Running a business in a country like India is not easy. There are tons of things that you must be aware of, from the legal to the financial. A great way to stay on top of things is to keep a checklist of all the things that you need to do or get it done from a professional. This checklist will help you stay compliant with the law as well as prove you are compliant.
Private Limited Company is one of the most popular type of entity amongst the startup community. 95% businesses in India choose private limited company as the legal entity structure for their business. Here is why?
In a financial year there are various compliances that a private limited company owner/directors needs to comply with.
These mandatory compliances are divided into 7 categories
- Accounting Compliances
- Direct Tax Compliances
- Indirect Tax Compliances
- Labor Law Compliances
- Secretarial Compliances
- HR compliances
- Annual Compliances
The above mentioned categories of compliances needs to be filed Monthly/Quarterly/half yearly/Annually. This frequency depends on the type of compliance and its requirements.
- Accounting compliances:
Basically accounting is the process of recording financial transactions pertaining to a business. Accounting a compliance fall under the monthly compliance category.
There are various activities include in the process of accounting, given below few
- Bookkeeping of Expenses & Payments: Maintaining a book of account for all the expenses and the payments made by the company. By doing this on a regular basis the company can get Expense report within seconds.
- Bookkeeping of Sales and Receipts: In this activity, all the details of revenue generated by company is maintained. Trough this revenue reports can be generated.
- Monitoring of TDS Transactions & Expenses: In this activity the accountant monitors if TDS needs to deducted on any payment that the company is making. TDS needs to be deducted only if the transactions between a buyer and supplier is crossing the threshold limit.
- Monitoring of Debtors and Creditors: In this process the accountant monitors the transactions between organizations or persons who owe money to company and vice versa.
- Correlating the receipts and payments with the Bank statement: In this activity the accountant corelates the expense report and revenue reports with the bank transactions of the company.
Income tax, Property tax, capital gains tax comes under the direct tax compliances. The amount of tax paid/deducted (on invoices) in a month needs to be filed with the Income tax department every month.
- TDS/TCS Calculation and Filings (Invoices): Tax Deducted at Source/ Tax Collected at Source needs be calculated every month and paid to the government in the next month. A quarterly TDS return needs to be filled with the respective department.
- TDS Calculation and Filings (Foreign Remittance): This is similar to the above point but it is applicable only when a company is paying to foreign entity/person.
It is a tax imposed by government on a taxpayer for using the goods and services. Unlike direct tax, Indirect tax is not levied on the income, revenue or profit of the taxpayer. It can be passed on from one individual to another.
- GST Calculation and Filing: Goods and Service Tax (GST) receive from selling the product or services or paid to suppliers in a month needs to be calculated and the excess amount of GST needs to be paid to the government and file the GST return for the same. Nil return needs to be filed if the company does not have any transactions in that month.
These compliances are related to labors law department, every company who has 1 or more employees will have to mandatorily file for these compliances as they applicable.
- PT Calculation and Filings: Professional Tax (PT) is a mandatory compliance for every private limited company who has 1 or more employees (Except for some states, which do not have Professional Tax registration).
- ESI Calculation and Filing: Employee State Insurance (ESI) is applicable to only those companies/businesses who have more than 9 employees. The contribution for this scheme paid from the employer and employee side from the monthly salary.
- PF Calculation and Filing: Provident Fund (PF) is applicable for business who have more than 19 employees. PF is similar to retirement funds. Submitting the PF contribution amount every month to the department is an employer’s responsibility.
Every month a fixed amount (Based on the employee’s salary) Needs to be deducted and file with the government.
These compliances are related to the Ministry of Corporate affairs and Registrar of companies. Most of the secretarial compliances are mandatory for companies.
- Board Meetings: Every private limited company needs to hold minimum 4 board meetings in financial year. The Gap between two consecutive meeting shouldn’t be more than 120 days. And details of these board meeting need to recorded.
- DIR 3 KYC: Every year a director needs to file the Director needs to file the DIR 3 KYC from. He/ She needs to declare their current address, Phone number and email, etc.
- DPT 3 Filing: If a company has outstanding receipt of loans or money other than deposits, than the company must furnish that information by filing DPT 3 Return annually.
- FLA Reporting: If a company has received foreign investment in the past or if company has any investment in other countries, those companies need to file the Foreign Assets and Liabilities Return (FLA) annually.
- MSME Filing: The companies who receive goods or services from a MSME registered entity and if the payment is due for more than 45 days from the date of acceptance of the product or service are required to file a half yearly return. Read MSME benefits for startups.
If a company has 1 or more employees, these HR practices/ compliances needs to be followed.
- Payroll Processing: Payroll process includes tracking of hours worked of each employee, calculation of employees pays, and distribution of payments via direct deposits to their bank accounts. A monthly pay slips needs to be issued to the employees.
- TDS Calculations and Filings for Employees: Employees whose salary fall under the tax liability, The tax needs to be deducted on monthly basis and same needs to be filed with government.
- Form 16 for Employees: Once the taxes have been deducted from the employee’s salary, filing ITR returns of the employee is companies’ responsibility. Hence Form 16 needs to be issued to every employee and ITR return needs to be filed.
- HR Policies and Contracts: Every company must have HR policies or contracts such as Offer Letter, Employment contract, Appointment letter, Code of conduct, leave policy, etc to minimize the conflicts in organization that may occur in future.
Annual compliances are those which needs to be completed after completion of a financial year (From 1st April – 31st March). These compliances are related to accounting and secretarial compliances.
- Statutory Audit: Statutory audit is a mandatory compliance which insures that books of accounts and financials prepared and presented to the regulator are true and fair.
- ITR Filing: Every company must file the Income Tax Return (ITR) after completion of its financial year. It is a mandatory compliance for all types of entities.
- ROC Filings: It is mandatory for every company to conduct an Annual General Meeting for each financial year and file an annual report along with the Statutory Auditors report approved by the members of companies.
Form AOC-4 needs to be filed for the financial statements of each financial year. These forms need to be filed with the respective registrar of companies (ROC).
- MGT-7 Filings: This form is issued by the Ministry of Corporate Affairs (MCA), the purpose of this form is to inform the MCA regarding their annual return details. This form is mandatory to file by all the companies registered under the companies Act 2013.
- Tax Audit: Tax Audit is required to be done if the annual turnover of a private limited company is more than 10 Crores subject to the condition that the cash transactions don’t exceeds 5% of the total turnover otherwise 1 crore.
- GST Audit: Companies whose turnover exceeds 2 crore needs to get their GST Returns, Records, and other documents audited by a GST Professional.
The Companies Act, 2013 has undergone many changes which have resulted in compliance requirements becoming more onerous. The changes have also brought in complexities in compliance processes that require the private limited companies to adopt a more systematic approach towards monitoring their businesses.
The companies should take stock of their compliances and ensure that they comply with the mandatory compliances.
It is hard to keep a track of compliances. However, we have created a complete compliance calendar through which you can easily track each and every due date of compliance for your private limited company here it is: Compliance Calendar for 2021 in Excel
We hope you enjoyed our article about the mandatory compliances applicable for a Private Limited Company in 2021. If you need any help with the above compliances feel free to write to us at Enquire@wazzeer.com