Key vat changes - by mymuneemji

The Maharashtra BUDGET for 2014-2015 is announced today 5th June, 2014 and the main tax proposals in respect of Maharashtra VAT and

1.Profession Tax are -
Registration limit increased to 10 lakhs

2.VAT Audit limit raised to 1 crore from FY 2013-2014

3.Late Fee reduced to Rs.2,000/- for late upto 1 month in filing Return

4.Pending Returns can be filed with Tax, interest and Late Fee of Rs.1,000/-.

5.Retailer composition @1% of total turnover or @1.5% of taxable turnover

6.No 30(4) penal interest if additional demand as audit or investigation is less than 10% of tax paid with returns.

7.Rate of Tax on Cotton reduced to 2%

8.Profession Tax limit for salaried persons increased to Rs.7,500/-

Tax is not on revenue but on Profit!!

In India, a typical entrepreneur always wants to hide things from the tax department under a feeling of being questioned and asked for paying taxes. In this race for non-disclosure, sometimes the things of our benefit also remain underground.

This process of hiding starts without even knowing "What if this is disclosed?". Many a times this has positive impact as well!! Seems funny?? In our experience, many are seen doing the same.

Tax is not on revenue (sales) but on Profit!!  Funny part is people start worrying about taxes with respect to the revenue.

1. There are expenses which are deductible from this revenue to arrive at the profit. Please understand all the expenses which are incurred to earn the revenue directly and indirectly are allowed to arrive at the taxable profit.
2. Not only cash expenses but the expenses which are to be paid on later date are also available. These are termed as accrued expenses in accounting language. This include your year end bills of supplies, rentals, electricity which don't get paid in that period but are pertaining to that period. 
3. Also, there is are certain virtual deduction like for depreciation of Capital Goods like plant, building, machinery, equipment, motor car purchased in past for the purpose of the business. This is basically value for wear and tear of the assets in that period to generate the sales. Additional deduction on account of depreciation is allowed in the year of such investments for plant and machinery.
4. Other virtual deduction that needs to be taken into account while doing the computation of profits is with regard to the Bad Debts. Many times of our customers don't pay after committing even after followup and legal action. Those customer balances could be written off in the books and claimed as deduction. Even the discounts while settlement of dues are available as deduction if part of the deal.
5. Whenever there is an actual help coming in from the Partners, Directors, family members or relatives, we can pay them salaries and commissions. Even the directors and partners can have legitimate remunerations which are available as deductions subject to certain conditions. 
6. You may claim market rentals for the family properties from the company. This is something that many of us may be missing.
7. Other areas to check are credit card expenses and cash spending for business directly and indirectly. This many a times doesn't gets reflected in the books and may be missed out. It may be for business development, marketing, conveyance and so on for business purpose.

Above is a very broad list of items which are available as business deductions and we can deduce the sales / revenue to this extent before working out the taxes.

Our article on 5 basic disciplines of accounting for businesses would help you with tips of tracking the same diligently.

So, first track and than calculate correct PROFITS. It's quiet possible that you end up at a legitimate and acceptable tax liability without playing any gimmicks :-)

How to Form a Company in India with New Companies Act

The first thing to take care of under the new Companies Act, 2013 is to follow a changed procedure for giving birth to a Company. This article speaks of only Public and Private Limited Companies and does not cover One Person Companies. The brief procedure to be adopted for incorporating a Company would be :

Action Points : Formation of a Public / Private Limited Company – under Companies Act, 2013
[Covered by provisions of Chapter II]

