting functionalities which must meet the Indian Generally Accepted Accounting Policies. An organization has the freedom to chalk out their accounting year in terms of financial year, calendar year or otherwise. However, as per Indian income tax laws, it is compulsory to close account books as per the financial year.
- Payroll: Appropriate employment contracts must be drafted with accordance to the Government’s income tax laws and employment regulations. Organizations are required to pay salaries on a monthly basis, generate pay slips. Your business should be compliant with the labor laws outlined by the government.
- Statutory Audit: Under the Indian Companies Act, businesses have to compulsorily get their accounts audited by an Indian firm of Chartered accountants which are, in turn, to be filed with the Registrar of companies and, in some cases, with the Reserve Bank of India.
- Tax Audit: Businesses that have an annual turnover of more than INR 10 million (USD 150,000 approx.) need to additionally have accounts audited under specific provisions of the Indian income tax laws along with certification by an Indian firm of Chartered Accountants.
- Internal Audit: Private Companies that have an annual turnover of more than INR 2 billion (USD 31millions approx.) or have outstanding borrowings worth INR 1 billion (USD 15 million approx.), need to have an intra company audit system in place. This can either be outsourced to an Indian firm of chartered accountants or can be done through their in-house team, the latter being prevalent in case of larger establishments.
- Corporate Tax: Advance Tax is an instalment plan under which businesses need to deposit their annual tax payment after employing measures to determine the required amount. Any sort of delay, deferment or incorrect calculations attract penal provisions. At the end of a year, an annual return together with audited accounts and tax audit report must be submitted, as well.
- Transfer Pricing: Indian Transfer Pricing regulations need to be followed by businesses that have cross border dealings. These businesses may have similar interests and goals. An Indian firm of chartered accountants has to maintain documentation and certification, confirming that the firm’s dealings with related concerns were at an arm’s length, and the profits were appropriately and accurately reported by the Indian business entity.
- Withholding Tax: Businesses need to withhold tax on specified payments viz salary, contractual, etc.
- Expatriate Taxation: An expatriate deputed to India is liable to pay tax in respect of his remuneration. The components of taxable remuneration are similar to those applicable to a local employee, though one may explore relief under the Double Tax Avoidance Agreement between India and the parent country. The expatriate would need to file an annual personal tax return with the Indian tax authorities by July 31st. All foreign nationals who are likely to exceed 180 days stay in India, need to register within 14 days of their arrival with the Foreigners Regional Registration Office.
- Customs Duty: This is again for businesses engaged in cross border trading. Such businesses need to comply with customs duty regulations. The duty varies according to the product under consideration. The compliance requirement includes determination and deposit of duty prior to clearance of goods by the customs authority. While basic customs duty remains, the Counter Vailing Duty (CVD) and Special Additional Duty (SAD) of customs are subsumed into GST.
- Goods and Services Tax: GST is applicable on supply of goods and/or services. It consolidates the erstwhile excise duty, service tax, central and local VAT, amongst others. Compliances include deposit of taxes and filing of monthly/ quarterly returns.
- Secretarial Compliance: Businesses in India need to comply with secretarial matters specified under the Indian Companies Act and report to the concerned ROC.
- Labour Law: An employer needs to consider the impact of Provident Fund, government regulated Pension Plan scheme. Furthermore, an outgoing employee, who has exceeded 5 years of service, is to be paid Gratuity calculated as per specified scales. Industrial units are covered by the Employee State Insurance, Industrial Dispute Act, Contract Labour Act, etc.
- Miscellaneous: There are certain state specific regulations e.g. Professional Tax and the Shop and Establishment Act which prevail in Indian states like Karnataka, Maharashtra, Tamil Nadu etc.
These compliances seem like a lot to keep in mind, which is why compliance tools like VComply are making a foray into the market to keep your organization’s compliance woes at bay. Apart from Indian compliances, it also lets you choose from a library of a variety of compliances as well as add necessary compliances specific to your needs.
So before you jump into the Indian business scenario with full gusto, make sure you have your legalities covered.Add to favorites