Sr No	Action Point	Requirement
01	Obtain Digital Signature Certificate (DSC)	Obtain a Digital Signature Certificate from authorized DSC issuing authority.
02	Obtain DirectorIdentification No. (DIN) [S.153]	Make Application in Form DIR-3  [Rule 9 of Chapter XI Rules]
03	Register DSC in the name of Director on MCA portal
04	Apply for Reservation of Name [S.4(4)]	Apply in Form No. INC.1 [Rule 9]. The same shall be reserved for a period of 60 days
05	Adoption of Memorandumof Association [S.4(6)]	MoA shall be in respective form as prescribed in Table A, B, C, D and E of Schedule I as may be applicable
06	Adoption of Articles of Association [S.5(6)]	MoA shall be in respective form as prescribed in Table F, G, H, I and J of Schedule I as may be applicable
07	Incorporation	File with ROC Form No. INC.7 [Rule 12 to 18] alongwith(a)   The Memorandum and Articles of the company duly signed by all subscribers; (b)   A declaration in Form No.INC.8 by an advocate or Practicing professional (CA, CS, CA) who is engaged in incorporation, and a person named in director as Director, Manager or Secretary, that all requirements related to incorporation has been complied with; (c)   an affidavit in Form No. INC.9 from each subscriber and from each person named as first director in the articles that; he is not convicted if any offence in connection with promotion, formation or management of any company, he is not been found guilty of any fraud or misfeasance or of any breach of duty to any company during preceding five years, and all the documents filed with the Registrar contain correct, complete and true  information to the best of his knowledge and belief; (d)  the address for correspondence till its registered office is established; (e)  the particulars of every subscribers along with proof of identity; (f)   the Particulars of first directors along with proof of identity; and (g)  the particulars of interests of first directors in other firms or bodies corporate along with their consent to act as directors.
08	Commencement of business [S.11]	Director should file Declaration with ROC in Form No. INC.21 [Rule 24]
09	Registered Office [S.12]	A company shall have a registered office within 15 days of Incorporation and it shall file Form No.INC.22 [Rule 25] to verify the same

5 basic accounting disciplines for startups.. Credit to Yourstory

MyMuneemji did a guest blog for one of the renowned blogs for entrepreneurship called YourStory.in.
Below are the excerpts of the blog. http://
bit.ly/1gRSmws

Caution - Six things to start doing immediately if you own a Corporate entity in India

With effect from 01.04.2014 as per Notified section 12 of the New Companies Act 2013, every company shall comply with the following requirements:

1. Paint or affix its name and address of registered office, outside every offices of the company;
2. Get its name, address of its registered office and the Corporate Identity Number (CIN) along with telephone 
3. Number, fax number, if any, e-mail and website addresses, if any,
4. Printed in all its business letters, billheads, letter papers and in all its notices and other official publications;
5. Get its name printed on hundies, promissory notes, bills of exchange and such other documents as may be notified by Central Government from time to time.
6. Also, in case where the company has changed its name during last 2 years, it shall also print former name along with its current name under Sr. no. 1 & 2 mentioned above.

Penalty for non-compliance : Rs.1,000/- for every day during which the default continues but not exceeding Rs.1,00,000/-.  

6 accouting tips for smooth year end closing

March end seems to be very hectic for the accountants and tax professionals. Sometimes, we hear the businessman saying they are busy with the year end closing.

As startups or new entrepreneurs, you may be thinking what really needs to be done?

Here is a top 6 items to be sorted out his year end.

Provisions for Expenses

Prudent accounting thumb rule is debit expenses pertaining to a period eventhough the payments are due in next period. With this in mind all your electricity, telephone, rent, salaries, etc. till march needs to be booked even if due in next month. If actual bills are not received, prudent accounts estimate and Book those to show correct picture. There is a basic matching principle to be kept in mind wherein all expenses corresponding to income generated in that period need to be booked showing correct picture of profit or loss for that period.

Check your VAT and Service Tax Calculations
Whether all the invoices are booked and accounted before the calculation for the same is done.

Has the legitimate setoff been claimed on the purchase side. Many of us miss claiming this while it is available. This has a cash impact and hence very trivial. Taxes once paid are difficult to get refunded. The setoff gets missed in the small expenses like flight tickets, hotel bills, taxi bills, purchase of office equipments, AMC charges, and so on.

Bank Reconciliations
Completely verify your bank statement visa-a-vis the books of account. This will allow you know if there are any cheque which are received but not deposited in the Bank or cheques which are issued but not cleared. This may also throw surprises like cheque bounces not recovered, huge bank charges and so on. Very important to pass all the pending entries in the Bank before deciding on the available balance for payments at the year end.

TDS (Withholding Tax)
Here the expectation is from the payer of income to deduct taxes while doing so. Contractors, Professional Fees, Advertising, Renting broadly attract deductions before making the payments from 1% to 10%. It is necessary to do this even with respect to the provisions of expenses even though the payments would be done later in the next year. As a recipient of the services, please be careful that each and every provision for expense is Tax Deducted

Writeoff all the bad clients
You may have been raising invoices on clients all through out the year. Now is time to clean up. Check if there are any clients not going to settle these and reverse those. This will help you save unnecessary VAT, Service Tax and even the Income Tax. From the commercial point of view, you may have only the real receivable customer balances lying in the books to be recovered. Doing a bill to bill reconciliation is advised instead of account to account.

Check whether your Cash book tallies with that in Hand
It's common that the cash doesn't matches with the balance in hand. Matching the physical cash with that in the book throws up surprises like cash lying with some employees, vouchers not booked, payments made without supporting documents and even theft.

It's like taking "a stitch in time would save nine".  This would not only make the life smoother from taxation angle but also show correct picture for the financial as to what's your profile or loss, which are liabilities to be paid and assets to be collected.

People say that accounting doesn't add any value in the business but we do not tend to agree. It acts like a mirror to show how do you look. It's like a dashboard of the Car which doesn't help in efficiency or speed but it definitely measures the achieved one.

What are the Changes in formalities to incorporate a Company?

The new rules have built in counter measures to tackle fictitious applicants from forming a company. 

This is one of the ,must know changes for the Startups in Companies Act 2013.

Below is the brief and point to point update on these changes for some one keen to form a new Company.

A. Reservation of name
An application for the reservation of a name shall be made in Form No. INC.1

B. Signing of memorandum and articles
The Memorandum and Articles of Association of the company shall be signed in the following
manner, namely:-

1. The memorandum and articles of association of the company shall be signed by each subscriber to the memorandum, who shall add his name, address, description and occupation, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation.
2. The witness who is generally a practicing professional shall state that “I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given); further I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in”.

C. Declaration by professionals
For the purposes of clause (b) of sub-section (1) of section 7, the declaration by an advocate, a Chartered Accountant, Cost accountant or Company Secretary in practice shall be in Form No.
INC.8.

D. Affidavit from subscribers and first directors

For the purposes of clause (c) of sub-section (1) of section 7, the affidavit shall be submitted by each of the subscribers to the memorandum and each of the first directors named in the articles in Form No.INC.9 

E. Particulars of every subscriber to be filed with the Registrar at the time of incorporation. The following particulars of every subscriber to the memorandum shall be filed with the Registrar- 

• Name (including surname or family name) and recent Photograph affixed and scan with MOA and AOA: 
• Father’s/Mother’s/ name: 
• Nationality: 
• Date of Birth: 
• Place of Birth (District and State): 
• Educational qualification: 
• Occupation: 
• Income-tax permanent account number: 
• Permanent residential address and also Present address (Time since residing at present address and address of previous residence address (es) if stay of present address is less than one year) similarly the office/business addresses; 
• Email id of Subscriber; 
• Phone No. of Subscriber; 
• Fax no. of Subscriber (optional) 
• Proof of Identity 
• If the subscriber is already a director or promoter of a company(s), the particulars relating to- 

           (i) Name of the company;
           (ii) Corporate Identity Number;
           (iii) Whether interested as a director or promoter;

• The specimen signature and latest photograph duly verified by the banker or notary shall be in the prescribed Form No.INC.10. 

F. Particulars of first directors of the company and their consent to act as such The particulars of each person mentioned in the articles as first director of the company and his interest in other firms or bodies corporate along with his consent to act as director of the company shall be filed in Form No.DIR.12

Would this impact the companies already under incorporation?
In our view, it will impact. The registrar of Companies would demand for the documents and witnesses even in those cases. Certain forms for approval may be considered in transition if already filed before this comes into force.